The advice in this column is really personal finance 101, but this bit really astounded me:
"You leave your job, and then face the question of what to do with your 401(k). If you're like 46 percent of workers, you will cash out the account even though this money is meant for retirement."
Nearly half of all Americans are that foolish? How is it that people can't wrap their heads around the tax consequences of cashing out a 401(k)?
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slomo007 said:What's the big deal? Social security will take care of me!
My first instinct is not to care, since it's not my problem if people have to work as Wal-Mart greeters because they were idiots and bought a car with their 401(k). The problem is that's not what's going to happen, they are going to vote themselves the money of those of us who actually had some self-discipline. I can already hear the politicians saying "oh don't worry, we're only going to take money from those who have more than X dollars in their retirement accounts. They're rich, they can afford it, we need to do this for social justice!" Time to start a thread on how to move your retirement savings into offshore bank accounts.
I know someone who took out a large chunk of money (and paid the penalty obviously) to use it in other investments. I just sat there in shock, didn't know what to say.
TxAggieJen said:I know someone who took out a large chunk of money (and paid the penalty obviously) to use it in other investments. I just sat there in shock, didn't know what to say. It is a pity 401k accounts don't allow investment in Agape, forcing someone to do what you describe!
401k are flawed in that if you leave a job that won't let you keep the 401k, and don't ACTIVELY roll over the money, they will send you a distribution.
You are then required to deposit the check with an additional 10% from your own pocket to avoid taxes. Force the companies by law to keep 401ks above lets say $250 and you'll see a lot less withdrawals.
Yeah, they say 46% of workers, but they don't mention anything about percentages of total funds. I had like 200 bucks in a 401K from a job I quit about 3 days after one deposit. I ended up paying the $20 fine because I didn't roll it over in time. I would count in that 46% then.
Whenever I counsel people finanacially, the first thing I must determine before I advise is whether thay are just trying to survive or are they evolving.
I counsel accordingly.
Don't judege people just trying to make it to Friday.
How is it that people can't wrap their heads around the tax consequences of cashing out a 401(k)?
Maybe because they have to make a decision based on the "better" of two evil situations?
We do not know the facts behind each story, besides, those are only numbers and furthermore behind those numbers are real people with real situations - again, we do not know what those are, and should not judge based on the numbers only.
The United States is the wealthiest nation in human history. I really doubt that 46% of Americans are just trying to survive.
Part of the problem is the lack of financial education in our schools. A basic understanding of personal finance should be required to graduate high school. Unfortunately the few schools which do teach that topic focus on stock picking contests and similar idiocy which is worse than useless.
If the foolishness of people's actions isn't pointed out to them then they won't learn from their mistakes.
incompetent people do not know they are incompetent. they are not interested in learning from their mistakes. they want to believe what they believe and do things the way they know how. most people do not want to improve themselves if it requires effort. they want things handed to them, without work and without a lot of explanations. so, just let me be!
ppatin said:The United States is the wealthiest nation in human history. I really doubt that 46% of Americans are just trying to survive.
Really?
Currently 14% of adults in the US are on some sort of public assistance and 45% of all children in the US have been part of the WIC food stamp program at some point in their lives.
20% of the homes in my county are currently in some step of the foreclosure process and unemployment in this area is almost 20% as well.
micker said:Currently 14% of adults in the US are on some sort of public assistance and 45% of all children in the US have been part of the WIC food stamp program at some point in their lives. The best way to reduce the number of people on welfare is to cut their incentive to be on it. Plus we need to tighten the restrictions on the use of funds, verify the eligibility of those applying for it and limit the amount of time they can be on it. If you can't find a job where you are, you can make one for yourself or move to another state or country where there is one.
Message edited by: lonestarguy on 2009-11-03 22:41:28 CST
ppatin said:The United States is the wealthiest nation in human history. I really doubt that 46% of Americans are just trying to survive.
Most people have little to no real savings. If you are struggling to maintain shelter, food and health, having a retirement fund seems silly, regardless of the penalties. If you are struggling to survive and you get the opportunity to access money for your retirement fund or use it to keep the power from going off and your house from being foreclosed for another month or two, you are likely going to eat a penalty on it.
Cashing out your 401k is not universally stupid. It is entirely dependant upon each individual situation and the value of doing it ranges from absolutely necessarily to completely stupid.
Having a retirement fund is a luxury a lot of people can not afford to have right now. I have no idea what the percentage is, I just know a whole lot of people in this country live from one paycheck to the next. So it would not surprise me at all if someone told me that number was close to half.
ppatin said:My first instinct is not to care, since it's not my problem if people have to work as Wal-Mart greeters because they were idiots and bought a car with their 401(k). The problem is that's not what's going to happen, they are going to vote themselves the money of those of us who actually had some self-discipline. I can already hear the politicians saying "oh don't worry, we're only going to take money from those who have more than X dollars in their retirement accounts. They're rich, they can afford it, we need to do this for social justice!" Time to start a thread on how to move your retirement savings into offshore bank accounts.
That's not social justice. "Social justice" is typically for people who have little/no opportunity to begin with...not middle-class True American Heroes® who whine about their job not allowing them to get luxuries like a new car every year or a 5000-square-foot McMansion.
micker said: We're quickly becoming a 3rd world country here.Then you need to travel a bit, because you have no concept of what a 3rd world country is like.
micker said: Currently 14% of adults in the US are on some sort of public assistance and 45% of all children in the US have been part of the WIC food stamp program at some point in their lives.
Maybe parents shouldn't be breeding kids that they can't feed. The fact that so many teenagers are being idiots and getting knocked up is an indictment of their poor judgement, not of American society (although I suppose it's partially our fault for no longer placing a stigma on out of wedlock pregnancy).
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