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Comment by imwithstoopid | Hacker News Reader

$1 million will be a king's ransom compared to Gen X's retirement plans

last time I checked known stats on Gen X retirement savings, the national average was under $100k...Gen X is the first generation that is almost entirely dependent on 401k

for bonus points, Gen Xers in large cities are more likely renters than owners, so they won't even be able to sell a property to prop up the low 401k balance

the Gen X retirement bailout is probably already unavoidable and will be in the trillions

everyone says its fine because they love what they do and will do it forever...do they really think there will be a hot market for 67 year old React devs?

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This could be fixed by:

1. Eliminating income tax on 401k distributions

2. Eliminating tax on social security income

3. Increasing social security benefits

None of these will happen.

1. Giant tax cut, inflationary

2. Giant tax cut, inflationary

3. Without corresponding tax increase or cuts elsewhere, inflationary

Taxes are the last reason people don't have enough in retirement. If you only have 100k saved up in a traditional 401k, and say you're doing pretty well in the 22% income tax bracket overall so that over time gets taxed down to 78k, over the course of a 20 year retirement that's just $1100.00/year in taxes. That's what, a few weeks' groceries? Taking those taxes away by contrast will be extremely inflationary and lead to people losing more money to inflation than they saved in taxes.

Stating that tax cuts are inflationary assumes that the government is able to put the money to better use than individuals. Have in mind that when the government taxes your money, it also spends it - but instead of spending in productive pursuits, it often spends it in a way that doesn't lead to increase production and, thus, inflation.

No, it's assuming whatever the government does with it won't cause a generalized inflation spike.

Let's say the government wastes all the tax revenue building a next-generation aircraft carrier that's so incompetently constructed it collapses in drydock before it can ever set sail.

That won't cause the price of everything to go through the roof, except perhaps locally where the money is spent.

And actually, the government can often put the money to better use than individuals. Is there incompetence, corruption, and wasteful government spending? Of course. But two things can be true at the same time. I'd like to see an individual try to build a bridge, repair a road, or open a public school off of their tax savings.

IIUC, and am certainly not an expert, some of these can apply in practice for those with lower retirement incomes. That's not to say it's not a struggle at these levels, of course; the challenge might be cost of living vs dollars in the account, rather than taxes.

So (3) would definitely help that group (as sibling mentions, it's also inflationary). Bernie Sanders and others have proposed raising benefits for current retirees recently, even while Social Security needs to be shored up. With the Republican House it can be argued this is mostly political theater (disclaimer: I vote for Democrats and am usually a Bernie fan.) tl;dr like you mention this probably won't happen.

(2) Social Security is 50% taxable between $30-45k and 85% taxable above $45k. IIUC, couples over 65 get a slightly raised standard deduction of $29,200, so if they only have social security they're paying 0 and half-tax up to $74,200, which if my math is right will be an effective tax rate of around 3-4%.

Some states may tax retirement benefits; due to the above these can be higher than the Federal taxes.

(1) There's Roth for this, though I recognize not everyone has the means or planning. But I mention this in the context of +1'ing Trad 401(k) taxes not going away... Roth lets the government pull future revenue into the present to be spent now. Also, Dems would probably bring up a fairness angle as to which groups contributed to 401(k)s and how this would be more regressive than an across-the-board cut.

But regardless of whether it's 401(k) or other income, the Federal tax rates can be quite progressive. The 2023 12% bracket for couples goes all the way up to $89,500, so adding the standard deduction a couple can make $118,000 and still be in the 12% bracket (effective federal tax will be around 8-9%). Though the more that they make under this point, the more it pushes their social security into taxable ranges...

If the couple has long-term gains from a taxable investment account, there is a 0% LTCG bracket up to $89k as well, meaning so long as they have no other income, a couple can realize six figures of gains every year and pay no federal tax on them.

> the Gen X retirement bailout is probably already unavoidable and will be in the trillions

State governments are going to get huge bailouts too. Most state pension funds are way underfunded. The my state's DOT pension is <60% funded, and that's assuming 7+% average returns.

So expect massive inflation in the future?

Yes. We’ve written too many checks that we can’t possibly hope to cash.

If the fed gets in the way of the fiscal policy makers and their spending, they will obliterate it - it only exists because of a law passed by congress anyway.

Here’s a taste: https://www.rickscott.senate.gov/2023/3/sens-rick-scott-and-...

Edit:

That SAID, anything can happen. These breakthroughs with AI could very likely change all of that.

>If the fed gets in the way of the fiscal policy makers and their spending, they will obliterate it

"The enemy of my enemy is my ally"

-Rand Paul, probably.

This will be a bipartisan movement, that oversight plan is led by Elizabeth Warren and Rick Scott.

EDIT: Would be fun to see Rand Paul crusading for the Fed in defense of spending cuts.

That or much higher taxes and austerity. Max out your Roth account while you can.

They can always change the law and tax your Roth withdrawals...

I think the best bet is to do what everyone else is doing. They can't fuck everyone and keep their heads and keep their jobs. What do Millenials and Gen Z's retirement contributions look like? How's the picture gonna change as the Boomers die? Gen Z?

You don't wanna be the minority with a 401k when everybody else has a Roth and you don't wanna be the minority with a Roth when everyone else has a 401k. When push comes to shove the political minority will get fucked first. Alternatively, you can do something so off the wall and uncommon that you're a "small fish" and they don't care to tax you.

> do they really think there will be a hot market for 67 year old React devs?

To be fair, if you're in this industry and not constantly revising your skillset to learn new things, that's on you.

Say’s Law. Supply will create demand.

You don’t need a hot market. You just need a market.

That’s fine we’ll just expropriate the Boomers hoarded wealth as they churn.

The fiat currency numbers are not a fundamental, immutable feature of reality. The obsession with loss of hallucinated values is a bit unsettling. As if entirely ephemeral fiat economics has latched onto the same biological nature as religious conviction in gods.

Better to legislate the fake money as needed than let hundreds of millions get disenfranchised, especially in the country of 3 guns per adult.

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