My spouse says they want to move somewhere w less taxes. I countered that can also mean less services.
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It depends on the state. We live in one of the higher tax states and one of the biggest spend is the very generous public pension for state employees.
The other reason we will move out of here is they take our state income tax and redistributes the money. Our town pays a lot of state income taxes but receives very little of the money we pay. Higher taxes for us doesnt mean better services. It means better services for other people in the state.
Weâre out of here as soon as D26 graduates.
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Since this is a thread on retirement, what items are taxed can be more important as the actual tax rate. For example 8-9 states tax social security benefits, whereas the other 40+ do not. ~15 states donât tax pension income (but most of those have no income tax at all). Pennsylvania doesntâ even tax 401k/IRA distributions.
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We would be really unhappy if our state taxed pensions, particularly at a high rate like CA and NY. We pay high property tax, but it is our choice to live in a pricier home. Itâs not a choice whether to get a pension or not. Well, I suppose we could turn it down, but obviously we wouldnât do that. Totally agree how much it matters what items are taxed. You might not care if income is taxed highly if you have a low income, or if purchases are highly taxed if you donât buy much.
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Excepted from interesting AARP article (content more comprehensive than the title implies)
13 States That Wonât Tax Your Retirement Distributions.
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Retired teachers in CT have 50% of their retirement incomes taxed.
I totally disagree with their conclusion that having 401Ks doesnât help savings ratesâŠâŠwhat are they smoking? Do these people even live in the real world? Of course it encourages people to save for retirement, having a specific plan that many people know about and parents lecture their children about, and employers set up, often offering a match or contribution has to help. I think many people contribute to this plan because they started it with their employer, and they just kept it rolling along.
Yes, keeping social security solvent is tough, but doing away with a plan that highly encourages people to save for retirement is not the way to go. Iâm not convinced it really costs the government that much anyways, not everyoneâs taxes go down, especially after 40 years of employment, who knows what your taxes will be.
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Theyâre looking at the retirement savings rates of people that arenât contributing. Those people are more likely to solely rely on Social Security. Thatâs why they are suggesting what they are. They are basically saying why spend (or more accurately delay collecting taxes) any federal dollars in a program that doesnât help everyone.
I agree that the government isnât missing out on tax money in the end. They are delaying when they will get it though which does affect their current balance sheet. I think that is one reason they are pushing more for Roth investments, get those tax dollars now.
Anyway, I totally agree with you that the 401k has been a real boon for many peopleâs retirement savings. It has allowed so many the opportunity to take a personal role in their future by taking advantage an easy payroll deduction. Through this program a person can easily set themselves up for a more comfortable retirement as Iâm sure many here have. It would be a shame to do anything to jeopardize this highly popular retirement savings vehicle. And yes, as you say Social Security is important and there are other ways that hot mess can be addressed.
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I agree. With the death of pensions, it is important for people to have personal retirement savings to augment social security. The taxes will get paid (Iâm paying mine in retirement!). The fact that more people arenât taking advantage doesnât mean itâs not a good thing.
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The problem with the move away from defined benefit pensions to 401K-type retirement provision is that it assumes that the average person is able to be their own investment/money manager, and frankly that is not the case. Some people enjoy investing and find it an interesting intellectual puzzle, or get a dopamine rush watching their returns, but most people just want to to have a guaranteed income when they are too old/sick to work full-time. I think we are asking too much of the general population to expect them to become educated and investment savvy in old age in order to avoid destitution. Many, many people live hand to mouth all their lives and do not have the bourgeois future-time orientation (or income) it takes to fund a "comfortable retirement) on 401ks. It is becoming a political problem. Whatever some politicians say, they will not abolish Social Security. That would be a rope/lamppost scenario in DC. Younger people donât want Mom and Dad dependent on them, however much they may gripe about âBoomersâ hoarding the national wealth. I have idly wondered what would happen if we end up with an Argentina-style populist regime and the government confiscates 401k funds to shore up Social Security. This is under the heading of âcatastrophizingâ; it wonât stop me from contributing to my 403b.
