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How much should you save for retirement ?

Sugarcubesea

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True. However, most Americans live far beyond their means. We do earn very good money, but we have always lived below our means.

Just a point:

Some of the staff who work for me were talking about buying expensive Air Jordan sneakers (well over $150). I buy my sneakers at Costco ($20 or so). I told them I wear Air Kirklands.
All kidding aside, I know they make 1/3 of what I make. But they are also buying Canadian Goose coats, leasing BMWs, etc.
My employees all think I'm so poor, I always bring my lunch to work, they always eat out, like you I buy my shoes and clothes at Costco, they buy all designer clothes and lease cars with $500 and $600 payments. I max out my 401K, I max out our Roth IRA's, I Max out my HSA and I put money in my FSA ( I have really bad gum disease, so I deep cleanings 4 times a year, so this allows me to use pre tax money)...
 

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I am not a fan of Trump. He is a repugnant individual. However, none of us know what is going on with his taxes. Many individuals, especially in RE, have their business set up to minimize taxes. His taxes might be 100% legit. Maybe not. However, Mazars is a tier II firm. I deal with them often. They are not some backwater setup. They would take a serious hit to their reputation if they were committing tax fraud on behalf of Trump - possibly go under.

Not really sure why this is the counter argument for the discussion.
nothing to do with "Mazars". I have never heard of that firm. But I have read about NY city ( Manhattan district) prosecutors

You said in a previous post that the federal government bails out everyone. If that's true maybe we don't have to save for retirement ;)
but (just in case) I have saved enough for retirement without federal government assistance.



.
 
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HitchHiker71

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This dude is very calming. I am 55yrs old. We have 4x in cash and retirement accounts. Plus another 2x ish in equity in our house. Ive always been handicapped by an inability to fully fund my 401k (due to IRS rules). We got bought by a big Corp and we were supposed to be able to finally fully fund this past year. Nope. Just got a $5500 check back from Fidelity due to over-contributing to my 401k (I put in the max amount for a person my age).

Boy it would be nice to retire in another 5 years...
What prevents you from contributing the maximum to your 401k? I’ve never heard about this issue before. I contribute the maximum of $19,500 and just started the $6,500 catch-up contributions this year.


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Icc5

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The problem today is that many are not saving either by design or necessity. This is why I advocate changing Social Security from a safety net into forced retirement savings by increasing the amount withheld from earnings and the accompanying employer match. Withdrawals and loans from 401ks and IRAs become too tempting for those who started contributing but don't have the discipline not to tap for whatever reason. Thus I say we need to protect these people from themselves now rather than wait until they are old and destitute...

George
Only problem with this idea is 95 % of people I worked with don't make enough to survive if you even took $10 more out of their paycheck. Rent is so high here that many of these workers live with 4-5 families in the same unit.
 

joestein

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What prevents you from contributing the maximum to your 401k? I’ve never heard about this issue before. I contribute the maximum of $19,500 and just started the $6,500 catch-up contributions this year.


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HCE or Highly Compensated Employee - which is defined by either a salary great than $130K or a minimum 5% owner. The average 401K contribution for the HCEs can't be more than 2% higher than the average 401K contribution for the non-HCE. So, for example - if the average non-HCE employee contributes 2% than the average HCE employee can't contribute more than 4%.

I have always thought this is very unfair. If you make $150K - you are limited to $6K in the above example. But if you make $500K - you can contribute up to $20K (more than the $19K 401K limit). It really doesn't affect the very large earners- but it hurts the upper middle/lower upper people.

I work in NYC where $130K is not a big salary, but my company has property maintenance & staff all over the country that dont make anyway near NYC money. Most of those people dont contribute much to their 401K, bringing down the average.

Most years I have been able to contribute $11K - $13K. I usually get a check back for excess contributions. I was able to put in 19K (due to 50 YO catch up) and haven't gotten a check yet. Crossing my fingers.
 

heathpack

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@joestein you stated it better than I can

I work for a big veterinary corporation. There‘s lots of lower paid entry level non-career type jobs- like kennel attendants. Many employees do not contribute at all to their 401k. This prevents me from maximally contributing to my 401k.
 

