That’s what I was asking, why are contribution limits a bad thing/too low?I meant any contribution LIMITS. Omission on my part
That’s what I was asking, why are contribution limits a bad thing/too low?I meant any contribution LIMITS. Omission on my part
Because the distributions will always be subjected to income tax and people shouldn't have to invest in high risk to save enough for retirement.That’s what I was asking, why are contribution limits a bad thing/too low?
Good idea. Still, State of residence has no bearing on the uncertain Federal Tax you'll pay on 401k withdrawals. But you must know this so this is for other reader's benefit.I plan on retiring in a state with no state income taxes
You have to take risk to save for retirement. High risk is not the same for everybody as you know. But if you can't tolerate a risk, you'll have to save much more of the low risk paycheck. People have done it. But risk is exhilarating when you risk your own money in your own idea and reap a reward. Makes you more attractive too. Just much more fun. Take a risk on a house flip; or a car needing repair; or anything- do it once and you'll be on your way. Failure? You can't succeed without failure. Kind of a riddle , really...but true.Because the distributions will always be subjected to income tax and people shouldn't have to invest in high risk to save enough for retirement.
One shouldn't be forced to accept risk they're not comfortable with in order to save for retirement.You have to take risk to save for retirement. High risk is not the same for everybody as you know. But if you can't tolerate a risk, you'll have to save much more of the low risk paycheck. People have done it. But risk is exhilarating when you risk your own money in your own idea and reap a reward. Makes you more attractive too. Just much more fun. Take a risk on a house flip; or a car needing repair; or anything- do it once and you'll be on your way. Failure? You can't succeed without failure. Kind of a riddle , really...but true.
What's high risk? General market return like 8% or something more aggressive?Because the distributions will always be subjected to income tax and people shouldn't have to invest in high risk to save enough for retirement.
Well to the extent that you believe the tax code and a progressive income tax is ethical, then there needs to be some limit. Possibly the current limit is too low, but the law says the federal government gets the majority of their money through income tax, so deferral is basically a late payment vs someone that pays on time. If everyone deferred all income there would be no tax money.One shouldn't be forced to accept risk they're not comfortable with in order to save for retirement.
If you want to save half your pretax income for retirement you should be allowed to.
High risk is subjective but you're missing the point. It's really about freedom. Freedom to invest how ever much you want where you want.What's high risk? General market return like 8% or something more aggressive?
I'm asking because the 2024 contribution limit is $23K and $7,500 catch up contribution over 50 years old. At 8% return, if someone maxed their contribution from 25 years old to 65 they would have $6.6M at 65. If they didn't start until 30 they would have $4.5M at 65. That's without the contribution limit going up over time, which it will.
I'm all for saving as much as one wants to, I'm just unclear why the tax deferred or tax free growth in the case of a Roth needs to be higher (or unlimited).
Was about to say that. You can save outside of a retirement fund, you just can't reap the tax benefits, so you lose some percentage.You can always save for retirement after its taxed. No law against it.
The lack of income tax revenue has never been a deterrent to government spending.Well to the extent that you believe the tax code and a progressive income tax is ethical, then there needs to be some limit. Possibly the current limit is too low, but the law says the federal government gets the majority of their money through income tax, so deferral is basically a late payment vs someone that pays on time. If everyone deferred all income there would be no tax money.
Now if you want to say they squander our tax dollars anyway and don't need anymore and we should abolish the income tax completley - you will get no argument from me on that.
You can always save for retirement after its taxed. No law against it.
We disagree about a core point which is fine. But to be clear, I'm not sure why there is/should be an inherent freedom to defer taxes or create limitless tax free growth. Your point makes me basically ask, why should there be any tax deferred or tax free growth. We could all just be free to save for retirement with after tax dollars, whose growth was taxed just like a traditional investment account.High risk is subjective but you're missing the point. It's really about freedom. Freedom to invest how ever much you want where you want.
