So my employer did this thing where new hires automatically got enrolled in a 401k. If you did absolutely nothing to your 401k, each year it would automatically up your percentage to a max of Y. Is that common or uncommon? And in this world of 401k over pension, should that be more of a norm to help protect people that don't know better build retirement savings. It doesn't solve the problem of folks not having enough money and needing to use 401k for emergency funds...
It's common among good employers, but unfortunately a lot of companies don't do it. We should be encouraging more of this because people tend to suck at preparing for retirement.
And while it doesn't solve the emergency fund issue, people tend to adjust their spending based on how much lands in their account. This is called the hedonic treadmill, where people adjust they lifestyle to fit their means on the way up, but they struggle to adjust it back down. Automatically increasing investments just reduces the impact of a raise, it doesn't actually reduce your actually income since it just pulls 1% out of your normal raise (probably 3%).
The proper solution is for people to learn to properly budget and cut out things that don't provide enough value, but that's a much harder problem to solve than automatically increasing investments.
Gold... Okay, well technically it inflates by 1.8% per year, but at least that's steady and predictable. Where some years the dollar inflates by 3% a year and some years it inflates by 10%.
Pensions worked the same way. The difference is personal responsibility and inequity of employment and wage. But who's 401k deprecates in value over the long term anyways? If you select a target fund that should be fine.
Yeah the comment treats 401ks like they are checking accounts rather than investment accounts. Outside of a major recession, a 401k should outperform inflation. And if it grows at 5% (conservatively) during a 30-year career and then you happen to have to retire during a 2008-scale recession, you'll still have way more than your principal investment in there.
From the extensive research that she has done, Forbus has become a fairly savvy investor; she’s familiar with all of the major funds and has 60 percent of her money in stocks and the rest in fixed income, which is generally the recommended ratio for people who are some years away from retiring.
With Americans now aging out of the work force in record numbers — according to the Alliance for Lifetime Income, a nonprofit founded by a group of financial-services companies, 4.1 million people will turn 65 this year, part of what the AARP and others have called the “silver tsunami” — the holes in the retirement system are becoming starkly apparent.
But he explained to me that the remorse he expressed had nothing to do with 401(k)s themselves, which he said had helped convert millions of Americans from “spenders into savers.” Rather, what he regretted was the complexity of many plans — he thought a lot of employees were overwhelmed by all the investment options — and the fact that the financial-services industry profited from them to the degree that it did.
A few years ago, Kevin Hassett, who was chairman of the White House’s Council of Economic Advisers for a portion of Donald Trump’s presidency, became familiar with Ghilarducci’s work and sent her, unsolicited, the draft of a paper he was writing about the retirement-savings gap.
This past January, another bipartisan collaboration — between Alicia Munnell, who was an economist in the Clinton administration and who now serves as the director of Boston College’s Center for Retirement Research, and Andrew Biggs, a senior fellow at the American Enterprise Institute, a conservative think tank — published a paper calling for a reduction or an end to the 401(k) tax benefit.
Hassett has been concerned for some time that the country is drifting toward socialism — the subject of his most recent book — and part of the reason is that too many Americans are economically marginalized and have come to feel that the system doesn’t work to their benefit.
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