Rolling US Economy Into The Shitbin Thread

i missed that part what is it

from Barron's, i guess this is a decent summary:

In addition to allowing retirees options to defer required minimum distributions, the so-called Cares Act will allow eligible individuals to withdraw up to $100,000 from their retirement accounts, in total, without the 10% early-withdrawal penalty as long as they pay back the distributions within three years. The relief package also eases some of the rules surrounding 401(k) loans.

To qualify for the provisions, individuals need to fall into one of two main categories. You, your spouse or a dependent is diagnosed with Covid-19, the disease caused by the new coronavirus. Alternatively, you qualify if you have experienced adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care or closures related to the coronavirus pandemic.

i mean the idea that you have to pay back as much as 100K (OVER THREE YEARS!?!?!) to a 401K in times of dire need is kinda insane to me but what do I know I'm advocating for violent revolution

yeah, i saw some people thinking this would be a "real gamechanger" and I was like ?????????????????

especially since there is a prerequisite of having a 401k in the first place

i mean most of the reason I contribute to an IRA for tax reasons; my galaxy brain says that contributing to an IRA is betting on yourself to Not Die before 66 (or whatever it is now). I wish to live long enough to see the statistical evidence that the past 4 years have shortened humans' live expectancy by, like, ten years on average but

*proceeds to make "this expression" while gesturing thoughtfully to thousands of dead people*

my pt is that it's weird to be shocked about historically high unemployment numbers when you shut down a large % of the businesses in your country. it's not shocking, it's per plan.

Not shocked at all, but they shut down the businesses, they didn't force those businesses to lay off workers. I don't know what to tell people that don't believe executive compensation, stock buybacks, and general need to run businesses as ruthlessly efficient as possible to pump the stock price aren't factors in those businesses having insufficient reserves to weather a shutdown for even three weeks.

many of the closed businesses were not publicly traded like think about every business in your neighborhood they're almost all closed (may vary depending on where you live/coming soon to a neighborhood near you)

A lot of excessive business travel is going to permanently disappear.

I know that will cause all kinds of rough ripples for workers in several industries, but workplace observation has suggested to me that 2/3 of biz travel is bullshit. Schmoozing for schmoozers.

i mean the idea that you have to pay back as much as 100K (OVER THREE YEARS!?!?!) to a 401K in times of dire need is kinda insane to me but what do I know I'm advocating for violent revolution

― Its big ball chunky time (Jimmy The Mod Awaits The Return Of His Beloved), Friday, April 3, 2020 12:40 PM bookmarkflaglink

You don't have to pay it back. It's a taxable withdrawal. The IRS is allowing people to pay back withdrawals (which is not normally allowed) in 3 years, and in exchange, the 10% penalty for being under age 59.5 will be waived.

Most actively working customers under age 59.5 don't have in-service withdrawals available unless they've contributed post-tax monies or rolled money into the plan, as their pre-tax contributions and earnings are restricted before turning 59.5 to prevent them treating it like a savings account. There ARE hardship withdrawals already available in 401(k) plans, but most plans follow the Safe Harbor standard, which mean you can only get the money out for six specific reasons, none of which involve illness/COVID.

The IRS, as they have done for previous disasters, have created a special hardship withdrawal for this situation that makes the money accessible for COVID-related hardship. Without it, this money wouldn't have been accessible to most active customers under 59.5 unless they quit their jobs. People over age 59.5 usually have most if not their entire balance available as before-tax monies are no longer restricted at that age.

Also, nobody has to take 100,000 dollars. Most people probably don't even have that balance available (I sure don't). Most people would probably take far less

The 401(k) loan change is a bigger deal as the IRS formula that determines availability is a two part formula of:

A) 50% of your vested balance OR
B) $50,000 - your highest outstanding loan balance in the last 12 months.

So effectively, you can never get more than 50,000 out for a loan. This rule changes that to maximize the limit to 100k, so swap out 50,000 for 100,000 in that formula.

This would also free up more money for people who had already taken out their max amount available (50,000). If their plan allows for more than one loan, this would give them instant access to another 50,000 that they could repay over 5 years with payroll deductions.

And if they get terminated before they repay it? No negative impact on credit. It gets treated as a withdrawal and subject to taxes the next year. And that money simply doesn't go back into their balance.

