SECURE Act

[Smallsteps]

Exactly. The same as for healthcare. Uncouple it from employment and let employers cover some or all of the costs as part of your total compensation plan.

While in theory I would agree.............. however even when subsidized through employment so many people do not take advantage of plans /options that are offered to them NOW.

I have come to understand while there is a certain percentage of people whom will learn the retirement game and any changes and play it to their advantage........ most people simply do not play.
Even in employee healthcare many people do not know, research or care what plan they chose until their part of the bill shows up. Only the lowest premium unless they were burned before and then study up to not learn the hard way again. what is covered? what was the deductible and who is in network.

Far too many want someone else to take any risk and make any decisions regarding investments or healthcare.
It has been as old as time in the good old days when pensions were the norm, savvy investors knew that some running the pensions were corrupt or worse yet inept.

401ks were to enable employees to drive their OWN future but far too many WANT to leave the task with an employer.
Someone to blame that the available options were not good ... the match too small etc.

This is what has pushed so many into thinking a one size fits all approach would be better ....IMO a proposal designed by jealousy and greed, Mad that some worked the system to their advantage and some sat on the sidelines.

[disneysteve]

I think that we should just do away with employer plans altogether and raise the IRA limits. We could still allow employers to match and even fund IRAs through payroll deduction.

Exactly. The same as for healthcare. Uncouple it from employment and let employers cover some or all of the costs as part of your total compensation plan.

[Petunia 100]

I think they should have more savings opportunities for people without a 401k. I am one such person who doesn't have a 401k. I have been saving since 2006 the maximum in a Roth IRA. I did not have a 401k during my years working because I was mostly a temp for 4 years. I had health benefits from my DH and being able to buy from temp agency. Plus seriously I was 22-25ish and I needed crap with health insurance. That being said I have about $150k in my Roth IRA after investing and saving this entire time. It just was hard to save in a tax advantageous way without a 401k. During the same time frame 2006-2019 my DH has amassed over $525k in his 401k plus his Roth $325k for max contributions from 2006-2019. So he's the bulk of our retirement savings. If I had chosen to work and had a job that offered and matched we'd have $2 M+ in retirement accounts probably. But at the same time maybe not because maybe we wouldn't have been saving.

I think that we should just do away with employer plans altogether and raise the IRA limits. We could still allow employers to match and even fund IRAs through payroll deduction.

[Petunia 100]

Maybe a little off topic but I've been thinking about this. We have a retirement saving crisis! Why doesn't the company match ever INCREASE??

I've been working for 29 years and in all that time its always been matched 100% up to 3% then 50% up to 6% in my job (I know different everywhere).

How about companies having to increase their MATCH periodically! What about that????

Companies don't have to offer a match at all.

[bjl584]

I've been seeing this pop up recently.
I haven't really researched it enough to know the details.
It doesn't seem like anything is going to change from a personal perspective for me for the time being.

[LivingAlmostLarge]

I think they should have more savings opportunities for people without a 401k. I am one such person who doesn't have a 401k. I have been saving since 2006 the maximum in a Roth IRA. I did not have a 401k during my years working because I was mostly a temp for 4 years. I had health benefits from my DH and being able to buy from temp agency. Plus seriously I was 22-25ish and I needed crap with health insurance. That being said I have about $150k in my Roth IRA after investing and saving this entire time. It just was hard to save in a tax advantageous way without a 401k. During the same time frame 2006-2019 my DH has amassed over $525k in his 401k plus his Roth $325k for max contributions from 2006-2019. So he's the bulk of our retirement savings. If I had chosen to work and had a job that offered and matched we'd have $2 M+ in retirement accounts probably. But at the same time maybe not because maybe we wouldn't have been saving.

[Smallsteps]

I guess it is law now. This is the provision that will require a careful plan if you have managed to save enough for 30-ish years of retirement (in tax advantaged retirement accounts) and unfortunately pass on early in your retirement. The biggest problem might be a lack of awareness for non-spousal heirs which might be a problem even if you have managed to convert your pretax retirement accounts to Roth. I think the penalty is 50% if all the funds are not removed by the 10 year point.

