Analyzing the monetary component of employee benefits at leading US startups
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You'd be crazy to buy into a de luxe health plan by yourself if you're self-employed. I go for something minimal: no drugs or routine dental, just emergency dental and medical: for situations you pray won't actually happen.
It's so much cheaper to just pay for the massage or to have a cavity filled, it's not even funny.
+1 to this entire concept.
Insurance is for dealing with catastrophes. Not to cover an annual physical or dental cleaning.
Correct, and that's why we're in the situation we're in today. Insurance turned from, well, insurance into a bizarre discount club.
The real solution to the high price of medial procedures and prescription drugs is to do away with insurance (as we know it today) and normalize paying out-of-pocket for procedures and drugs like we did so many years ago, and still do for car-related expenses. I have no doubt that if the auto insurance industry worked the way health care insurance worked a routine oil change would cost $3000 and the out-of-pocket expense would be anywhere from $30 to $200 depending on how good your coverage is.
But fortunately for us, that industry can't obfuscate prices and consumers are informed and can shop around. And the prices stay sane. Funny, that.
There is strong evidence that they actually do not.[1]
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http://jamanetwork.com/journals/jamainternalmedicine/article...
But I'm frustrated that with all the time and energy put into healthcare over the last decade, no progress has been made in keeping health insurance coverage separate from employment status.
Self-employed people can write off payments for extended health. (There are some upper bounds on how much, but generous enough that I think I would have a full write off even with the rather frivolous plans out there.)
I did the number crunching that way, using pre-tax dollars. Of course, it looked better that way, but still a waste of money compared to giving your credit card to the dentist or whoever.
By the way, in British Columbia, if you make a decent income, you are required to pay some $1800 per year to the province for a health care plan called MSP. That is not a business expense you can deduct from your income as a self-employed person, nor a qualifying medical expense for a tax credit.
I'm at the age and activity level (and higher risk ones) where that's not a sound economic option for me, unfortunately, and didn't know about HSAs until health insurance started paying me more than I paid in (after a shoulder surgery next month, I think I'll have gotten more out of it than I've ever put in).
If, on average, only half of the plan members get dental check-ups and 10% get massages, the insurance company can still make the same 50% profit margin if your premium includes 75 cents per dollar towards dental and 15 cents per dollar towards massages.
Now, in the real world, fewer people use all these benefits, and far more is charged on the premiums. I suspect that the profit margin in the whole industry is much larger than 50%.
It's ironic that you have a Security Exchange Commission down there which will put you in jail for trading on an insider stock tip, yet they don't crack the fuck down on this sort of blatant anti-trust between health and insurance.
The US is such a cop against corruption abroad. I worked for a US firm for some years and had to regularly go through anti-corruption training.
Like, clean up your local messes first that affect the lives of millions of Americans at home, before worrying that someone working abroad is wining and dining some foreign official to get a deal and how that affects their democracy over there.
If instead my employer decided to give me the money directly, my marginal tax rate would take roughly half of it.
The existing system works really well for well-compensated employees, and we vote. That's probably why it's been allowed to be on fire for everyone else for so long.
Sometimes you can get a cash discount that is similar, but not always.
I think personally it is because of our atttitude towards retirement planning that majority of the companies today offer either no pension or almost-entirely employee-funded direct contribution based pension system.
My Dad drilled one concept into my head in my early days of career - everybody gets old and every old person wish to retire with pension.
I don't exclusively rely on my employer's pension plan for my retirement planning -- on top of it, I contribute to my state defined (bank managed) retirement funding.
I don't think the average American is any different.
http://www.cnbc.com/2016/09/12/heres-how-much-the-average-am...
Nearly half have no retirement savings at all.
And if it is still around, then you'll be ahead of most of our peers.
Regarding your parents' funds, were these pensions or investment accounts? Pensions got screwed, yes. But unless your money was being managed poorly, IRAs and such should've been fine, though temporarily low, you didn't lose any shares in your investments, just value.
401k -> IRA -> Low cost index funds are a reasonable stepping block.
This has led to me just taking the money I would have put into a 401k and using it to pay off loans, which provide a financial benefit equivalent to having an investment grow by the same rate as the loans interest rate. That lets me snowball my payments and pay off the debt faster and eventually I will move the debt payments over to retirement. I probably would be better off overall putting the money into a 401k or Roth IRA if I could guarantee I would never be out of a job, but having graduated into the workforce during the Great Depression Ive become pretty averse to holding any significant amount of debt after seeing people lose everything
I see a version of this statement all the time from us old people, sometimes it ends with "purchasing homes" or "full time long term careers at one company" say, or "retirement saving" as in your example.