Brett

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@joestein you stated it better than I can

I work for a big veterinary corporation. There‘s lots of lower paid entry level non-career type jobs- like kennel attendants. Many employees do not contribute at all to their 401k. This prevents me from maximally contributing to my 401k.
An unfortunate financial downside of being a "highly compensated employee".
I was in that category a long time ago but I put extra retirement money in a taxable brokerage account, it's now far larger than any of my tax deferred accounts
 

bogey21

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Only problem with this idea is 95 % of people I worked with don't make enough to survive if you even took $10 more out of their paycheck. Rent is so high here that many of these workers live with 4-5 families in the same unit.
The change I suggest would be phased in slowly. The alternative is that if nothing is done, the people you are talking about will have to survive on less than adequate Social Security when they get old. Of course another alternative is for the Government to take care of them by taxing those who acted responsibly...

George
 

Conan

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Overall, taxable accounts are not a bad alternative to IRA and employer plan employee contributions.
(Except to the extent the employer matches contributions.)

Taxable Brokerage Account
Tax deduction for contributions?No
Interest earned from municipal bond-type investments is tax-free?Yes
Interest earned from U.S. government debt is free from State tax?Yes
Other interest earned is free from federal and State tax?No
Federal and State tax on capital gains and qualified dividends?Yes and at capital gains rates
Federal and State tax on non-qualified dividends?Yes
Federal and State tax on distributions of principal?No
Penalty tax on early withdrawals?No
Required minimum distributions starting at age 70 1/2 or age 72?No
Required distribution rules continue for beneficiaries after your death?No
Federal and State tax on distributions of principal to beneficiaries?No


Roth IRA
Tax deduction for contributions?No
Interest earned from municipal bond-type investments is tax-free?Yes
Interest earned from U.S. government debt is free from State tax?Yes
Other interest earned is free from federal and State tax?Yes
Federal and State tax on capital gains and qualified dividends?No
Federal and State tax on non-qualified dividends?No
Federal and State tax on distributions?Yes before age 59 1/2, then No unless 5-year rule violated
Penalty tax on pre-age 59 1/2 withdrawals?Yes unless hardship rules apply, also yes if 5-year rule violated
Required minimum distributions starting at age 70 1/2 or age 72?No
Required distribution rules continue for beneficiaries after your death?Special rules apply
Federal and State tax on distributions of principal to beneficiaries?Special rules apply


Employer Plan or regular IRA
Tax deduction for contributions?Yes but no deduction + penalty tax on over-contributions
Interest earned from municipal bond-type investments is tax-free?Yes but ordinary tax on withdrawals
Interest earned from U.S. government debt is free from State tax?Yes but ordinary tax on withdrawals
Other interest earned is free from federal and State tax?Yes but ordinary tax on withdrawals
Federal and State tax on capital gains and qualified dividends?No but ordinary tax on withdrawals
Federal and State tax on non-qualified dividends?No but ordinary tax on withdrawals
Federal and State tax on distributions of principal?Yes and ordinary tax rates apply
Penalty tax on pre-age 59 1/2 withdrawals?Yes unless hardship rules apply
Required minimum distributions starting at age 70 1/2 or age 72?Yes
Required distribution rules continue for beneficiaries after your death?Yes
Federal and State tax on distributions of principal to beneficiaries?Yes


Hopefully I got all this right -- it wasn't easy!!
 

rapmarks

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The change I suggest would be phased in slowly. The alternative is that if nothing is done, the people you are talking about will have to survive on less than adequate Social Security when they get old. Of course another alternative is for the Government to take care of them by taxing those who acted responsibly...

George
yeah, the government is doing this already
 

Rolltydr

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The change I suggest would be phased in slowly. The alternative is that if nothing is done, the people you are talking about will have to survive on less than adequate Social Security when they get old. Of course another alternative is for the Government to take care of them by taxing those who acted responsibly...

George
So, either people have good paying jobs that afford them the opportunity to save enough for their elder years, or they’re irresponsible? Real life isn’t that simple. There are many, many people, including my single divorced mother, who work all their lives at low paying jobs that only allow them to feed their families and pay for the necessities. There is nothing left to save! She wasn’t irresponsible, she was poor. She lived her later years on a minimal SS check of between $700-800 a month, Medicare, Medicaid, and whatever her proud self would allow her 2 sons to provide her. Irresponsible? I don’t think so. Unlucky? Maybe, but through no fault of her own. She was from a rural area where there were very few jobs of any kind. She did what she could, including taking care of her own mother, who had Alzheimer’s for the last few years of her life. There are millions of people like her. Why do some of us find it so bad that our tax money helps to provide for people like this?
 

easyrider

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So, either people have good paying jobs that afford them the opportunity to save enough for their elder years, or they’re irresponsible? Real life isn’t that simple. There are many, many people, including my single divorced mother, who work all their lives at low paying jobs that only allow them to feed their families and pay for the necessities. There is nothing left to save! She wasn’t irresponsible, she was poor. She lived her later years on a minimal SS check of between $700-800 a month, Medicare, Medicaid, and whatever her proud self would allow her 2 sons to provide her. Irresponsible? I don’t think so. Unlucky? Maybe, but through no fault of her own. She was from a rural area where there were very few jobs of any kind. She did what she could, including taking care of her own mother, who had Alzheimer’s for the last few years of her life. There are millions of people like her. Why do some of us find it so bad that our tax money helps to provide for people like this?
Exactly this above.

