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.
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.
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.
From where should I have gotten the money to invest in it?
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.
I do not work for a company that offers such a thing. And I never have.
This is what I’m saying about assumptions.
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.
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.
This is really good advice. There’s no minimum, but there is an annual maximum of $7K.
If your employer doesn’t offer a 401k or similar plan, the IRA limits are actually higher.
With what money?
If you’re absolutely scraping by, where you can’t even spare a few bucks a week on something like this, then yeah, maybe you just can’t do it. But if you can spare even a tiny amount, then it’s wise to do that small amount starting as early in life as possible.
The money your earn for working.
Yes, all the underpaid people having to choose between food and rent just need to bot spend money on either so they can invest it.
Yes, great insight!
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
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.
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.
It might be unproductive hyperbole, but I’ve been told that exact same thing more than once right here on Lemmy.
Sounds like you have an axe to grind. Sorry life has been hard for you friend. Hope it gets better. Hang in there.
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?
Do you think that maybe you don’t pay attention to what actual times of day I’m on Lemmy vs. when I’m not on Lemmy and think that maybe I spend those times with my family?
I’m here a lot because I’m currently very sick (I recently got back from the Mayo Clinic). I suppose that’s my fault?
No, I’ve never paid attention to when you’re online, I just see you average 100 comments and posts per day. I still think telling your daughter that you’re spending $30/month on her instead of saving for retirement is not healthy.
I know a lot of people taking care of their elderly parents. I have yet to meet one who says they regretted their parents buying them toys. Do you know any?
Also, as I already said, I am on Lemmy a lot because I am very sick and have nothing else to do most of the time.
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.
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.
“I know you want that doll, honey, but I’ve put the money for it into an IRA and it will make you a lot happier when you don’t have to support me when you’re grown up.” You do you with your kids, I’m going to get mine things that will make her happy.
And she already knows she has no obligation to support me. I’ve made that clear to her.
Do you really think she’s just going to let you starve and live on the street?
And yes, that’s exactly what you say. Funny how it’s not things that make kids happy, it’s spending time with them. Reading to my daughter her favorite book for the 1000th time is much more enjoyable than just buying her a new doll.
It’s also a great lesson in short term happiness vs long term happiness.
You bought her a book? When you could have put that money in a Roth IRA?
You’re clearly an abusive parent!
I think that’s an excellent lesson to teach a child.
Poverty sucks. Try to get out of it. Deny consumerism, save your money.
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.
That doesn’t sound like enough to retire on.
Fine, then think of it as free money to supplement your income with when you’re 60+.
You would be wrong. Compounding is an absolute beast. It’s nearly a Million. Let’s say you are 25 and just starting out. You manage to put in $1000 a year and get the $1000 credit. Let’s say you do this exact same thing until you are 65. You invest it in the S&P500 Index which historically returns ~10% annually…
Balance at 65: $929,444
Total contributions: $80,000
Employee contributions: $80,000
Employer match: $0
Investment returns: $849,444
If only I had an extra $1000 a year.
Gotta give up the avocado toast.
/s in case it isn’t obv.
I’d be willing to bet that medical bills at the generally accepted “retirement age” will eat through most of that inside of 5-10 years. A retirement home even faster.
“Millionaire” doesn’t mean what it used to.
an actual career at a real company.
Well excuse me for not being the success you are. Fucking poor people not pulling themselves up by their bootstraps, am I right?
No. It’s the exact opposite. It’s your company not putting in the minimum to support it’s employees.
Welcome to a life in the entertainment industry. In behind-the-scenes roles that didn’t even have unions until recently in some cases and were usually contract positions anyway. And then a series of low-end jobs after that because I moved back to Indiana where I was from because there are no entertainment industry jobs here.
What can I say? I haven’t been a success.
Hey, I see you a lot on here, and from one of your other comments in this thread I can see why I might see you more often.
You were probably being sarcastic with that success comment, but just in case you weren’t… Success isn’t a single definition, and I hope you don’t dwell on the cookie cutter model of “success” too much. Be the absolute best you can be for yourself and those you love, that’s success too.
I hope there’s a positive outlook for you healthwise. And despite there being some short sighted shit birds, there’s also some good folk on Lemmy/fedi, and I think you’re one of em. Hang in there comrade.
Thank you. To be fair, I meant financial success. I think I’m a success in other ways, such as being a parent. But I appreciate it.
If you don’t have access to one through work you qualify for a deduction and a credit if you contribute to an IRA.
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.
It doesn’t make sense not to put at least $2k in for the savers credit.
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)
I would have.
Are you American?
Yes, that’s why I’m poor.