401(k) plans help sustain capitalism

or not. i'm not sure.

many americans have 401ks, some of the people reading this thread probably have 401ks. they're retirement accounts, usually tied to investments in stocks and bonds. which means our individual financial security depends on the continuing growth of the stock market. there are stiff financial penalties for withdrawing 401k funds before retirement.

i check the default stock app on my phone every day. i don't care about the individual companies, just the overall % change of the Dow, or the S&P500. if it has a really good day, up 1%, i think about what that increase equals in my retirement fund, and if it goes down 1% i move the decimal of my total retirement savings two places to the left, and that's what i lost that day.

the economy must continue growing until i retire (ETA 2050) for all of this to work. not only that, but the economy must continue growing exponentially. i don't even think that's possible. but it has to, for me and a bunch of other people.

and so i find myself in the position of internally rooting for a group of immensely powerful multinational companies to do well, or at least to grow consistently, so that i can have a safety net when i retire. even though i dread most of these companies, hate how their financial goals warp personal ambition and shape our lives. there are two demons inside me that roots for destruction. one cares about my 401k, and the other wants to end the thing that ensures my 401k.

i could withdraw the money early (with massive tax penalties) and try to use it to make money for my retirement in other ways, or to go ahead and construct my hermit hut with the cool bridge in the woods, but that would be a relatively courageous step for me. and it would be unreasonable to expect others to do so, with their 401k plans.

so we all become more invested in the system with every passing paycheck. not just literally, with our money in various investment funds, stocks, and bonds, but also ... i don't know what word i'm looking for here. emotionally? ideologically? none of those seem right. but basically, you know that lame thing where baby boomer hippies got older and made money and turned into the thing they supposedly hated so much in their youth? that feeling, that slow, excruciating twisting of a rope with many strands, all caught up in it. whatever that's called. 401k plans get us all caught and wrapped up in capitalism, and ensuring the continuing future for that system.

Pension plans do this too. Social Security is basically the only thing that doesn’t.

do you feel conflicted? or just roll with it? my imaginary CBT therapist voice says "there's no point in worrying about things you can't change it", but...i mean, that's one of my main things.

Put it in a small-cap stock index fund. Those have consistently outperformed the S&P500 anyway.

I pay into social security by law and I voluntarily put a massive amount into my Thrift Savings Plan every pay period (basically a big 401(k) for feds) which is divided into three different funds, varying in their levels of riskiness / bullishness. I see the point you are making, but the fact is the only other option for providing for myself and my family in retirement would be to solely buy bonds, and they simply don't offer the returns that 401(k)s have done. Hell, bond rates barely keep up with inflation in a lot of cases.

Capitalism is only one thing in a basket of things that we must live around that you may not necessarily agree with. Make that money and put that money to uses that better expresses your individual beliefs.

Also, I don't know how or with who your 401k is set up with but you typically have a multitude of choices in where to allocate your funds. It shouldn't be a static thing. Within each fund you can see what the individual components are.

Pension plans do this too. Social Security is basically the only thing that doesn’t.

Bingo! Capital placed in 401(k)s or pension plans is invested in a limited basket of stocks, or bonds, or maybe real estate, or some combination of these. Sometimes the investments might be more exotic or abstruse, like Bitcoin. But the whole emphasis is on picking 'winners' or shorting 'losers' out of the broader economy, thus distributing risk in very asymmetric ways. The whole system depends largely on trying to predict the future, which means it is operating at least half-blind, if not wholly so. That blindness creates a void that is quickly and easily filled by delusions. The more you understand these mechanisms, the more randomness, deception and profit-skimming you see.

Social Security ultimately rests on the same capitalist mess of an economy, but at least it has the virtue of distributing risk far more equitably. The irony is that the 1% keep trying to convince society that it is Social Security which is the bigger risk, while dumping all your 401(k) into the stock market is the safer bet. Nope. Just more deception at play in the interest of profit-skimming.

Bingo! Capital placed in 401(k)s or pension plans is invested in a limited basket of stocks, or bonds, or maybe real estate, or some combination of these. Sometimes the investments might be more exotic or abstruse, like Bitcoin.

there are regulations about these plans (esp. pension plans) in terms of how risky the investment plan's assets can be, like for the most part, they aren't very exotic or abstruse. Part of the outrageousness of the last financial crisis is how the banks/brokerage firms were able to sell supposedly cautious managers of retirement funds on buying into these bullshit mortgage backed securities that were actually super risky.