I'm in the opinion that most of the tax load should be paid by entities that earn the most. These are the corporations that make billions but pay no income tax because they can afford to payoff the system legally. Not only do these companies not pay taxes, very often they receive Federal and State assistance. This type of issue is why I think there are very few decent politicians at the higher levels. It's the same game with different players no matter who is in office. Please excuse my morning rant, lol.

Bill
 

heathpack

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An unfortunate financial downside of being a "highly compensated employee".
I was in that category a long time ago but I put extra retirement money in a taxable brokerage account, it's now far larger than any of my tax deferred accounts
Ive decided to do exactly that with my check I got back this time.

Although I’m in a field which is in uber high demand and I could get a new job very readily, it’s likely if I lost my job that I’d get the sweetest deal by relocating. And that process takes time- flying multiple places to interview, negotiating out multiple contracts, selling a house, buying a new house. So Im someone who has always felt the need to have a big bucket of cash- 10-12 months of living expenses- sitting in the bank getting essentially no return.

But in this housing market, the house is now so liquid that I am starting to feel ok with sitting on less cash. It’s time to get a better return on my bucket of cash. I’m going to park some of it in an ETF for the immediate future.
 

grupp

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HCE or Highly Compensated Employee - which is defined by either a salary great than $130K or a minimum 5% owner. The average 401K contribution for the HCEs can't be more than 2% higher than the average 401K contribution for the non-HCE. So, for example - if the average non-HCE employee contributes 2% than the average HCE employee can't contribute more than 4%.

I have always thought this is very unfair. If you make $150K - you are limited to $6K in the above example. But if you make $500K - you can contribute up to $20K (more than the $19K 401K limit). It really doesn't affect the very large earners- but it hurts the upper middle/lower upper people.

I work in NYC where $130K is not a big salary, but my company has property maintenance & staff all over the country that dont make anyway near NYC money. Most of those people dont contribute much to their 401K, bringing down the average.

Most years I have been able to contribute $11K - $13K. I usually get a check back for excess contributions. I was able to put in 19K (due to 50 YO catch up) and haven't gotten a check yet. Crossing my fingers.
Your employer may want to consider setting up a Safe Harbor 401K
 

rapmarks

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Exactly this above.

I'm in the opinion that most of the tax load should be paid by entities that earn the most. These are the corporations that make billions but pay no income tax because they can afford to payoff the system legally. Not only do these companies not pay taxes, very often they receive Federal and State assistance. This type of issue is why I think there are very few decent politicians at the higher levels. It's the same game with different players no matter who is in office. Please excuse my morning rant, lol.

Bill
Corporate welfare
 

am1

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So, either people have good paying jobs that afford them the opportunity to save enough for their elder years, or they’re irresponsible? Real life isn’t that simple. There are many, many people, including my single divorced mother, who work all their lives at low paying jobs that only allow them to feed their families and pay for the necessities. There is nothing left to save! She wasn’t irresponsible, she was poor. She lived her later years on a minimal SS check of between $700-800 a month, Medicare, Medicaid, and whatever her proud self would allow her 2 sons to provide her. Irresponsible? I don’t think so. Unlucky? Maybe, but through no fault of her own. She was from a rural area where there were very few jobs of any kind. She did what she could, including taking care of her own mother, who had Alzheimer’s for the last few years of her life. There are millions of people like her. Why do some of us find it so bad that our tax money helps to provide for people like this?
Governments give a lot of support to people as it is. How much does one want? I feel family should step up more when needed. That being said people can always save a few dollars more but I guess do not see the point and want instant gratification. I see it all the time.
 

bogey21

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These are the corporations that make billions but pay no income tax because they can afford to payoff the system legally. Not only do these companies not pay taxes, very often they receive Federal and State assistance.
I'm going to open another can of worms here. IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax. I would make one change in the tax code. It would require corporations to make one simple calculation when they file there taxes. Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders. If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax. It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...