I'm starting to suspect the reason just might be that the new generation doesn't actually have any fucking money or stable jobs. Just a theory.
possibly in other contexts, but obviously not in this one. if what the article states is true, they are paid pretty well at these companies, but seemingly at the cost of no matching retirement plans.
I think it's a _little_ bit of that and a whole lot of "the government will take care of me." I mean it's a legitimate strategy to a lot of young voters. Too much student loan debt? Vote for Bernie, he'll nullify it. Broke at retirement age? Vote for Bernie 2.0, he's promising a healthy "basic income" for seniors, indexed to inflation.
As is usual, the answer is somewhere in the middle, which is being lost in this increasingly polarized world.
Perhaps it is because they don't wan't to pour what little money they have into what could likely be a black hole. $3.4 trillion[1] in retirement savings were swindled in the Big Short of 2008, and no justice was done despite the massive amount of fraud going on. And then there is Social Security, which they will never see a penny of.
There's a reason Millennials typically aren't buying houses, having kids, and investing in retirement funds. It's because they can't afford it and/or the risk is too high.
[1]http://www.pbs.org/wgbh/frontline/article/how-much-did-the-f...
People who left their 401k investments alone, or drew them down slowly, have more value in their accounts now than they did before 2008.
Really, the generation that normalized the concept of FI/RE (financial independence/retire early) has no interest in retirement? I find that hard to believe. I think it's more to do with the segment that is burdened with high debt loads. Those with the income seem excessively interested in retirement, while those of more modest means just want to get ahead.
I'd rather not have risks just swept under the rug.
Roth 401(k) plans are less common, you'd owe a penalty but not taxes since it's pre-tax money. No mandatory distributions because they've already gotten your money.
IRAs are the same. HSAs (mentioned elsewhere) are tax-free if distributions are spent on medical costs. For non-medical costs, you owe taxes and a penalty. After age 65 you'd only owe taxes.
401-Ks have no underfunding problem. Of course, they expose you to market risk directly.
Give me the money so I can put it someplace where you won't spend it on this year's budget shortfall, thanks.
In retirement, I can raise my standard of living while halving my spending by relocating to somewhere that's not a high-end job center. That would mean a much lower income tax bracket.
I don't quite understand how your current city's cost-of-living factors into this equation. At the end of the day your investment choices are primarily governed by your income tax bracket now vs. in the future. This holds true regardless of whether you are planning to retire in a low cost-of-living city - which is something everyone should plan to do anyway regardless of the type of retirement account they have.
With sane housing priced and no need to save, I could live the same way on about $45k/yr less.
Roth IRAs have income limits as well for contributions, but as long as backdoor contributions are allowed, you can still manage to contribute regardless of your income. Saving some on taxes coming out is better than not saving anything on taxes whatsoever.
In this situation though, a 401(k) is almost certainly a higher priority. But once that's maxed, an HSA (as a retirement vehicle) and Roth IRA are still very good.
I understand how social pressure works and that there might be punishments for breaking unstated rules, but oftentimes someone has no choice, don't give a fck or is asperger enough not to get it aaand nothing bad happens.
Assumes you are not slacking the rest of the time obviously.
Amazon (3 years), Microsoft (9 years), Google (6 years), Facebook (8 years), Yahoo (1 year), Netflix (5 years).
We may disparage Yahoo but the initial formula was right.
In addition to match, other factors that matter a lot (but are harder to find out up front) include what funds are available and if after-tax contributions are allowed. Having access to low-cost funds is a huge plus, and after-tax contributions allow for the mega-backdoor Roth 401(k) strategy.
It's the pingpong tables that kill me. Why does this make me want to work there?
Note that 401(k)-to-401(k) rollovers are generally always allowed.
That doesn't make any sense. Even if you value retirement savings at zero, you can withdraw as soon as the match hits with a 10% penalty. Matching is free money.
What I mean to say is that salaryX + 3% 401k match is not as valuable as salaryX + 50% salaryX with no 401k match.
The extra salary you need to ignore a lack of 401k can be debated, but at some salary, I just don't care.
Highly valued startups aren't generous employers (when viewed along a single axis)