401(k)s and other defined contribution plans (as opposed to pension plans) give the individual more leeway into investing their money as they choose-- so you can pick things like mutual funds where all the companies they have money in are doing positive things for the environment, or are less rapacious assholes than most large companies, etc. The "selling point" is that you get to choose stuff, but the drawback is it limits the responsibility of the employer ... which is just a logical step from the existence of 401(k)s and other defined contribution plans to begin with ... as opposed to pension plans, where the employer is responsible for providing you adequate money to live on when you retire. ... But then you have the real absurdity of this in practice where it is likely the city you live in now, is cutting services and promoting gentrification and other bad things because a very large portion of their budgets are required to go to ... pension fund obligations (fwiw, a very large amount of this goes to cops ... also fuck cops).

also, if your company 401(k) plan has limited options for where you put your money, you can always take money out of it, and roll it over into an individual retirement account that could give you more choice ...

I actually never thought about how Social Security works--doesn't the government invest the funds in the stock market as well?

I worry a bit about this with my government pension, TIAA Cref, etc. The good thing for me about the pension is that smarter people than me invest the funds for me, whereas TIAA Cref is just like pick some stocks that look good to you.

My rec would be not to check everyday, wrt your retirement. I think you are supposed to be fairly agressive the further you are away from retirement, and then when closer turn most everything away from stocks and into cash.

My philosophy is that I don't count on any of this being there when I retire, or even making it to retirement age. If either of those things happen, I would be pleasantly surprised. The nihilistic school of long-term planning. It helps when you don't have any dependents though.

Don't even get me started on police pensions. I got into an impromptu Beckett play with my parents who kept calling my brother's pension "his money" and I kept asking if he had paid "his own money" into the pension. He was being forced to retire early from the police force and the police were trying to keep from paying the pension because they were forcing him to retire a year before the 20 year mark. My parents hate all forms of socialism unless they profit from it.

xpost, yeah I was about to say, I don't participate in 401ks unless there is a company match or I need it to receive company stock. Other types of retirement accounts offer more options in where to invest.

oh man, don't get me started on compensation being paid in company stock .... like talk about sustaining capitalism ...

i mean, technically, savings accounts are all based on the time value of money, and that a dollar today will increase in value over time. like this isn't an inherently capitalist concept. putting money into shares of corporations with the assumption that you will make more money than if you just rely on this "natural" increase in the current value of your money -- that is a capitalist ideal.

So - assuming I'm not going to immediately need the money during this pandemic - would it be wise to pump more money into my 401k now? Or would it be wiser to not change anything, because the stock market could tank even further when we get second or third waves of the virus?

I wondered about this as well.i already contribute the max but thought about stopping last month when I lost a ton. However, since then it’s almost all come back so I decided to stick with it. It depends on your allocations and how much you need cash right now but I’d put more in if you can afford to

i don't know, i see waves upon waves of ugly economic news, both for the near-term and long-term, along with the stock market holding relatively steady for the past 2 weeks. has the market already priced in all of the negative outlook? apparently so, but i have no idea how

xpost_ what would your reason be for wanting to put more % of money into your 401k right now?

That confuses me too. I mean, deep down, I believe the value of the stock market is based on completely imaginary whims of high-end gamblers and just barely tied to economic reality, but I don't expect the Dow to follow that...

But, if I'm going to have savings at all, I might as well put away something, assuming that we'll some kind of functioning economic system in three decades. If we're in a Mad Max world then it's all moot anyway, so I'm going to hope that the money will be there when I do call it quits.

xp Yerac - I started my first ever retirement account a couple of months ago. (First job I've had that made this available to me...) So I haven't gained or lost much, and my tiny account already broke even from the losses in March. In my mind, I wonder if it would be the prudent thing to invest more now, since I'm not desperate.

if your company matches up to a certain percentage of your investment into your 401k it's generally good to take full rule advantage of that. But if they don't, there are also other types of accounts not affiliated with your employment that you can use to save (that will have fewer restrictions).

Sadly, no matching.

then one of the other things to consider is how much you benefit from the tax savings from the contribution. You can also just start an investment account that you do pay taxes on dividends, capital gains when they happen, but you can also take money out of that account with no penalty, unlike the 401k

good point! i think it does actually put me in a different tax bracket, i forgot about that.