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Trump Calls For Review Of Rule Requiring RMDs At 70 1/2
How successful have such tax deferred plans been at their original intention of providing ordinary Americans with a secure retirement?
These numbers (from 2017) would suggest not very successful. If all retirees have to go with this is SS (no pension or employer provided health insurance), it would be tough living another 20-30 years on those amounts - even if savvy investors and even if the current exuberant market were to continue bubbling along.
Remember that these are tax deferred amounts - meaning a chunk of these savings will go to covering the deferred taxes upon withdrawal.
2017 Average 401K Retirement Plan Totals
Under age 25 Average 401(k) account balance: $4,773 Average 401(k) savings rate: 4.8 percent
Age 25 to 34 Average 401(k) account balance: $24,728 Average 401(k) savings rate: 5.9 percent
Age 35 to 44 Average 401(k) account balance: $68,935 Average 401(k) savings rate: 6.3 percent
Age 45 to 54 Average 401(k) account balance: $129,051 Average 401(k) savings rate: 7 percent
Age 55 to 64 Average 401(k) account balance: $190,505 Average 401(k) savings rate: 8.3 percent
Age 65 plus Average 401(k) account balance: $209,984 Average 401(k) savings rate: 9 percent
>> How successful have such tax deferred plans been at their original intention of providing ordinary Americans with a secure retirement?
Good grief, hugely successful is the answer, for me and for a great many people I know, also my parents, also my children. And just about everyone I ever worked with. That is, employed over a normally long career. Some started middle-class, some much lower and got to join the middle class. Some probably were rich young, but the careers and companies I worked for, including many public-sector, generally did not have rich kids at all.
I make no claim that it has been enough for some, nor that it should not have been done better, and more generously, but
>> If the answer is not very successful,
I disagree with that speculation 100%, without even thinking long about it.
@msf: I completely agree. Have a good night and I look forward to the next one. We all belong to our cult of personality, but I'm trying to listen and understand.
@DavidRMoran How successful does this sound to you?:
Around half of American households have no retirement accounts at all. No 401(k)s, no IRAs, nothing. You might think that’s because they’re all expecting pension income in retirement. In fact, according to the Government Accountability Office (GAO), around 29% of households age 55 and older have neither retirement savings nor a pension. It doesn’t paint a pretty picture.
The original intention language is indeed in ERISA (Pub. L. 93-406), right at the top, Title I, Subtitle A, Sec 2, "Findings and Declarations of Policy". That section was subsequently codified as 29 USC §1001.
A little over 30 years ago, Congress enacted and President Gerald R. Ford signed into law the Employee Retirement Income Security Act (ERISA). The purpose of the Act was to protect and enhance Americans’ retirement security by establishing comprehensive standards for employee benefit plans. The Act also created the Individual Retirement Account, or IRA.
The ICI goes on to note that the purpose of those IRAs was narrow - to fill the gap only for "individuals not covered by retirement plans at work."
That study complements the data Lewis cited by providing data for the IRA subset of all retirement accounts. Its summary:
The brief’s key findings are:
IRAs were intended to give those without an employer plan access to a tax-deferred savings vehicle.
Today, IRAs hold nearly half of all private retirement assets, but most of these funds are rollovers from 401(k)s, rather than contributions.
The 14 percent of households who do contribute to IRAs include:
higher-income dual-earners who also save in a 401(k);
moderate-income singles or one-earner couples, often with a 401(k); and
higher-income entrepreneurs with no current 401(k).
One way to turn IRAs back into an active savings vehicle – one used more for contributions – is to auto-enroll all workers without an employer plan in an IRA.
I think it was Bush II whose administration proposed privatizing a part of SS (25% IIRC) and making wage earners participate in 401K-like vehicles. I recall that idea going nowhere. It may be that many Americans who could benefit from investment savings have an unhealthy fear of the securities markets.
From my point of view, Americans are poor savers; public institutions and the private sector have long abandoned providing meaningful pension plans; we are going to live much longer than thought when ERISA was enacted; therefore something must be done to address these problems. Tinkering with RMDs isn't even a band-aid solution to the retirement savings problem and what the Administration is proposing would only exacerbate growing inequality.
@DavidRMoran How successful does this sound to you?:
Around half of American households have no retirement accounts at all. No 401(k)s, no IRAs, nothing. You might think that’s because they’re all expecting pension income in retirement. In fact, according to the Government Accountability Office (GAO), around 29% of households age 55 and older have neither retirement savings nor a pension. It doesn’t paint a pretty picture.
Not news, and not what I was saying about those who partook.
So good grief (favored locution with you), man, whose doing, or whose fault do you think this is? Not to sound like a wingnut anti-libtard, since you can take offense all you want but you fully know by now where I stand, is this the doing of gov, and / or / but what do you think gov role in all of this should be?
It is like the args made about lack of exercise and smoking and fat and health. I have a bil who works for Doctors Without Borders but used to be a cardio in Michigan with a preponderance of patients who were cheese-eating smokers, as his practice put it.
