Comments on: Raid that 401(k)! http://www.bargaineering.com/articles/raid-that-401k.html personal finance blog with anecdotes, advice and commentary. Thu, 11 Mar 2010 02:06:53 -0500 hourly 1 By: John http://www.bargaineering.com/articles/raid-that-401k.html/comment-page-1#comment-1112 John Wed, 21 Sep 2005 01:58:10 +0000 http://www.bargaineering.com/articles/?p=242#comment-1112 I hope the last post helps some people realizes the pitfalls of the IRAs/401s. By the time many of these problems come about, we were well into them. I hope the last post helps some people realizes the pitfalls of the IRAs/401s. By the time many of these problems come about, we were well into them.

]]> By: John http://www.bargaineering.com/articles/raid-that-401k.html/comment-page-1#comment-1111 John Wed, 21 Sep 2005 01:55:40 +0000 http://www.bargaineering.com/articles/?p=242#comment-1111 I'm really down on this IRA/401K scheme. They have so many pitfalls that it resembles a scam. My wife and I have both and the government keeps changes the rules every few years that some of the accounts become useless. For example, I don't know anyone except the government that touts these things and next year, implements a law saying you are not qualify to contribute anymore. My IRA is now dead. Another example is where you can't tell how much you can contribute during the year because there's a law that the employer must calculate the average of the whole company and if you're over this amount, they refund your excess contribution the next year to you but tell you that you must include it in the previous year's income tax return. Can you ever anticipate your tax bite this way? Or is it just a way to penalize ignorant people for trying to contribute to their retirement? Do people realize that most countries don't tax investments so there is no need for retirement funds to shelter your income? I’m really down on this IRA/401K scheme. They have so many pitfalls that it resembles a scam. My wife and I have both and the government keeps changes the rules every few years that some of the accounts become useless. For example, I don’t know anyone except the government that touts these things and next year, implements a law saying you are not qualify to contribute anymore. My IRA is now dead. Another example is where you can’t tell how much you can contribute during the year because there’s a law that the employer must calculate the average of the whole company and if you’re over this amount, they refund your excess contribution the next year to you but tell you that you must include it in the previous year’s income tax return. Can you ever anticipate your tax bite this way? Or is it just a way to penalize ignorant people for trying to contribute to their retirement? Do people realize that most countries don’t tax investments so there is no need for retirement funds to shelter your income?

]]> By: jim http://www.bargaineering.com/articles/raid-that-401k.html/comment-page-1#comment-1091 jim Tue, 20 Sep 2005 12:44:07 +0000 http://www.bargaineering.com/articles/?p=242#comment-1091 Yes, I think a lot of people overvalue 401(k)'s in that they don't consider how much higher taxes will be in the future. I think sometime between now and when I'm 65 (40 years!) there will be nationalized health care (in addition to paying off the debt) which will mean a much higher tax rate, similar (higher) to how the rates in Europe compare to ours today. I contributed to my 401(k) because I could get a company match and I always contribute the maximum to the Roth IRA. The economic point of IRAs is the hope that your rate of return on a larger sum (because it is pre-tax dollars) will outweigh the larger tax bite of the future. Is it folly? Perhaps, but time will be the final arbiter. Yes, I think a lot of people overvalue 401(k)’s in that they don’t consider how much higher taxes will be in the future. I think sometime between now and when I’m 65 (40 years!) there will be nationalized health care (in addition to paying off the debt) which will mean a much higher tax rate, similar (higher) to how the rates in Europe compare to ours today. I contributed to my 401(k) because I could get a company match and I always contribute the maximum to the Roth IRA.

The economic point of IRAs is the hope that your rate of return on a larger sum (because it is pre-tax dollars) will outweigh the larger tax bite of the future. Is it folly? Perhaps, but time will be the final arbiter.

]]> By: John http://www.bargaineering.com/articles/raid-that-401k.html/comment-page-1#comment-1085 John Tue, 20 Sep 2005 08:04:15 +0000 http://www.bargaineering.com/articles/?p=242#comment-1085 "One can never predict the future ...." When it comes to economics, everything is in the details. Suzie Orman said IRAs/401Ks are trouble. I tend to believe her. Unless, the employer matches your contribution, economically, there's no point to it. For many of us, the employer does not match. Yet, no one teaches this except Ms. Orman. As she points out, it is probable that the tax bite will be worse in the future to pay for the high deficit of today. Tax savings today is an illusion. The point of saving for retirement in accounts that we can't touch for 30 to 40 years makes very little sense. These IRAs/401Ks are resembling the scheme of the social security system. “One can never predict the future ….” When it comes to economics, everything is in the details. Suzie Orman said IRAs/401Ks are trouble. I tend to believe her. Unless, the employer matches your contribution, economically, there’s no point to it. For many of us, the employer does not match. Yet, no one teaches this except Ms. Orman. As she points out, it is probable that the tax bite will be worse in the future to pay for the high deficit of today. Tax savings today is an illusion. The point of saving for retirement in accounts that we can’t touch for 30 to 40 years makes very little sense. These IRAs/401Ks are resembling the scheme of the social security system.

]]> By: jim http://www.bargaineering.com/articles/raid-that-401k.html/comment-page-1#comment-1040 jim Mon, 19 Sep 2005 12:33:14 +0000 http://www.bargaineering.com/articles/?p=242#comment-1040 One can never predict the future but he or she can certainly plan for it. There is something to be said about enjoying life now but that can be funded by something other than a 401(k). One can never predict the future but he or she can certainly plan for it. There is something to be said about enjoying life now but that can be funded by something other than a 401(k).

]]> By: John http://www.bargaineering.com/articles/raid-that-401k.html/comment-page-1#comment-1030 John Mon, 19 Sep 2005 07:22:26 +0000 http://www.bargaineering.com/articles/?p=242#comment-1030 My personal observation is those who save for the future either use their retirement money to pay for the nursing home bills or die and leave their money to their heirs. Your friend who spend their money on the little dingy may not feel so bad if he knew this. My personal observation is those who save for the future either use their retirement money to pay for the nursing home bills or die and leave their money to their heirs. Your friend who spend their money on the little dingy may not feel so bad if he knew this.

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