It could make saving in taxable equity investments for heirs a little more attractive, although legislation could be passed to take away the stepped up basis....

That is a good point that good, bad or indifferent all the changes to plans and rules can be changed again.
Usually I would assume if the government thinks there is a big enough pool of non spousal heirs that will end up paying more taxes on money left in IRAs.

[Like2Plan]

Also some less good, but noteworthy items:
- Non-spousal inherited IRAs must be completely withdrawn within 10 years (eliminating the "stretch" IRA)

I guess it is law now. This is the provision that will require a careful plan if you have managed to save enough for 30-ish years of retirement (in tax advantaged retirement accounts) and unfortunately pass on early in your retirement. The biggest problem might be a lack of awareness for non-spousal heirs which might be a problem even if you have managed to convert your pretax retirement accounts to Roth. I think the penalty is 50% if all the funds are not removed by the 10 year point.

It could make saving in taxable equity investments for heirs a little more attractive, although legislation could be passed to take away the stepped up basis....

[corn18]

My 401k is 100% up to 6%.

[disneysteve]

Just like your post says you might need to review an new employers match policy since your current is generous.

We get a 50% match up to 6% of pay. Isn't that a pretty standard formula?

We do also get an additional 1.5% whether we contribute or not. That part is probably more generous than most.

[scfr]

Probably not. That just indemnifies the employer if the underlying provider of the annuity fails. So no help for the annuitant. It may simplify things if you want an annuity. But I can see this going in a bad direction where insurance companies bombard everyone with offers to annuities their 401k and trick them into variable or index annuities with stupid high fees. Like reverse mortgages, annuities make sense for some, but not all and a variable or indexed annuity never makes sense. If they set it up like TSP and offer only SPIA's, then it will be a good thing.

My thoughts were similar … that it could be a really good thing, but that it probably will wind up being bad because the options may be driven by annuity sales people who don't have the best interest of the employees at heart. And that a lot of employees will look at their plans and say "guaranteed income? sign me up for that" without understanding what they are getting.

[Smallsteps]

The problem is not everyone has that sort of teacher/influencer in their lives. As we repeatedly say, education is critically important. People don't all just figure this stuff out on their own.

As for COBRA, a lot of people can't afford that as it's often around double what you were paying while working, since you have to pay both your share and the share your employer was paying for you. So yes, you can carry COBRA for 18 months, but a great many people can't actually do that, especially if they aren't working for any period of time.

Yes your daughter is lucky to have a good teacher. Most people whom do not take it upon themselves to learn.... the ones who come forward to "teach" often are more likely targeting people to invest in a way to benefit or pay them.
Just like your post says you might need to review an new employers match policy since your current is generous. You would need to factor that in in switching jobs and some people may stay put for similar reasons.

I think everyone should see a cobra statement. Very often people are NOT really aware of the total cost paid by employers for their benefit.
NO it is NOT cheap and many CAN not afford to keep it. but it is an option.

The problem with all these retirement "fixes" is they are often complicated and with a lot of legal jargon and" in this case but with these various exceptions" etc.
Half way through the bill people get glazed over and simply do not get much more then bits and pieces.

ANNUITIES often have higher fees and there are many junk ones out there people won't know they bought junk until after it is too late. I understand the desire for people to want a set amount instead of risking running out of their saved money especially if they started late or did not have a large income to begin with.

[disneysteve]

I don't think I've ever spoken to anyone who was staying in a bad job situation because of a retirement plan match but I'm sure it probably happens. Realistically, if you've been getting the maximum match you could be talking about a nice chunk of money. My match for 2019 was $4,400 so if I need 5 years to be vested and leave after 4, I'd be throwing away almost $18,000. I could see someone sticking it out a little longer rather than losing that kind of money.

