I’m a bit curious considering you don’t have government pensions and what not in the US, right?
I’ve heard of 401k? And that there used to be pensions or something? But I’ve heard it depends a lot on the employer and what they offer? So I just wanted to ask how you guys have planned to retire? There’s a lot of personal responsibility?
​
36 comments
Invest a lot while young and hope your investments pan out. 😬
Die by 60? I have a 401k too.
Tbh, I assume I’ll die during my shift and they’ll just sweep my body into the dumpster when they have time /s
But really, I’m pretty good at saving money. And when I graduate and get a real job, I’ll do the whole 401k thing. Not sure of SS will be a thing by the time I’m retiring age, but that should have a good amount of money put into by then
We do have a government pension, it’s called “Social Security”. It’s not really enough to live off of though, so people save money for retirement as well.
A 401k is a special type of investment account where there’s less taxes taken out, and often employers will “match” your investment. So for example every paycheck I put 6% of my pay into my 401k rather than my normal bank account, and my employer puts in that same amount effectively doubling the amount I saved for retirement.
With 401k accounts the employee has all the investment risk. “Defined benefit” pensions used to be more common, where your employer would agree to pay you a % of your normal pay after you retire. Employers didn’t like this, because it resulted in future financial obligations that they needed to invest for today, and if the value of investments went down then they had to put more money in. Many pensions were underfunded and cost employers a lot more than they anticipated, some even failed to pay out to the retirees.
Over time more employers switched to a “defined contribution” model like 401k accounts. Now the employer has their financial obligations in the short term, and if the value of the investments goes down that’s the employee’s problem rather than the employer’s.
We have Social Security which is a government pension. The pensions people talk about disappearing are from private employers and were typically defined benefit plans. 401ks and similar accounts (eg 403b) are tax advanted savings accounts. These are defined contribution plans.
401k, employer pension, social security
Social security and 401k are the main retirement sources of incomes. Everyone who works pays into social security. When you retire you will get a fixed monthly amount of money from it based on how much you paid in and when you start drawing. 401k is a special tax deferred way to save money for retirement and to invest that money into markets. Because it gains interest over decades, you have a good chance of building a sizable retirement fund in your 401k. Finally, there is an IRA (Individual Retirement Account) that you allowed to contribute to and invest as well.
For me personally, I contribute to all three of these, and I fully plan to retire comfortably.
A 401k is an investment vehicle that has tax advantages allowing you to invest money before taxes (thus more money is invested up front). You then pay the taxes on that money when you withdraw it, most often at retirement. There are several versions of 401Ks, 403Bs, etc. They basically all do the same thing of making it advantageous to invest and reduce your tax burden.
Some other options will be pensions which are quite rare. IRAs and Roth IRAs. SEPs. Many others.
They seem complicated at first, but they really aren’t. You can have a Roth IRA account set up in about 20 minutes. Then its just a matter of deciding how to invest. Most people seek advice from a financial planner. For some, you can do it yourself. I run my own IRA. Contribute every month and decide how I want to invest.
There are numerous options for setting up your retirement. Most seem difficult at first, but they really aren’t.
I have a 401k and an IRA that started back when I was 16. I’ve also been pretty good about just saving money.
Three years ago I said fuck it and built a $48.5K pool at my house and kissed retiring away lol. I do still have IRA account which I contribute to every paycheck and my company matches a certain % yearly. My wife has similar with her job. I kind of set myself back because I had a pretty nice junk of money (when I was in my 20’s) in an old IRA account but I had to take all that money out due to me being stupid and having some legal issues. Just hoping we can save enough before retiring and combine it with what we get from social security.
My husband has a pension. Technically a government pension, he works for the state. We each have an IRA we max out every year, and we have a significant brokerage account. Plus I own a business.
Oh and social security, but that’s negligible.
My wife has a 401k and we have some savings. I actually just had my first social security check deposited the 8th of August so I’m now officially a retired American. Our house and cars are paid for and the COL is extremely cheap here. Property taxes and insurance on the house and cars is about 3000 dollars a year.
I have a 401k that I have been contributing to since my mid 20s, I joined a start-up and my stocks are worth several hundred thousand dollars and I will probably roll most of that into tax advantaged stuff eventually after I buy a house.
We have social security, which is a government pension we pay 6.5% of our income into. I will not see any of that and neither will anyone else under 40 probably, it’s going bankrupt which is why nobody in Washington ever talks about it. I’m planning to be completely on my own.