This doesn't just pertain to 401k but IRA's(Roth/Traditional) as well.
The whole concept of a catch-up contribution at age 50 is so stupid. Why 50 and not 40 or 30?
It's not tax free but tax deferred (Roth notwithstanding). You're also foregoing access to those funds for a set period if time. So the saver is also deferring consumption which is probably the real reason behind these limits. We're also talking about a potentially huge amount of savings based rather than credit based capital deployed in the economy. That's a win for everyone.We disagree about a core point which is fine. But to be clear, I'm not sure why there is/should be an inherent freedom to defer taxes or create limitless tax free growth. Your point makes me basically ask, why should there be any tax deferred or tax free growth. We could all just be free to save for retirement with after tax dollars, whose growth was taxed just like a traditional investment account.
Easy fix - max out the contribution, then roll it over to a traditional IRA.
Fund selection problem solved.
No, it’s not necessarily in the market - you can invest in IRA in whatever underlying investment you like, it could be bonds, it could be individual stocks, it could be mutual funds, it could be mutual funds that hold stocks, it could be mutual funds, that hold bonds, it could even be physical gold, or it could be cash at a bank.It’s still in the stock market, it’s still applicable to RMD and you can’t get complete control of it until you leave that employer.
Roth accounts were my exact point, which is why I listed tax deferred or tax free. FYI - my example above could all be in a Roth 401k, assuming they continue to exist, and all that savings could be tax free, with no RMD requirements. And wouldn't even include IRA (of course potentially Roth IRA) contributions or a company match to a 401k.It's not tax free but tax deferred (Roth notwithstanding).
Thing is, how does removing contribution limits achieve that goal? The stats are somewhere in the 15% range of participants in 401k plans max out their contributions. Uncapping or increasing contribution limits are not going to suddenly impact the 85% of participants that today, are not hitting the limits, or people that are not/can not participate in a 401k. So there is a pretty small portion of the population removing contribution caps would impact, and my guess is if you are hitting that contribution cap today, you are looking for a way to defer your tax liability, tax free growth or squirreling money you aren't using as discretionary spending today already, because you are not looking to get whacked on taxes.You're also foregoing access to those funds for a set period if time. So the saver is also deferring consumption which is probably the real reason behind these limits. We're also talking about a potentially huge amount of savings based rather than credit based capital deployed in the economy. That's a win for everyone.
Savers already have a hard enough time trying to get ahead of inflation. Why make life more difficult for them?
Why?
Yup, totally get that some folks can push $50K or $100K to for retirement (or for purposes that they want to leverage 401ks, IRAs, etc. to be more exact) I'm unclear what the benefit is or the reasoning that the current level of tax advantages provided needs to be enhanced.Because the contribution limits need to be raised for a 401K and IRA.
Some folks can easily put $50K away for retirement every year.
Roth accounts were my exact point, which is why I listed tax deferred or tax free. FYI - my example above could all be in a Roth 401k, assuming they continue to exist, and all that savings could be tax free, with no RMD requirements. And wouldn't even include IRA (of course potentially Roth IRA) contributions or a company match to a 401k.
Thing is, how does removing contribution limits achieve that goal? The stats are somewhere in the 15% range of participants in 401k plans max out their contributions. Uncapping or increasing contribution limits are not going to suddenly impact the 85% of participants that today, are not hitting the limits, or people that are not/can not participate in a 401k. So there is a pretty small portion of the population removing contribution caps would impact, and my guess is if you are hitting that contribution cap today, you are looking for a way to defer your tax liability, tax free growth or squirreling money you aren't using as discretionary spending today already, because you are not looking to get whacked on taxes.
On a personal basis I'm okay with that, and would probably chase it down if the caps were increased, because I do every year. What gives me pause, and causes me to ask the question, is other than benefiting those 15% of participants that can afford it and want to take advantage of it for themselves, what's the benefit, particularly if it was limitless.