I do see this as a positive. No, nobody should have to raid their retirement, but if you're young like me and can make it back up later, it can help bail you out of a hole, and you can even gross-up the payment to proactively put aside money to pay any tax liability.

On a side note - not that anybody is doing it here, but I'm sick of people assuming 401(k)s are this bougie rich person thing. The majority of people in 401ks aren't rich and often have small balances. When i handled 401k withdrawal processing, i used to take call after call from people who had to use their 401k to prevent losing their home.

So I had to snipe at some friends the other day when I posted this news and they all mocked "lol 401ks who the fuck had those, who cares", and i had to point out that I did, and in fact if there was a way for me to be devious and take some money out, i could eliminate two very specific debts that are crippling me at the moment which would help me take care of other family members without hurting my own future.

sarahell, how do you feel about the 401k/ira early withdrawal that's in the bill?

I think it's actually a great humane thing. I remember doing taxes for people post 9/11 and post-recession, and they had to cash out retirement plans when they lost their jobs or had serious reductions in income, and then to have to tell them, guess what, you get a 10% tax penalty for needing money to pay for basic living expenses ... that really sucked. It's up there with having to tell people who got paid as 1099 contractors and were low-income people, that actually, they owe $3000 - $5000 in self-employment tax, even though they only made $20k and they live in one of the most expensive places in the world, and also, their employer should have been paying them as an employee, and they could file a bunch of forms and try to get that fixed, but in the meantime, they owe a shit-ton of taxes.

I'm sick of people assuming 401(k)s are this bougie rich person thing. The majority of people in 401ks aren't rich and often have small balances. When i handled 401k withdrawal processing, i used to take call after call from people who had to use their 401k to prevent losing their home.

co-sine!

how would you make it better? (the early withdrawal in the bill)

Not shocked at all, but they shut down the businesses, they didn't force those businesses to lay off workers. I don't know what to tell people that don't believe executive compensation, stock buybacks, and general need to run businesses as ruthlessly efficient as possible to pump the stock price aren't factors in those businesses having insufficient reserves to weather a shutdown for even three weeks.

This is a weird thing to say here? Idk most of the affected workers I know work for small businesses and non-profits. Meanwhile, a lot of the big retail chains (for example) were still open (and their workers still employed) when the small businesses had closed, such that our state government had to make even stronger rules about essential businesses to get them to close their stores.

one could easily imagine obama handling this crisis a million times better than trump even before we get to capitalism vs socialsim.

― Mordy, Friday, April 3, 2020 12:10 PM (two hours ago) bookmarkflaglink

obama would’ve been more competent with executive stuff but Obama with republican congress would probably not have passed any stimulus and it would be Great Depression x10

It maybe shouldn't be a surprise, but it's a completely unprecedented jump, and we have no idea how it will play out over time.

― Mario Meatwagon (Moodles), Friday, April 3, 2020 11:15 AM (three hours ago) bookmarkflaglink

it’s unprecedented nationally, but not at subnational levels for large natural disasters. compares similarly to Louisiana post Katrina. look at the chart here https://www.bls.gov/opub/ted/2015/mobile/hurricane-katrina-a-look-back-at-employment-and-unemployment.htm

especially since there is a prerequisite of having a 401k in the first place

― silby, Friday, April 3, 2020 9:44 AM (one hour ago)

You aren't a parent, are you? (I'm not either, but ...)... Another fatuous "leftist" gripe about retirement plans and jobs that have them tends to be unrealistic about the economic and uh, personal responsibilities of people with kids. Like, being 35 years old without health insurance and benefits could be fine, but once you factor a kid into the equation? So many of my friends went from under-employed hipsters without benefits and insurance to "full-time with retirement and family health plans" once they became parents.

I mean I'm not, but I do have substantial savings in various defined-contribution plans (403b technically for my current employer).

I'm pretty sure poor parents exist though!

if I had a kid I would have even less money tho lol

if you have kids and savings you are the monopoly man to me

Canada has p generous refundable credits, you’d probably come out ahead jim

Someone added the GameCube intro to my unemployment graph & it’s significantly better now. pic.twitter.com/c35hS74sok

— Dorsa Amir (@DorsaAmir) April 3, 2020

omfg

now do it with the marimba one

Worth noting in comparisons to Katrina, that property owners in NOLA were practically swimming in insurance payouts for the first 2-3 years thereafter. The country through the insurance and Federal grants, subsidized a local remodeling and real-estate boom, in which shotgun shacks got new wiring, flooring, plaster and paint, and were converted to Air B&Bs, even though the underlying tourist driven economy wasn't much improved. Contractors did really well. Early RE investors did really well. Renters that didn't land permanently in Dallas or Houston, all were screwed by a near doubling of housing costs.

