Biggest crash in stock market history?

[rick81721]

Consider the company match on regular 401k, it usually specifies something like 50% of the first 6% of salary.
well, what if 6% of salary is above the max contribution? max contrib is $20k, company match is $10k,
if you were doing well, making $100k per year, then 6% is $6k, and the match would be $3k. Even if you were a monster saver
and put away the same $20k as the executive.

Our match was 75% of 6%. Most people that I knew put in more than the 6% min to maximize the company contribution. I did 10% for most of my career. Remember over 50 yrs there's a catchup ability to put more in. No idea how much these days.

 

[Patrick]

Our match was 75% of 6%. Most people that I knew put in more than the 6% min to maximize the company contribution. I did 10% for most of my career. Remember over 50 yrs there's a catchup ability to put more in. No idea how much these days.

$6,500 for catch up.

Again, tax deferment for high earners. The idea that kids may be grown, and discretionary income available.

If ya can't Max out the $21k base, what good is the catch up!

Anyway, the point was it favors higher earners. Even tho it seems fair.
It was used at the corporate level to move away from pensions.

 

[rick81721]

$6,500 for catch up.

Again, tax deferment for high earners. The idea that kids may be grown, and discretionary income available.

If ya can't Max out the $21k base, what good is the catch up!

Anyway, the point was is favors higher earners. Even tho it seems fair.
It was used at the corporate level to move away from pensions.

It's tax deferment for everyone (who participates). I don't see how it favors high earners when it caps the max at 20K. As a percentage of income, a lower income participant can sock away tax deferred more than a high earner.

 

[Patrick]

It's tax deferment for everyone (who participates). I don't see how it favors high earners when it caps the max at 20K. As a percentage of income, a lower income participant can sock away tax deferred more than a high earner.

They can't afford it
And read the match scenario I outlined even if they could.

 

[rick81721]

They can't afford it
And read the match scenario I outlined even if they could.

says who?

 

[Patrick]

says who?

In general, a family making $60k wont be able to save $27,000/yr in their 401k

 

[Patrick]

In general, a family making $60k wont be able to save $27,000/yr in their 401k

And they probably hit the upper limit of the plan too

 

[jShort]

Pat and Rick. Every day.

 

[Patrick]

Pat and Rick. Every day.

View attachment 151502

Isn't that where ricks sig is from?

 

[djm]

PM’ing you my number. This can be tricky territory.

*edit - what I think the best plan for this is a backdoor Roth. Totally legal and a great loophole to take advantage of. But everyone’s situation is unique in pulling one off.

Thanks! Will check it out

 

[rick81721]

In general, a family making $60k wont be able to save $27,000/yr in their 401k

So what? Who says they have to max out? It's the percentage of income saved that's pertinent. People who make 300K+ a year will barely be able to get to the 6% match level.

And the ability to save is a life style choice, not an absolute. People who spend more on housing/cars/appliances/vacations/clothes/toys then they can really afford are the ones who won't save enough.

 

[Patrick]

So what? Who says they have to max out? It's the percentage of income saved that's pertinent. People who make 300K+ a year will barely be able to get to the 6% match level.

And the ability to save is a life style choice, not an absolute. People who spend more on housing/cars/appliances/vacations/clothes/toys then they can really afford are the ones who won't save enough.

you have it totally backwards - a person in a low tax bracket is going to be in a low tax bracket and saves nothing by deferring.
(other than the actual habit of savings - they only get the match as a gain)

matching some percentage of 6% when it is 5x what a lines-person is getting in a match is the unfair part. and the high earner
has a good chance of riding it until the tax bracket comes down.

i'm not talking about lifestyle, i'm talking about the systematic inequity in the policy.

more simply - 'we will match 100% of the first $2,000 saved would be equitable.'

 

[djm]

tell me about your non-roth account. is it a regular brokerage account?

this could also be called a wash trade, depending on timing and accounts.

just a basic self directed ira with TD ameritrade. Funds came from in-service rollover out of my employer 401k plan because it was too restrictive.

I still think I'm overlooking something obvious i.e., why is 100 shares @ $1/share better than 25 shares @ $4/share.

 

[rick81721]

Pat and Rick. Every day.

View attachment 151502

Haha yeah Pat is Jack Lemmon's character. Maybe I'll bail him out when the IRS takes his house!

 

[rick81721]

you have it totally backwards - a person in a low tax bracket is going to be in a low tax bracket and saves nothing by deferring.
(other than the actual habit of savings - they only get the match as a gain)

matching some percentage of 6% when it is 5x what a lines-person is getting in a match is the unfair part. and the high earner
has a good chance of riding it until the tax bracket comes down.

i'm not talking about lifestyle, i'm talking about the systematic inequity in the policy.

more simply - 'we will match 100% of the first $2,000 saved would be equitable.'

Silly. Everyone benefits by accumulating savings without paying taxes on it until they take it out!

 

[Patrick]

Silly. Everyone benefits by accumulating savings without paying taxes on it until they take it out!

not if they don't reap the gain of a lower tax bracket, or LTG - it might cost them money, vs doing a roth.
the one benefit is tax-exempt transactions inside the account, which can be accomplished in a roth.

 

[rick81721]

not if they don't reap the gain of a lower tax bracket, or LTG - it might cost them money, vs doing a roth.
the one benefit is tax-exempt transactions inside the account, which can be accomplished in a roth.

Seriously? You've already forgotten the company match - free money!

 

[Patrick]

Silly. Everyone benefits by accumulating savings without paying taxes on it until they take it out!

or move to fla and avoid nj state tax on w/d....

 

[Cassinonorth]

i was assuming that the stock was in a regular brokerage account -
which is where i was thinking a wash might be applied.
otherwise a backdoor IRA is required to avoid the penalty (i think?).....

---

I'm not sure - IRAs/401ks are a staple of wealthy america - and the people that make the rules.
They usually don't stab themselves. Consider the ROTH IRA, it favors the wealthy, as they can afford the tax
on the initial earn, and max the contribution, creating a tax free stream in the future.
Sure everyone gets to participate, and should, but it is a lot easier for higher earners.
Consider the company match on regular 401k, it usually specifies something like 50% of the first 6% of salary.
well, what if 6% of salary is above the max contribution? max contrib is $20k, company match is $10k,
if you were doing well, making $100k per year, then 6% is $6k, and the match would be $3k. Even if you were a monster saver
and put away the same $20k as the executive.

I max my IRA and 401k...it's about 35% of my gross salary. And I still ride an s-works. #ChildFree.

 

[rick81721]

or move to fla and avoid nj state tax on w/d....

only have to move to pennsy to avoid paying any state tax on IRA distributions