You're totally right that for folks who are saving nothing, an IRA is a perfect option. My daughter started hers when she was 16 or 17 with babysitting and summer job income. She didn't fund it during college since she didn't have a job but as soon as she graduated and started working, she started contributing again. She's not even close to maxing it out as she doesn't earn that much yet but at least she's funding it. But I taught her early on the importance and value of starting early with whatever you can. I sat down with her and used a savings calculator to show her how that money would grow over time. The problem is not everyone has that sort of teacher/influencer in their lives. As we repeatedly say, education is critically important. People don't all just figure this stuff out on their own.

As for COBRA, a lot of people can't afford that as it's often around double what you were paying while working, since you have to pay both your share and the share your employer was paying for you. So yes, you can carry COBRA for 18 months, but a great many people can't actually do that, especially if they aren't working for any period of time.

[Smallsteps]

Those are two entirely different issues, apples and oranges.

You don't lose your retirement account if you leave your job, but lots of people feel trapped in dead end jobs because if they leave, they won't have health insurance.

Also, the non-employer-based retirement options are hardly comparable to the employer-based ones. I can put $25,000/year into my 401k but only $6,000 into a Roth. And I can't even fund a Roth because I'm over the income limit, so if not for my 401k, I'd have no tax-advantaged way to save for retirement.

As for auto-enrollment, it isn't perfect but it's way better than nothing. Momentum is a very strong force. If you have everybody contributing, even if only 3%, very few will go to the trouble of opting out. Most will just leave it be. Sure, some will pull the money out for something stupid at some reason, but that's a different issue.

People stay in DEAD end jobs for many reasons not just health or retirement but the talking point is separate healthcare ASAP but if there is a retirement lack it is the EMPLOYERS fault.

The difference is not that big if you leave your job cobra can keep going for a time like until you get new job .... the may keep SOME retirement ( employee contributions) but the amount they get to TAKE with them OF any match varies greatly by plan and length of service.
People stay out of being Afraid of what IF ...... what if the new insurance cost more or covers less ? what if my deductible is more...... they NEVER seem to ASK what if it is cheaper / covers more and easier to deal with.

How is counting I must stay ( for example 5 years) to vest and keep my employer match or I must stay to keep this insurance....... apples and oranges?
.
I just do not understand why every time the subject of lack of retirement savings they BLAME employers who have not offered plans.
WHY,? There are other ways and while there are limits ect. , MOST are not in your shoes that max out all tax advantaged options every year.
I am talking those whom are in the zero balance category where the 6000 a year for IRA seems like a impossible task.

My point is from the stand point of those whom work for small employers that as of NOW may not have a plan. NOT to mention some plans have varying match equations some do not even match.

I think your income distance from most of the ones who need the most help in starting or working towards retirement does not necessarily give you a front row seat to see what really happens.
I work with and or have friends whom are in these shoes.
If they stay a short time maybe 1 year etc the often just cash out that 3% if they did not bother to opt out. Since they pay tax and penalty they are moving backwards.

Many simply not sure who or where to trust to ask about how to roll over and what type of options they have.
Many with perhaps a few years or over the limit where they can leave with an employer often are not doing well as these inactive accounts are slowly being eaten by admin fees etc.

Others whom are wanting the match feel like i must stay X amount of time until I am vested to take the match. So staying in a dead end job for that is OK and not the same as those whom CHOSE to stay for whatever health plan they like.

[corn18]

Maybe a little off topic but I've been thinking about this. We have a retirement saving crisis! Why doesn't the company match ever INCREASE??

I've been working for 29 years and in all that time its always been matched 100% up to 3% then 50% up to 6% in my job (I know different everywhere).

How about companies having to increase their MATCH periodically! What about that????

This is driven by labor market dynamics, not inflation or personal savings factors. I get 100% up to 6%. If I were looking for a new job, I would look at their match. If it is not competitive, they better have something else to make up for it if they want me to work there. That works in a tight labor market, but not so much if unemployment is high.