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  • #31
    Originally posted by disneysteve View Post
    If I ever have to borrow from my retirement accounts, I'll be in such deep crap that it really won't matter where I'm taking the money from, so I don't think that alone is a selling point for a Solo 401k vs. a SEP-IRA.

    If it were up to me, 401k loans would be eliminated entirely. Retirement funds should be for retirement - period.
    It's not the only selling point. As I previously mentioned, they also have higher contribution limits...much higher. As an example, for 2012 if I'm a sole proprietorship with a Solo 401k, with $60,000 profit, I can contribute $28,159.32. For comparison, with a SEP IRA I can contribute $11,159.32. Sure, if you want to avoid the Solo 401k just because you hate 401k loans (which by the way I'm glad it's not up to you, since some of us run into unexpected costs such as a car dying and needing a down payment), go ahead and miss out on the additional $17,000 a year you can put towards your retirement. That's your choice.

    Originally posted by LivingAlmostLarge View Post
    Pensions rule period over 401k. Where else can you have a pension for life and not pay anything? The state where I grew up gave people pensions at 1.25% per year of service for life without contributing anything! $0 saved and you work 30 years and you get 37.5% of your salary for life. Not huge but OMG, how do you expect the state to balance a budget when you are giving people a monthly income for life from ZERO?

    Hence why they are going bankrupt fast and have changed the laws called civil servant reform. I mean pensions don't work because people quickly run through what they have "saved" and end up living off the state or government instead of their own money. Hence why 401ks are a huge savings. The company/state only contributes even 10% is way less than a pension.
    Pensions are a joke for this reason. You have the "promise" to pay from an organization which can just declare bankruptcy to get out of their obligation to you. I fail to see how this was ever a good idea, even when the economy wasn't awful.

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    • #32
      Originally posted by scubatim84 View Post
      It's not the only selling point. As I previously mentioned, they also have higher contribution limits...much higher.
      Sorry, I wasn't saying solo 401ks aren't good. I agree that the higher limit is the best selling point. I have a SEP-IRA but that's because the self-employment income I earn is very low, nowhere near the limits on either type of account. If my income were higher, I'd go with the 401k also. I just don't think the fact that you can take the money out early via a loan is a selling point.

      I feel the same way when folks post about opening a Roth because they know they can withdraw the money at any time. If the money is for retirement, then it should be used for retirement (unless something truly catastrophic happens in your life).
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

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      • #33
        Originally posted by LivingAlmostLarge View Post
        Pensions rule period over 401k. Where else can you have a pension for life and not pay anything? The state where I grew up gave people pensions at 1.25% per year of service for life without contributing anything!
        I can understand the feeling that pensions are possibly over generous, but I see this attitude (above) from too many people that simply don't understand how pensions work. The employee isn't getting "something for nothing". The pension is part of the benefit package (just as a matching contribution to a 401k is). There is usually a trade off where the jobs with pensions pay somewhat less but the pension is the "pay equalizer" (My job in the private sector would get at least 10% more). For example, when the economy was going good, private company employees would laugh at accepting the much lower pay of government employees, even with the pension added in. Yet these same people complain now that public employees are getting too much with their pensions. You can't have it both ways (well you can if some Tea Party groupies have their way... but I digress).

        Is it possible that the pensions were too generous? Maybe, especially for certain employees (I'm looking at you, public safety employees!), but its certainly not "something for nothing".
        Don't torture yourself, thats what I'm here for.

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        • #34
          Nope my mom was one of those people who got a pensions and I am glad for it. Her 7.5% payments over 33 years of working was around $212k. Her pension now is about $60k/year. She was a social worker. Explain how to generate $60k off of $212k? Not possible even with 33 years of returns. Assuming $500/month contributions and 7% returns for 33 years she'd only have $812k definitely not enough to generate $60k/year.

          So she is very fortunate that the state was dumb. Hence probably why back in the 80s and 90s they began civil servant reform and begin kicking people out of the pension. The funding of such a plan was impossible.
          LivingAlmostLarge Blog

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          • #35
            Originally posted by LivingAlmostLarge View Post
            The funding of such a plan was impossible.
            The funding is STILL impossible and that's why you're seeing reduced benefits, more employee contributions, moves to defined contribution plans and the like.
            The easiest thing of all is to deceive one's self; for what a man wishes, he generally believes to be true.
            - Demosthenes

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            • #36
              Originally posted by LivingAlmostLarge View Post
              Nope my mom was one of those people who got a pensions and I am glad for it. Her 7.5% payments over 33 years of working was around $212k. Her pension now is about $60k/year. She was a social worker. Explain how to generate $60k off of $212k? Not possible even with 33 years of returns. Assuming $500/month contributions and 7% returns for 33 years she'd only have $812k definitely not enough to generate $60k/year.

              So she is very fortunate that the state was dumb. Hence probably why back in the 80s and 90s they began civil servant reform and begin kicking people out of the pension. The funding of such a plan was impossible.
              Exactly. They were so good that they were unsustainable. Did they provide a better retirement quality of life compared to 401k? Absolutely.

              Pensions: Great for Individual, Bad for Government
              401k's: Decent if you invest smartly/retirement timing is everything, great advantage for Government.

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              • #37
                Originally posted by disneysteve View Post
                Sorry, I wasn't saying solo 401ks aren't good. I agree that the higher limit is the best selling point. I have a SEP-IRA but that's because the self-employment income I earn is very low, nowhere near the limits on either type of account. If my income were higher, I'd go with the 401k also. I just don't think the fact that you can take the money out early via a loan is a selling point.