Considering many of us are deliberately kept too poor to afford homes, it’s unlikely that many will be able to afford to retire. Especially if they take our social security away like they keep threatening to.
A 401(k) is an employer-sponsored tax advantaged defined contributions plan. The idea is that you contribute some money from your paycheck to your 401(k) and invest it, and your employer matches your contribution up to a limit. You do not pay taxes on this income when you contribute, but rather when you withdraw that money after retirement. An IRA is similar, but it is not -employer sponsored.
Both of these plans are “traditional”. There are “Roth” versions where you pay taxes when you contribute, but pay no taxes (including on capital gains) when you withdraw. There are limits to how much you can contribute in a year and how and when you can withdraw your money. In general, for traditional plans, you cannot withdraw before you become 59.5 years old (barring exceptional circumstances) without paying a 10% tax penalty. You must withdraw a minimum amount every month once you become 72 years old (previously 70.5).
Pensions, on the other hand, are defined benefits plans. These days, pensions are associated with government and union jobs. Social security is a government retirement system funded by payroll taxes. 6.2% of your paycheck goes to social security and your employer has to contribute an equal amount. When you become ~67 years old, you get a certain amount from the government every month. I have no idea how this amount is calculated, and I also think that you need to pay into the system for at least 40 calendar quarters.
My retirement plan is as follows: when I get a job, I will maximize my 401(k) and IRA contributions and invest them in a moderate risk portfolio.
I have a 401k, and the new place I just started at does a 401k match and a pension, which is freaking sweet.
401k and an employer provided pension plus saving and personal investments.
I also get residuals from an old job but that is a tiny little income stream. The people who did sales at that job can actually make big money from it.
I will save for it, but I doubt that I will ever fully retire. For the most part, I enjoy what I do.
I took a job in my late 20s that involved mostly traveling. The plus was it paid about triple my salary. The minuses we’re that I was home about two months a year.
For basically 8 years I lived in hotels and corporate housing, and banked every penny I made.
The experience I learned and the skills I picked up basically set me for the rest of working life.
I basically sacrificed then to live better now.
And I have about 2 (maybe 3) pensions from working at jobs before that.
I’be been contributing into employer-sponsored 401k programs since I started working 20+ years ago. My employers have matched some part of that which has been helpful. I’ve also got an individual investment account I throw money into plus an IRA or individual retirement account, that I fund each year. I’ve also got a pension from a previous employer and, if I stay at this job long enough, I’ll get one from this job as well. That’s uncommon but it’s nice to have. My aim is to not have to rely on social security.
We have 401(k)s that we can put up to $61,000 per year in with certain tax advantages, and employers usually contribute some money too. We also have Individual Retirement Accounts that you can put up to $7,000 per year in with certain tax advantages.
I’m 58, and plan on retiring at 62. I have a pension, a 401 K and will get social security payments.
My husband will serve in the reserves long enough to have 20 collective years of service and get that retirement, he hopes to have a federal job and get that retirement as well. We will hopefully also have a 401k but we just cleared it out for an important expense. But he’s only 32 so we’ve got time for that
I have a 401(k) from my most recent job which ideally I won’t need to touch for the next 25 years or so.
Most people with pensions work or did work for some level of government in some capacity. My mother worked for the school district of Philadelphia for thirty years before she retired, so she’s pretty well set.
Really depends on your age.
55+ retire w/ pension/401k/social security/Savings
40+ 401k/social security
everybody else – climate change will probably kill me first. If not younger ones will probably keep me around to hear stories better times.
I put the legal maximum $20,500 in my 401k each year. My employer matches about 6% of my salary (or around another $12,000). Then every year they put in an additional 6% of my base ($12,000). My wife has a similar arrangement at her job.
This is all invested tax-free in an index fund tracking the S&P 500. I crossed $1,000,000 at around 35 and intend to keep going until I have at least $10,000,000, at which point I could live indefinitely on a mere 4% per year and leave all of it to my children after my death.
I am retired. I retired at 60 after 39 years of Federal Government service with a ( CSRS) Civil Service Retirement System pension.
I paid in 9% of my pay into the CSRS for 39 years. I am not eligible for Social Security benefits.
I also have a 401K which I paid into while working the government did not provide any matching funds.