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I agree that 401k type saving is not as good as pensions - but it is better than not having savings. Now ⊠a move to personal accounts in lieu of social security? Hard no!
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Certainly, pensions are ideal, but most private companies have managed to dump them. And nowadays, very few people stay with a job long enough that theyâd even earn one if it was offered. Then again, if they were offered, likely more would stay for a career. Me and my husband still have a pension, but boy, is the company we worked for trying hard to ditch them for current employees.
The concept of substituting personal savings, 401K, anything for SS would be a disaster. So many with personal financial savvy wind up not knowing their own name.
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Pensions arenât the nirvana that you might think.
Companies cut them back, abolish them without warning. It assumes that you stay in a job your whole career, even if itâs a terrible job. Demand you accept a pay out. Most people donât have a large enough monthly benefit to live on.
And ask all those people who Denny McClain stole their pension from, how that went?
They can work. Mostly I feel that they can be an additional source of income in retirement. Along with the 401k.
Itâs not the upper middle class but the working poor who have issues saving. It used to be that there were jobs for non college graduates that paid enough for an upper middle class life and a good retirement. Those jobs have changed.
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True. But⊠I do think frequent job switching is partly due to lack of pensions.
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Yes, I think pensions were based much upon a social contract with the company, you work hard, stay here and dedicate part of your life to us, and we will reward you. Then they figured out ways to raid/dump the pensions. Hard to raid them now, but the focus is on rewarding investors and top executives with share buybacks, not stabilizing and growing the company. Employee loyalty, who needs that? Stay until retirement? Nope, we donât want you to do that anyways, we can hire someone younger for less money.
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You described Hâs company exactly! He worked there his entire career, as did many of our friends. They chose to stay because for years & years, the company provided job growth and benefits that made it a great place to build a career. First, they figured out how to take from what they promised retirees (even those who were persuaded to retire early because of the promises). Then they froze pensions, leaving long time employees with much less than expected. Then they eliminated pensions for new employees. And now they wonder why itâs so hard to get & retain employees. But it is the new order.
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Donât Gut 401ks and IRAs to Save Social Security
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I havenât seen this proposed by anyone in office from either party (correct me if I am wrong). In the article referenced it comes from someone working for a University and someone working for a think tank.
Per the article:
âOne particular recent proposal, by Andrew Biggs of the American Enterprise Institute and Alicia Munnell of Boston College, would eliminate or reduce the tax advantages of accounts like 401(k)s and IRAs and use the additional government revenue to shore up Social Security. The remainder of this post offers a laundry list of reasons why that is a bad ideaâ
I have a pension but really no SS (Iâm
Subject to the offset and windfall provisions so my SS just covers my Medicare bill). My husband has SS plus decent 401 k.
We both have retirement accounts we are using in addition.
Our FA is terrific and has advised us well
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The tax things do become quite glaring - but many do want to stay where they have lived for a variety of reasons. We have lived in the lower end tax states (Texas for some adult years; N. Alabama for many years). DD1 lives in TX and DD2 lives in FL. DH and I grew up in WI, and have family in WI, IA, MN, IL, AK, TN, and a sibling in Switzerland.
I have run into people in our area that have pensions from other states and choose to live in my current area due to affordability of nice home and low taxes. One was a teacher in NYC, and she flies back to visit family/friends in NY; loves her life in N AL - she bought a new home in a wooded area with some land, something she dreamed about for many years. Another couple who retired from IL had a son who attended University of Alabama, and fell in love with AL - to afford the kind of home they wanted, they moved about 30 minutes away from major city/shopping.
Good health care is very important to me, a cancer survivor. DH and I have a very good network of MDs and medical care where we are â can get that elsewhere certainly, but will be important if/when we make a major move.
Saving on State Tax for pensions/401k would save us some each year, but not enough to be the reason for us to move.
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