Comment by throwawaygh | Hacker News Reader

Comment by throwawaygh | Hacker News Reader

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$1.2mm/20 years = $60K. So, max out your 401(K). Your before-tax income is now $80K. Of that, you have to save $40K to reach $1.2mm in 20 years. So your pre-tax income that doesn't go to retirement is $40K.

Sure, there might be an employer match, and your money will maybe grow over those 20 years, but unless there's a generous match and your portfolio grows, a lot of that gets eaten up by the 20%-30% taxes you're paying on that extra $40K you need to save. I mean, market returns were good between 2009 and 2019, but beating that tax burden of 20%-30% a year is pretty damn hard.

Also, your money might now grow over those 20 years. Especially the next 20 years. I don't think anyone has high hopes. "Past performance is no guarantee of future results". C.f. public sector pensions, which receive extraordinary protections and pay out the same whether the market is up 5% or down 30%.

That market independence is the major benefit of a pension.

The other not talked-about benefit is that a public pension is doing the investing and maintaining the financial discipline for you. Most people in the United States are not capable of this, as the savings rate has only been approximately 7%[https://fred.stlouisfed.org/series/PSAVERT], and 5 years down the road Once the Covid vaccine is developed and the economy has recovered it will probably return to those levels. Which brings me to the point that it is almost impossible for 99% of people in the United States to save 40k/yr. At a 10% savings rate this is someone making 400k/yr which is way above average even for FAANG companies. So government work might not be so bad afterall.

Every worker in The US is already saving 15% year for retirement. It is called social security. If that system was managed correctly it would be all we need. But instead the money is lumped in with general funds and spent.

That 15% would need to be distributed evenly among workers otherwise it doesn’t amount to much. That is only $5055 for the $33k real personal income from the fed https://free.stlouisfed.org/series/MEPAINUSA672N

That $5055 is not much, under the Roth IRA limit and not nearly enough to pay the median rent for a 1br apartment in the United States At $1025/mo per month https://www.abodo.com/blog/2018-annual-rent-report/amp/. IMO it’s time to go full ubi and Soviet housing blocks as we are keeping way too much artificial scarcity in housing. This will only get worse and causes more social unrest as we are currently seeing the beginnings of.

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