As he himself still says, talk about a collision of values / goals / efforts / freedom policies.
So ... what IS your point about the original provisions? How is success to be defined? You are the one who (wrongly, maybe) defined original intention. Read msf's links. I bet we are in violent agreement about future policy, or close.
But we are talking about the past, and I was commenting on all those who partook of this new legislation bigtime, including myself.
@Davidrmoran Good grief, acknowledge that you ARE atypical first and stop with the obnoxious good griefs. (You're not talking to Charlie Brown.) Look at the damn stats about savings for most Americans and tell me how you are typical when half have nothing saved for retirement! Our definitions of atypical are not dissimilar and you know it. I suspect from your post history you rank fairly high on the spectrum of amount saved for your age group--nothing at all typical about that. Are you next going to lecture about Americans drinking too many lattes and eating too much avocado toast and that's why they have no savings? Because I also suspect you know that is largely bs. So extrapolating your personal success with the retirement system as some sort of evidence of its larger success for the general or "typical" population is absurd.
What's the government to do? Nothing this government would ever do, but it would be to dramatically increase Social Security payments and/or create a Basic Guaranteed Income, and yes, raise income taxes/estate taxes/corporate taxes and capital gains taxes to pay for it. And it would be to finally acknowledge that some problems in post-industrial highly developed economies can't be solved via GDP growth and that that outmoded way of thinking has disastrous environmental consequences. So yes free markets, but tax appropriately to save people from their worst instincts--buying lattes, avocado toast and big screen TVs if you read the usual asinine arguments--but in reality their general poverty resulting from that massive drain of wealth caused by technology and globalization.
But assuming that the government will never do this, which is the correct assumption, the simplest path would be to leave the current system alone and not make the regressive retirement system we currently have even worse than it already is by getting rid of RMDs at age 70 1/2.
And what is the point of the original provisions?--ostensibly as MFS already spelled out quite clearly to get ordinary Americans to save. What was the other unspoken point? To create a new savings system that allowed companies to eliminate their pension plans and put the burden of retirement on employees' shoulders. And it was to foster the growth of the industry to which this board is dedicated. The ostensible goal of getting Americans to save has proven a complete failure for half of America--because apparently they like cheese and cigarettes--and largely a failure for millions of other Americans who still haven't saved enough. And yes, I know the previous pension plan system had many flaws too--another reason to take that pension system out of corporate hands and extend, expand, increase Social Security, which is the exact opposite of what our current government plans. Anything else or must I expect another sarcastic good grief directed my way?
I don't know how much political organizing you have done, or door-to-door canvassing, or even speaking up at town meeting, but part of making things widely sellable (apart from dealing gently / successfully with snoot, which so clearly is not your strong point) is honestly / fully / frankly addressing complaints real and semi-real. Including the 'save more' / 'you shoulda saved more' / 'work longer, take any job' thing.
Do you think getting rid of RMDs is a good idea? What do you make of msf's points and links?
No more good griefs from me; it makes you deaf and then sermonize to the side of the discussion
@LewisBraham. Very solid post in my opinion. I am effectively retired as of 9/1/18. With above average S.S. , a paid for home and a substantial portfolio.. luckier than most. And who knows what the future might hold? I can't imagine how the masses would fare,,, given what I read about their retirement readiness. It's only gonna get worse for many.
Comments
Remember that these are tax deferred amounts - meaning a chunk of these savings will go to covering the deferred taxes upon withdrawal.
2017 Average 401K Retirement Plan Totals
Under age 25
Average 401(k) account balance: $4,773
Average 401(k) savings rate: 4.8 percent
Age 25 to 34
Average 401(k) account balance: $24,728
Average 401(k) savings rate: 5.9 percent
Age 35 to 44
Average 401(k) account balance: $68,935
Average 401(k) savings rate: 6.3 percent
Age 45 to 54
Average 401(k) account balance: $129,051
Average 401(k) savings rate: 7 percent
Age 55 to 64
Average 401(k) account balance: $190,505
Average 401(k) savings rate: 8.3 percent
Age 65 plus
Average 401(k) account balance: $209,984
Average 401(k) savings rate: 9 percent
https://money.usnews.com/money/retirement/401ks/articles/2018-07-23/are-your-retirement-savings-ahead-of-the-curve
Above numbers based on a survey of actual 401K plan participants. Considering that fewer than half of all U.S. workers participate in a 401K plan (for a variety of reasons) the picture looks even bleaker.
https://www.fool.com/retirement/2017/06/19/does-the-average-american-have-a-401k.aspx
>> How successful have such tax deferred plans been at their original intention of providing ordinary Americans with a secure retirement?
Good grief, hugely successful is the answer, for me and for a great many people I know, also my parents, also my children. And just about everyone I ever worked with. That is, employed over a normally long career. Some started middle-class, some much lower and got to join the middle class. Some probably were rich young, but the careers and companies I worked for, including many public-sector, generally did not have rich kids at all.