                I feel the same way when folks post about opening a Roth because they know they can withdraw the money at any time. If the money is for retirement, then it should be used for retirement (unless something truly catastrophic happens in your life).
                I hear you Steve...I think we're on the same page after all then. I definitely agree that 401k loans should NOT be taken lightly...and you know, if we had any sort of savings cushion built up, I would have drained that before taking out a loan. Still, having just bought a house the year before, that pretty much tends to throw your finances into a cyclone which takes a while to straighten out. I think your caution came from the fact that some people may interpret my statement as thinking "oh, a 401k loan, I never thought of that", and in that instance, yes I think we both wish they didn't.

                Catastrophic events are a reasonable cause for taking some money out of your 401k, especially if it's only 3K which is paid back at a 4.5% interest. Shopping spree at Macy's? Eh, not so much.

                Originally posted by Christian321 View Post
                Exactly. They were so good that they were unsustainable. Did they provide a better retirement quality of life compared to 401k? Absolutely.

                Pensions: Great for Individual, Bad for Government
                401k's: Decent if you invest smartly/retirement timing is everything, great advantage for Government.
                This is always the problem. Government always wants to hand out a bunch of free stuff for people and people always happily accept it. They never stop to think where the money comes from or whether its sustainable. Eventually, if you're relying on this sort of garbage such as pensions, when the music stops you might just be the person standing without a chair.

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                • #38
                  Originally posted by LivingAlmostLarge View Post
                  Nope my mom was one of those people who got a pensions and I am glad for it. Her 7.5% payments over 33 years of working was around $212k. Her pension now is about $60k/year. She was a social worker. Explain how to generate $60k off of $212k? Not possible even with 33 years of returns. Assuming $500/month contributions and 7% returns for 33 years she'd only have $812k definitely not enough to generate $60k/year.

                  So she is very fortunate that the state was dumb. Hence probably why back in the 80s and 90s they began civil servant reform and begin kicking people out of the pension. The funding of such a plan was impossible.


                  ALL pensions are in a big heap of trouble, they will be cutting here and there until they have it all. we are already seeing big pension cuts on the state levels, public pension plans are under attack as well.
                  retired in 2009 at the age of 39 with less than 300K total net worth

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                  • #39
                    Military gets 50% for life after just 20 years. That is another unsustainable pension but it's still there.
                    LivingAlmostLarge Blog

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                    • #40
                      Originally posted by LivingAlmostLarge View Post
                      Military gets 50% for life after just 20 years. That is another unsustainable pension but it's still there.
                      hehe don't get me started on the issues I have with military pensions... Biggest one: it's all or nothing. If I don't stick around for 20+ years (to include getting kicked out, like the 18-year majors who recently got the boot) I get absolutely zero benefit. Less than 20% of military veterans stay in until retirement. All the rest give their best years in service to the country, and when they separate they receive nothing more than a pat on the butt and an empty resume. #2: Sustainability is non-existent -- its current form just keeps costing the country more and more money, and it never changes (e.g., gets FIXED) because to do anything along those lines is interpreted by the hysterical media as a politician who doesn't support the military. It's a joke...

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                      • #41
                        Originally posted by kork13 View Post
                        hehe don't get me started on the issues I have with military pensions... Biggest one: it's all or nothing. If I don't stick around for 20+ years (to include getting kicked out, like the 18-year majors who recently got the boot) I get absolutely zero benefit. Less than 20% of military veterans stay in until retirement. All the rest give their best years in service to the country, and when they separate they receive nothing more than a pat on the butt and an empty resume. #2: Sustainability is non-existent -- its current form just keeps costing the country more and more money, and it never changes (e.g., gets FIXED) because to do anything along those lines is interpreted by the hysterical media as a politician who doesn't support the military. It's a joke...
                        18 year Majors who got the boot... did they not receive a generous severance package? If not, sounds like they were passed over for promotion 3 times...otherwise they would not be 18 year majors. Just like any other job, you must produce and promote to advance your career. If you don't, it's only fair that you have to leave to make room at the top for the junior folks trying to advance. In fact, I don't understand why they were allowed to stay 18 years...typically, if you are passed over 3 times in route to the rank of Lieutenant Col/Commander, that should put you at right around 15 years of service...in your example referring to 18 year Majors, the military was very generous with these folks, they allowed them to stick around and continue to collect a paycheck for an additional 3 years when they could have sent these folks home years before.

                        You also state that you leave with zero benefits. Not true: you leave with a very generous GI bill for you or your kids (which now covers full tuition and extra money for housing/living expenses), you had free health care for 18 years, you got a steady paycheck for 18 years as well (let’s not forget that). Additionally, you have an option to contribute to the Thrift Savings Plan (Military version of the 401k), and there are other benefits that military members know about that I will not get into.

                        Additionally, anyone who leaves the Military after 18 years of service with an empty resume is not trying hard enough. Period.

                        I do agree that the 20 retirement option is not sustainable. However, I also believe that when our Soldiers, Marines, Sailors and Airmen signed a contract to enter the service, that contract stated that service members are entitled to a 50% military pension at 20 years of service. Therefore, it should be honored. After all, we have people out there losing their lives and limbs. A sailor at my command was recently injured in Afghanistan and lost both arms, both legs, and his vision in one eye. Additionally, we spend countless years away from our families during countless other deployments...time we can never get back. If the DoD wants to make changes to the retirement system, they must ensure that those changes only apply to those not already serving (i.e. only new recruits).

                        I can also tell you that the large majority of service members prefer the 20 year pension option vs. any proposal that the DoD has put on the table thus far (my sources: Army/Navy/AF/MC Times statistics and all the service members I've served with agree) In fact, so much so that there would probably be massive military service member protests if the DoD decided to end the current 20 year pension option without grandfathering current members.

                        Sorry for the short novel but I believe this deserved a response.

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