I work for a state-supported institution, so I have a pension. I’ve been at this job for almost 20 years and don’t know how much longer I will stay there, but when I do leave, I doubt I will quit paid work entirety.
401k + a good amount of savings I’ve built up, plus the equity in my house for now. I’m looking to do some more interesting investments.
We do have a sort of public pension, social security. Though it’s in some financial trouble and I’m planning my retirement as if it will be gone or drastically reduced in scope by the time I retire.
I’m fortunate to have an employer with good retirement benefits. I contribute 11% of my pay to a 401k account and my employer contributes an additional 10.25%. I also max out a Roth IRA each year. My wife saves a similar overall percentage of her pay and also maxes out a Roth IRA.
Assuming we get no Social Security at all and retire at around 65, we should have something like 5-6 million dollars saved total which will replace about 80% of our income for 25-30 years. So we should be able to live pretty comfortably in retirement unless something catastrophic happens. If we do get some social security we should live quite well.
It depends on a lot of factors. I have a good paying job, my 401k is doing well, etc. so financially I appear to be ok at the moment. However, there are a few ideas:
1. Leave the U.S. and live in Mexico or somewhere cheap in the E.U. I don’t require sponsorship in either case so depending on how things are at that period in time, I could go with either option.
2. If I’m in bad health, just go ahead and end things in the most humane way available. This isn’t something I hope to need to do anytime soon, but I’ve seen people die slowly of cancer, Alzheimer’s, etc. and I’d prefer not to decline and suffer.
Same job for 26 + years. It’s a good one with excellent pay, bonuses and benefits. They match 401k investment at the max allowed, so we do the maximum. Also have put a % of our pay in savings every week since we got married 29 years ago.
If something happens to him before retirement, they provide four times his annual salary.
We will be fine.
By dying.
While we don’t have government pensions, Social Security is a government-guaranteed basic income for older Americans, so it functions a lot like a government pension. It’s based on income, so the more you earn and pay for, the more you will get out of it when your reach retirement age. Currently, the retirement age for people of my generation is 67, but you can opt to take Social Security as early as 62 or as late as 70. Taking it earlier will decrease it, but opting to take it later will increase your benefit.
As far as private retirement options go, defined benefit pensions are almost of unheard of in the private sector and are usually only available to local, state and federal government employees. The most common retirement vehicle is the 401K, about 41% of the population has one (there are other options like Roth IRA’s, traditional brokerages and the like, but to make it easy I’ll just focus on 401K’s).
401K’s are investment accounts that you pay into each pay period, and your employer often matches a percentage of it. You then choose funds that are available from the account that either track financial markets (S&P 500, Dow Jones, etc) or are a collection of bonds and stocks that are determined by what age you want to retire (Target retirement funds).
The idea is that you keep contributing to them until you retire, and as a result of compounding interest, regular deposits and matching deposits from your employer, you will have a healthy amount for retirement. It should be noted that this money is not taxed until it is taken out as often at a lesser rate than regular income is taxed.
Hope this helps
We do have a government pension system called Social Security, with these features:
* Covers almost all workers in the US.
* $1669.44 per month average benefit for retired workers.
* $4194 per month maximum benefit for retired workers.
* Benefits depend on average wages over the highest 35 earning years, indexed based on changes in average wages before starting benefits, and indexed based on inflation afterwards. The benefit formula gives low-wage workers 90% of their average wages, but additional wages beyond certain points count at lower rates.
* One can get a higher benefit by starting later (up to age 70) or start earlier at the cost of a lower benefit (as soon as age 62).
Employer-sponsored pensions still exist but are now rare except for government employees.
401ks (and some less common types) are workplace retirement plans with these features:
* Almost all large employers offer them as do many small employers.
* Employers often make their own matching contributions but not always.
* $20500 is the basic annual limit but for employee contributions, but higher amounts are sometimes allowed.
* The “traditional” version exempts gains in the account from tax and also excludes the money going in from income taxes, but requires taxes to be paid when the money is withdrawn.
* The “Roth” version (included in most but not all plans) has no up front tax benefit but exempts gains from any taxes in the future.
* There are sometimes penalties for withdrawing before the year you reach age 59.5 but also many exceptions to the penalties.
There are also IRAs which provide similar tax benefits but are not through an employer. IRAs have a basic annual limit of $6000 this year with some variations. And it’s also possible to save money in a non-retirement account.
What’s with the negative posts against the US here lately? Every post seems to be that way.