Hacker News Reader

Hacker News

Comment by systemkei | Hacker News Reader

Parent Full thread

systemkei

>employed in corporate IT since I was 19

unlikely you'll ever collect from that 401k friend!

View on HN

>unlikely you'll ever collect from that 401k friend!

Like WillPostForFood, I'm baffled about where you're even getting this idea.

The 401k is their money. Right now they could withdraw all the money. If their employer goes bankrupt, the 401k balance didn't change at all. The only part that could potentially go away would be unvested company contributions (I'm not sure on this - it's all I can think of though).

If we were talking about a pension, Social Security, or a 457b deferred compensation plan - I get it. There's uncertainty. Pensions get underfunded routinely, private equity shenanigans occur etc. Social Security will likely see big changes in the next 40 years. In the case of the 457b plans, it's not your money until you leave the employer and start withdrawing money.

Please clarify your statement if you have something productive to add.

I think he's inferring to the government being able to get to it in the future. Whether it be by future legislation of extended early withdrawal penalties, or new tax laws. Yes, it is your money but is still subject to federal and state laws. It's different than a bank account.

Not really that much different with respect to their exposure to future laws; your bank account balance is subject to federal and state laws as well. Yes, future laws could affect your 401(k) balance, but the same holds true for your bank account balance (e.g., wealth taxes, etc..).

But what else can you do, really? Best to put your savings into the most cost effective / tax efficient vehicle that is currently available.

It is a huge disservice to take a cheap shot at 401ks. There is almost no case where someone who has the opportunity to contribute shouldn't do so.

There's plenty of companies that do not provide financial match to a 401k. For people making average income for a 25 year old or so, they are better off putting it in a Roth IRA then.

Invest in a Roth IRA first is good advice. However there are limits, you really should max out both in your early years. While you are at it you should max out your HSA (pay medical expenses in cash)

Of course as others have pointed you are now investing $30,000 before you have paid for any other life expense.

Eh, after fees most standard 401Ks are only marginally better than a bank account at this point.

I doubt 1%+ expense ratio funds across the board is the average case, but I could be wrong. Perhaps if you let your 401k provider manage your money.

In my 401k, I pay 1.5 bps/yr on 80% of my portfolio, a Fidelity S&P 500 fund (FXAIX), or $0.15 per $1,000 per year.

My other two funds are a Fidelity Small-Cap and Fidelity Mid-Cap funds (FSSNX and FSMDX), I pay 2.5 bps/yr on the other 20% between these two funds, or $0.25 per $1,000 per year.

If my balance was $100,000 right now, I would pay 80x0.15+20x0.25, or about $17/year for each $100k. $170 per million, and so on.

These 401k mutual funds have better expense ratios than my Roth IRA holding, VTI (Total Market ETF), which is at 3 bps/yr, and the mutual fund couterpart of VTI, VTSAX is 4 bps.

There is absolutely no possible way for a high-yield savings acct that yields (Fed Funds rate minus 15-25 bps) in interest (Goldman's marcus.com pays 2.23% APY, for instance, fed funds is ~2.40%) will ever approach my portfolio after 40 years of returns, barring total societal collapse.

Due to compound returns, a marginal advantage makes a huge difference over a 40 year career.

You'd hope, but a number of smaller plans have that entire advantage eaten, so you end up with no growth. Getting out of a lot of 401K plans and into something like an IRA is... advisable in many cases.

I'll admit that this is mostly a problem for small businesses, from what I read, and there are plenty of 401k's that aren't actively screwing people.

This is not true at all.

It is very easy to get some sort of vanguard s&p 500 index fund that will get you %7 return rates, with something like .1% fees.

A 401k wont be invested 100% in cash

Reply on news.ycombinator.com