this post was submitted on 14 Apr 2024
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Greased by lobbying and campaign cash, tax breaks for retirement savings are one thing Congress agrees on. But they also blow out the deficit and add to income inequality.

Five months before Congress faced a near-catastrophic standoff over the debt ceiling, with Republicans demanding restrictions to food and Medicaid programs to rein in spending, a bill that raised the cost of private retirement savings accounts to $282 billion per year was quietly signed into law.

In this era of deeply divided politics, the 2022 bill known as Secure 2.0 was hailed as a bipartisan success — a victory for average Americans. It had sailed through the House by a whopping 414-5 vote. It followed four other major bills passed between 1996 and 2019 that dramatically expanded taxpayer savings – all equally lauded as bipartisan victories.

But that rare issue that brought a divided Washington together also increased wealth disparities and the federal deficit. And the victory was most strongly applauded by the burgeoning financial services industry, for whom tax-advantaged retirement savings has transformed a $7 trillion retirement market in 1995 to a $38.4 trillion behemoth in 2023.

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[–] FlyingSquid 29 points 7 months ago (5 children)

Multiple times, people here on Lemmy have assumed I have a 401(k), as if it's something everyone has, and it always amuses me.

[–] newthrowaway20 47 points 7 months ago (1 children)

It probably is something you should have after a certain age. If not a work supplied 401k, then at least your own managed Roth IRA. And if you're still on the younger side, it's perfectly understandable not to have a 401k yet.

[–] FlyingSquid 17 points 7 months ago (12 children)

From where should I have gotten the money to invest in it?

[–] Xbeam 32 points 7 months ago (1 children)

If you work for a company that has a 401k then you need to sign up for it. If the company has a match percentage then that is the absolute minimum you should contribute. And when you are younger you should set it up as a Roth so you pay taxes on it now.

This isn't a thing you should do at a certain age. The younger you start the better. The money just comes out of your paycheck, same as taxes.

[–] FlyingSquid 12 points 7 months ago (1 children)

I do not work for a company that offers such a thing. And I never have.

This is what I'm saying about assumptions.

[–] gorysubparbagel 31 points 7 months ago (14 children)

You can sign up for a Roth IRA then, there's no need for anything from your employer to get one. As far as I recall there's no minimum amount of money you need to put in at start.

[–] bhmnscmm 29 points 7 months ago

I don't know why you're being down voted. I swear, some people would rather complain than make the smallest effort to help themselves. It's good advice.

Even very small contributions to a retirement account can make a big difference in old age.

[–] disguy_ovahea 16 points 7 months ago (1 children)

This is really good advice. There’s no minimum, but there is an annual maximum of $7K.

[–] yaaaaayPancakes 5 points 7 months ago

If your employer doesn't offer a 401k or similar plan, the IRA limits are actually higher.

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[–] Cosmonauticus 20 points 7 months ago* (last edited 7 months ago) (1 children)

Well if you stopped buying frivolous items like GROCERIES you'd have plenty to invest. Then you could enjoy your retirement for a comfortable 3 years before going back to work

[–] FlyingSquid 3 points 7 months ago (4 children)

We were talking to my daughter about this just yesterday. It's not even groceries. People think that if you spend $30 or $40 a month on things that make you and those you love happy, you'll never save enough to make yourself marginally more comfortable in the last 10-20 years of your life (if you're lucky) that will be uncomfortable no matter what.

So I suppose maybe if I denied myself and my child every pleasure in life, sure, I could put money in a 401(k). That is not something I would do and I certainly do not think it's a good lesson to teach a child. I'm sure someone will call that some sort of "live for today" or YOLO attitude rather than not giving your child the most miserable childhood you can.

[–] ampersandrew 18 points 7 months ago (2 children)

So I suppose maybe if I denied myself and my child every pleasure in life, sure, I could put money in a 401(k).

But that's unproductive hyperbole. Not every pleasure in life costs money, and lots of things you spend money on can be optimized. And even after doing that, if you still feel too squeezed, it might be worth considering a career change and a plan for how to get there.

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[–] [email protected] 15 points 7 months ago (13 children)

You were telling your daughter that you're spending $30/mo on her to make her happy instead of saving it for your old age? I don't know how you communicated that, but on the surface that does not sound like a healthy thing to tell a child.

If you're worried about providing your daughter a fulfilling childhood, maybe also consider prioritizing time with her? You spend a lot of time on Lemmy dude, is that time you could be spending with her? Or are you on your phone a lot when you're with her?

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[–] [email protected] 11 points 7 months ago (16 children)

I promise you, if you put that $30/month into your own IRA, you'll make her a lot happier when she doesn't have to support you when she's grown up.

The problem isn't spending a little to make you or your family happy, it's spending for consumable things today, that's going to put you at a huge disadvantage later.

I get it, I have two kids, it's fucking expensive. But you know what's even more expensive? Taking care of old people.

[–] [email protected] 2 points 7 months ago

put that $30/month into your own IRA, you'll make her a lot happier when she doesn't have to support you when she's grown up.

Unfortunately, with all of the price-gouging that's been happening, $30/mo is nothing. It probably is now productive being spent. Even with compounding interest, that is going to result in enough funds to retire as an expat in a developing nation with an exceptional exchange rate and likely next to no end of life care, supposing that the investment firm that is profiting off of pensions being extinct does exceedingly well.

I also like to suggest saving anything that one can but noone is going to be able to realistically be able survive on that, unless there are significant socio-economic changes. It's a "pie in the sky when you die" situation.

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[–] Cryophilia 7 points 7 months ago

So I suppose maybe if I denied myself and my child every pleasure in life, sure, I could put money in a 401(k). That is not something I would do and I certainly do not think it’s a good lesson to teach a child.

I think that's an excellent lesson to teach a child.

Poverty sucks. Try to get out of it. Deny consumerism, save your money.

[–] PriorityMotif 18 points 7 months ago (6 children)

You can put $5 a week into it if you want to. $38/ week ($2k/yr) will get you the full $1K savers credit if you don't have access to a retirement account through work. So essentially you're only contributing $1k and doubling it with the tax credit.

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[–] PriorityMotif 24 points 7 months ago (1 children)

If you don't have access to one through work you qualify for a deduction and a credit if you contribute to an IRA.

[–] ROAGO 2 points 7 months ago (1 children)

Regular IRAs are riskier in the long run though. The extra cash from the tax breaks is nice, but they'll more than likely get taxed to hell when you finally are able to withdraw from it. ROTHs are more resilient to changes because the rich use them to avoid taxes, so it has protections from changes by the government.

[–] PriorityMotif 3 points 7 months ago

It doesn't make sense not to put at least $2k in for the savers credit.

[–] [email protected] 5 points 7 months ago

The only reason I have one is because I can reasonably afford it, and I would be constantly harassed about not contributing to one if I didn't.

I am under no assumption it will even have any meaningful amount of money in it by the time I will be able to retire, assuming that will even be possible by the time I'm 65 (or whatever the retirement age is raised to in the meantime)

[–] [email protected] 3 points 7 months ago
[–] [email protected] 2 points 7 months ago (1 children)
[–] FlyingSquid 4 points 7 months ago

Yes, that's why I'm poor.