This model of "recovery" doesn't really apply when the whole country is suffering at once, and when 30% of workers at restaurants, hotels, taxi service, massage spas etc see no recovery for a year... One can throw money at a city at get a real estate boom, but throwing money doesn't change new patterns of social behavior.

it’s certainly true that it’s harder to insure a nation-wide shock than a regional one. but luckily US can borrow for free right now. the relevant constraint seems more congress’ willingness to spend (so far it’s been compliant) and institutional difficulty of getting cash out everywhere quickly (this one is more binding). the biggest factor that will contribute to a slow recovery imo is the virus lasting a really long time

i don’t think real estate is going to be super important to the recovery from this; there’s no destruction of physical housing stock as in Katrina and construction seems to be continuing apace (at least where i live)

the point of the analogy to katrina is that the labour market recovered quickly; it shows that it’s not the case that the length of the recovery is necessarily proportional to the size of the shock, as seems to be the case with “normal” recessions

Capital gains cut! Therse people are grotesque parodies. https://t.co/ZSaSXQe6ui

— Doug Henwood (@DougHenwood) April 6, 2020

I'd like to know where folks think they're going to be earning any capital gains rn

Meanwhile, coronavirus accelerates the death of retail, and things are so fucked up atm that it doesn't even make sense to file for bankruptcy
https://www.cnbc.com/2020/04/04/coronavirus-retail-is-used-to-existential-crises-but-bankruptcies-wont-save-it-now.html?&qsearchterm=retail%20bankruptcy

infrastructure week!

Instead, landlords are in their own pain and facing their own uncertainty

pobrecitos

There's some shorting stocks who've racked up sizable short-term cap gains.

so much for that story stock
https://finance.yahoo.com/news/peloton-halts-live-classes-employee-182923624.html

https://www.youtube.com/watch?v=7kNMIPBO-oQ

lol

I'd like to know where folks think they're going to be earning any capital gains rn

I would think people who have held stocks for a long time and are panic-selling are making capital gains (that stuff is still worth a lot more than it was 10 years ago) and a capital gains tax cut would presumably encourage more panic-selling, which sounds bad to me but what do I know, I'm not a Dow 36,000-level economist

i bought stock in a couple airlines a few days before they formally announced the bailout of airlines, figuring, the administration of this country is venal and corrupt, of course they are going to bail out the airlines. Once they formally announced the bailout, those stocks went up significantly. I almost doubled my money. (n.b. I think I made about $500 profit, but damn, it sure required less time and labor than working for $500) Capital Gains aren't only for stock profits -- they also apply to sales of real estate, for one.

arthur laffer to the rescue!

Tax non-profits. Cut the pay of public officials and professors. Give businesses and workers who manage to hold on to their jobs a payroll tax holiday to the end of the year.

“If you tax people who work and you pay people who don’t work, you will get less people working,” Laffer said. “If you make it more unattractive to be unemployed, then there’s an incentive to go look for another job faster.”

https://www.reuters.com/article/us-health-coronavirus-usa-laffer/cut-salaries-taxes-to-reopen-u-s-economy-says-laffer-conservative-fave-idUSKCN21Q3AT

That guy should be shot into space.

should have put an economist on the Challenger instead of a schoolteacher imo

now that there are three little vertical bars on the right, it's time to update:

https://i.imgur.com/ajKS6iW.png

the market has gone up like 20% in the last few weeks so clearly that's not bothering it much

it will be hilarious if the market makes it back close to its ATH's despite...reality. Everyone should be able to print their own money.

Yerac Monetary Theory

my printer would go "brrp brrp brrp brrp another one bites the brrrp"

Printers sold out worldwide, income inequality now based on who got to Best But the earliest

*Buy

Best Butt is funnier

Taking a cruel pleasure in yahoo finance comments like "Time to load up on cruise ship stocks, they haven't been this cheap in years!" Yup folks, expired milk on sale!