401k 15% Tax On Gains

[disneysteve]

I think the match is more of a draw of why people use it... I don't think the average 9-5er will care that much about delaying their tax.. maybe small business owner .. but not the average worker. The match is the draw..

I don't know. I think the average worker doesn't have a clue. They may not even know or understand that there is a match.

I had a conversation with a coworker just the other day. She is new to the job and was looking at her paycheck. She wanted to know why there was a deduction for the 401k. I explained that it is automatic enrollment. She said she didn't want them taking that money. I explained that they aren't "taking" it. It is her money that is being invested for the future. She wanted to know how she can stop it. She wants that money to pay bills. I explained that the amount being taken out ($34 in her case) is pre tax so if she opts out, she'll get less than that in her take home pay and it's really great to start funding retirement as early as you can. She still wasn't buying it so I explained the match, how for the $34 she was contributing, they were giving her another $17 totally free. If she stopped contributing, not only would she pay more in taxes but she'd lose the free $17 every 2 weeks.

It was all to no avail. She found HR's number and was going to call to stop the contributions as soon as she could. I tried my best.

[LivingAlmostLarge]

I see lots of people saving nothing. It's a lot more than you would think.

[phantom]

I think the match is more of a draw of why people use it... I don't think the average 9-5er will care that much about delaying their tax.. maybe small business owner .. but not the average worker. The match is the draw..

This is purely my opinion.. so if there were something to prove me wrong .. I'd consider it.

I don't know the statistic anymore than you do, but I can think of some other draws. I think a lot of people use 401ks simply because they know they should be saving for retirement and have heard that a 401k is how you do that. I think there are also a lot of people who fail to differentiate between a 401k and the investments inside the 401k and see a 401k as a way to earn more money than a savings account, not even realizing they could make similar investments outside a 401k.

[bennkar]

This wouldn't affect me much as I already put 66% of my money in as post tax (Roth) anyway, plus if 59.5 y.o. is a cut off for taxing I will only have a few years to deal with it my pre-tax monies anyway. I'm sure there will be some way to reconfigure my accounts to best deal with this. If I was younger I probably wouldn't like it. Seniority does have its advantages .

[scfr]

Why don't they just lower the age at which you must begin making RMDs so that it is aligned with the "full retirement age" for Social Security?

[GrimJack]

No one goes broke paying capital gains tax (except in certain stock vesting situations).