I make no claim that it has been enough for some, nor that it should not have been done better, and more generously, but
>> If the answer is not very successful,
I disagree with that speculation 100%, without even thinking long about it.
https://smartasset.com/retirement/average-retirement-savings-are-you-normal
Just the fact you’re here on this board proves you’re atypical.
Was this intention language in the ERISA legislation?
Your understanding of 'no way' and 'atypical' is unlike mine.
But I would never say I am not or have not been very fortunate (rising markets also), as well as a saver.
Here's how the ICI summarized that language in 2005:The ICI goes on to note that the purpose of those IRAs was narrow - to fill the gap only for "individuals not covered by retirement plans at work."
"IRAs “have drifted very far from their original intent” of helping those who need them most, researchers for the Center for Retirement Research [at Boston College] conclude in a new study."
http://squaredawayblog.bc.edu/squared-away/iras-fall-short-of-original-goal/
That study complements the data Lewis cited by providing data for the IRA subset of all retirement accounts. Its summary: The summary, including links to data (with charts) and to the full study, can be found here:
http://crr.bc.edu/briefs/who-contributes-to-individual-retirement-accounts/
OJ
From my point of view, Americans are poor savers; public institutions and the private sector have long abandoned providing meaningful pension plans; we are going to live much longer than thought when ERISA was enacted; therefore something must be done to address these problems. Tinkering with RMDs isn't even a band-aid solution to the retirement savings problem and what the Administration is proposing would only exacerbate growing inequality.
So good grief (favored locution with you), man, whose doing, or whose fault do you think this is? Not to sound like a wingnut anti-libtard, since you can take offense all you want but you fully know by now where I stand, is this the doing of gov, and / or / but what do you think gov role in all of this should be?
It is like the args made about lack of exercise and smoking and fat and health. I have a bil who works for Doctors Without Borders but used to be a cardio in Michigan with a preponderance of patients who were cheese-eating smokers, as his practice put it.
As he himself still says, talk about a collision of values / goals / efforts / freedom policies.
So ... what IS your point about the original provisions? How is success to be defined? You are the one who (wrongly, maybe) defined original intention. Read msf's links. I bet we are in violent agreement about future policy, or close.
But we are talking about the past, and I was commenting on all those who partook of this new legislation bigtime, including myself.
Good grief, acknowledge that you ARE atypical first and stop with the obnoxious good griefs. (You're not talking to Charlie Brown.) Look at the damn stats about savings for most Americans and tell me how you are typical when half have nothing saved for retirement! Our definitions of atypical are not dissimilar and you know it. I suspect from your post history you rank fairly high on the spectrum of amount saved for your age group--nothing at all typical about that. Are you next going to lecture about Americans drinking too many lattes and eating too much avocado toast and that's why they have no savings? Because I also suspect you know that is largely bs. So extrapolating your personal success with the retirement system as some sort of evidence of its larger success for the general or "typical" population is absurd.
What's the government to do? Nothing this government would ever do, but it would be to dramatically increase Social Security payments and/or create a Basic Guaranteed Income, and yes, raise income taxes/estate taxes/corporate taxes and capital gains taxes to pay for it. And it would be to finally acknowledge that some problems in post-industrial highly developed economies can't be solved via GDP growth and that that outmoded way of thinking has disastrous environmental consequences. So yes free markets, but tax appropriately to save people from their worst instincts--buying lattes, avocado toast and big screen TVs if you read the usual asinine arguments--but in reality their general poverty resulting from that massive drain of wealth caused by technology and globalization.
But assuming that the government will never do this, which is the correct assumption, the simplest path would be to leave the current system alone and not make the regressive retirement system we currently have even worse than it already is by getting rid of RMDs at age 70 1/2.
And what is the point of the original provisions?--ostensibly as MFS already spelled out quite clearly to get ordinary Americans to save. What was the other unspoken point? To create a new savings system that allowed companies to eliminate their pension plans and put the burden of retirement on employees' shoulders. And it was to foster the growth of the industry to which this board is dedicated. The ostensible goal of getting Americans to save has proven a complete failure for half of America--because apparently they like cheese and cigarettes--and largely a failure for millions of other Americans who still haven't saved enough. And yes, I know the previous pension plan system had many flaws too--another reason to take that pension system out of corporate hands and extend, expand, increase Social Security, which is the exact opposite of what our current government plans. Anything else or must I expect another sarcastic good grief directed my way?
I don't know how much political organizing you have done, or door-to-door canvassing, or even speaking up at town meeting, but part of making things widely sellable (apart from dealing gently / successfully with snoot, which so clearly is not your strong point) is honestly / fully / frankly addressing complaints real and semi-real. Including the 'save more' / 'you shoulda saved more' / 'work longer, take any job' thing.
Do you think getting rid of RMDs is a good idea? What do you make of msf's points and links?
No more good griefs from me; it makes you deaf and then sermonize to the side of the discussion