How much money is in your 401 (k) or similar DC plan?

[OttoVonBismarck]

Does the US military get DB pensions?

Absolutely, after 1980 it got less good, but they're still very solid after 20 years. I didn't stay for my 20, I got nothing. They also let military members invest in TSP (a type of 401k, as a Federal employee I also participate in the Federal TSP plan) in addition to their pension benefit. A lot of guys ignore that, but they shouldn't--it's a great tax deferred retirement plan on top of the pension.

The big thing about military pensions, especially the older guys before 1980, is these benefits perpetually increase with COLA and you usually retire well before your working age has ended so most of these guys work for 10-25+ years after leaving the military and are getting double paychecks the whole time. I know of guys through my dad who retired as Colonel or higher in the 80s and were making like $60k/year just from their pension, which was far higher than a Colonels pay in the 80s when they left the service and they had been getting regular raises for 15-20 years.

The Federal system isn't quite as good. Older employees under the old civil service retirement system are basically fully pensioned. Someone like me is under FERS, which is a hybrid system. The old system you didn't pay into social security, and thus didn't receive social security benefits. But you did receive a much better pension through the civil service retirement system.

Me, I pay into the FERS Annuity program (or "Basic Retirement System") which is a traditional defined benefits pension system, I pay into Social Security, and I pay into TSP (optional, with an automatic 1% contribution and the government matches my contributions.)

Retirement planning seminars here tell you to expect your FERS defined benefit plan to replace about 40% of your highest income when you retire, Social Security should replace 15%, and the balance you should get enough out of TSP--if you aren't contributing enough into TSP for that to be true you need to up your contribution amount.

[MadImmortalMan]

I'm going with the "suicide after I can no longer work" plan.  It's simplified things tremendously.

That's the spirit.  Don't feed the machine.  Control your own destiny.

Honestly, I think I might be coming around to Seedy's way of thinking. I've been very bitter and jaded recently. Normally I'm a pretty optimistic guy.

[Admiral Yi]

Honestly, I think I might be coming around to Seedy's way of thinking. I've been very bitter and jaded recently. Normally I'm a pretty optimistic guy.

From the guy with 100K burning a hole in his pocket?

[OttoVonBismarck]

I will say that it's obvious most people haven't saved enough. You need around $2.5m or so at age 65 if you want to convert it into an annuity that will keep you in "upper middle class" comfort til you die at age 90.

Generally they say you should have an amount equal to your annual pay saved in your 401k by 30, and an amount equal to 4-6 times your annual pay in your account by 40.

[MadImmortalMan]

Honestly, I think I might be coming around to Seedy's way of thinking. I've been very bitter and jaded recently. Normally I'm a pretty optimistic guy.

From the guy with 100K burning a hole in his pocket?

I have a lot of reasons to not be depressed. I'm not sure what's up. 

[Jacob]

I will say that it's obvious most people haven't saved enough.

Yeah... I wonder how that's going to work out?

General prevalence and acceptance of elder poverty?

Old people - usually a high-turnout demographic - influencing the political process and upping benefits? And at what costs?

Change in working lives?

Something else? It'll be interesting to see.

[MadImmortalMan]

Most peoples' savings really accumulates in the last decade before retirement. Compounding effect and all that.

[Sheilbh]

Nothing now. But as soon as I can I will save a lot 

Although my major concern will be getting property as soon as I can.

[OttoVonBismarck]

I think DB pensions aren't good, Sweden I believe went to a national defined contribution, variable benefit plan that I think could work well. I'd like to see 401ks turned into something like that, too many options exist in 401ks and for 95% of people the options are bad because they aren't sophisticated enough to use them properly.

You can straight up withdraw all your money from a 401k if you're willing to pay both income taxes and a 10% penalty on them. I think they basically should not be withdrawable until retirement. You can take loans out of your 401k, where you have to pay it back over a couple years but at a low interest rate (like 3.4%), which means most likely you come out far below what that money would have turned into after a couple years in the market.

I think if you're an employer with a 401k plan, there should be some mandatory % contribution minimum, and the employee should likewise have a minimum. I think 6/6 is a good bare bones minimum, that doesn't hurt employers too much and gives employees decent savings. You should save 10-15%, but I understand some people desperately need present day income so I wouldn't want to "mandate" 10-15.

I think there should be rules about what type of funds should be in 401k. Too many 401ks are filled with mutual funds with 1.25-2.0% expense ratios, instead I believe basically just index funds (which typically have 0.10-0.50% expense ratios) should be offered. I also think companies should be limited in what way they can mandate employees take company stock in 401ks (maybe whatever your policies, if an employee has over 10% of his 401k in company stock he retains the right to sell down to 10% and exchange it for other plan holdings.) I think 401ks are a good idea but too much freedom for most people, I think "regulated" 401ks where the government takes options away from individuals would work great.

I wouldn't mind if there was a way out of the regulations if you get certified as a "qualified" investor (sort of like how you have to be a qualified investor to buy into a hedge fund.)

[CountDeMoney]

I will say that it's obvious most people haven't saved enough.

That's easy to say, especially for so many families when there's simply nothing left to save.

Generally they say you should have an amount equal to your annual pay saved in your 401k by 30, and an amount equal to 4-6 times your annual pay in your account by 40.

Yeah, that's a good one.

[CountDeMoney]

You can straight up withdraw all your money from a 401k if you're willing to pay both income taxes and a 10% penalty on them. I think they basically should not be withdrawable until retirement.

Just imagine what the foreclosure rates would've looked like after 2008 if people couldn't liquidate their retirement funds.

I think if you're an employer with a 401k plan, there should be some mandatory % contribution minimum, and the employee should likewise have a minimum.

Smells like socialism.

[MadImmortalMan]

Generally they say you should have an amount equal to your annual pay saved in your 401k by 30, and an amount equal to 4-6 times your annual pay in your account by 40.

Yeah, that's a good one.

Yeah that's pretty hard to do if you go more than a couple years contributing nothing.

[Admiral Yi]

I think there should be rules about what type of funds should be in 401k. Too many 401ks are filled with mutual funds with 1.25-2.0% expense ratios, instead I believe basically just index funds (which typically have 0.10-0.50% expense ratios) should be offered.

My understanding is that 401k's only have mutual fund type investments because they're the only type of investment vehicles set up to handle dribs and drabs of money coming in every pay period.

Otherwise totally agree. The biggest problem with 401k's is *not* that the ordinary participant lacks the required sophistication, it's that they don't put any money in or, like you said, take it all out before retirement.  That's not lack of sophistication, that's being a meathead.

[Jacob]

I will say that it's obvious most people haven't saved enough.

That's easy to say, especially for so many families when there's simply nothing left to save.

Nothering wrong with saying that if you're defining one of the parameters of the problem you're trying to solve.

Of course, if you're saying it because you assigning blame to justify ignoring a social problem, then it's different story....

[CountDeMoney]

Generally they say you should have an amount equal to your annual pay saved in your 401k by 30, and an amount equal to 4-6 times your annual pay in your account by 40.

Yeah, that's a good one.

Yeah that's pretty hard to do if you go more than a couple years contributing nothing.

That's the kind of math that only gets sold to educated professional couples with substantial combined incomes with discretionary spending. 
T Rowe Price isn't exactly marketing that kind of advice in the 'hood or rural West Virginia for a reason.