George
 

am1

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I'm going to open another can of worms here. IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax. I would make one change in the tax code. It would require corporations to make one simple calculation when they file there taxes. Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders. If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax. It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...

George
No doubt they would find a work around. I would lower taxes and deductions all around. Let people and companies control their money.
 

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Your employer may want to consider setting up a Safe Harbor 401K
This is what the company I work for has. We have a 5% safe harbor match. This explains why I’ve never run into the HCE issue before - given I fall into the HCE category.


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easyrider

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I'm going to open another can of worms here. IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax. I would make one change in the tax code. It would require corporations to make one simple calculation when they file there taxes. Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders. If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax. It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...

George
I bet corporations would pay lobbyists 15% to quash any tax if asked to pay a 15% tax. If they were required to pay they would send their earnings elsewhere to avoid the tax. Currently, the tax payers pay the corporate tax.

I get that they need to make money but they do whatever it takes to do so. Many people I know that worked for bid companies had their jobs eliminated as they aged into their 50's. It's pretty common.

Bill

https://publicintegrity.org/inequality-poverty-opportunity/taxes/trumps-tax-cuts/you-paid-taxes-these-corporations-didnt/
 

rapmarks

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In October I pulled a lot of money from the market, later today, I will be speaking with financial advisor about reinvestment. Don’t need income. Bond rates too low and won’t buy into bond fund.
I know I lost on a lot of growth over past six months, but what do I do now
 

klpca

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Many people I know that worked for bid companies had their jobs eliminated as they aged into their 50's. It's pretty common.

Bill
My goodness - this in a nutshell. (And I assume that you meant "big" companies). And they get away with it despite laws on the books about age discrimination. When my husband was in his early 50's I started to notice that he was the oldest person - by far - in the room when we went to any company events. I kept asking him "where are the older folks"? Of course when he was 57 we found out - gone. Until then he had survived many rounds of layoffs (software engineering seems to have layoffs on an annual basis) but he lost his job when they closed the local facility. He was in the middle of cancer treatment so we did not move to the company headquarters in another state. Over the years I noticed that a lot of the people who got laid off in their 50's just "retired". Here I thought that they retired because they had a great nest egg, but now I understand that often, "retiring" in your 50's is another name for being unable to find another job because you are too old. My husband did find another job but it took almost 6 months and a 25% pay cut. But just because you are older does not mean that you suddenly contribute less. Being forced to retire in your 50's will do quite a number on your nest egg no matter how much you have. You not only lose up to 15 years of savings/company matches/earnings, you start making withdrawals. It's definitely less than ideal.
 
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Patri

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When the bosses hit their 50s, the tune will change.
 

joestein

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I'm going to open another can of worms here. IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax. I would make one change in the tax code. It would require corporations to make one simple calculation when they file there taxes. Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders. If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax. It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...

George
The problem is the way that taxable income vs financial statement income is calculated. You might depreciation an asset on you books for many years for FS purposes, but you might be able to appreciate all at once or quicker on a taxable income basis. An asset might be FV on a financial statement basis, but not on a taxable basis.

The better way might be for a minimum tax based upon revenue.
This is what the company I work for has. We have a 5% safe harbor match. This explains why I’ve never run into the HCE issue before - given I fall into the HCE category.


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I don't think this works for my company as we have such a low match that maxes out at $1k.
 

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My goodness - this in a nutshell. (And I assume that you meant "big" companies). And they get away with it despite laws on the books about age discrimination. When my husband was in his early 50's I started to notice that he was the oldest person - by far - in the room when we went to any company events. I kept asking him "where are the older folks"? Of course when he was 57 we found out - gone. Until then he had survived many rounds of layoffs (software engineering seems to have layoffs on an annual basis) but he lost his job when they closed the local facility. He was in the middle of cancer treatment so we did not move to the company headquarters in another state. Ove the years I noticed that a lot of the people who got laid off in their 50's just "retired". Here I thought that they retired because they had a great nest egg, but now I understand that often, "retiring" in your 50's is another name for being unable to find another job because you are too old. My husband did find another job but it took almost 6 months and a 25% pay cut. But just because you are older does not mean that you suddenly contribute less. Being forced to retire in your 50's will do quite a number on your nest egg no matter how much you have. You not only lose up to 15 years of savings/company matches/earnings, you start making withdrawals. It's definitely less than ideal.
That is horrible. Many companies simply want to replace higher salaries with lower ones.
 
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