I was reading this article in Time Out New York where the 26 year old author is pontificating on her philosophy that 401k plans are for suckers and she would rather have her cash now. Even going so far as to endorse her mom’s mattress hoarding of cash.
As someone who also works in Manhattan, I see this a lot with many of my younger coworkers. They fail to sign up for employer sponsered plans like our 401k or ESPP (stock) plan. To some extent it is a cost issue, but for the most part it seems like mostly ignorance (unforgivable ignorance IMHO as we work in a management consulting firm that investigates corporate fraud and we have two floors of lawyers, accountants and financial analysts to ask for advice). I don’t know about you, but to me it’s like throwing money (100% matching up to 6% of your income for the 401k and 15% off the low price of any stock you purchase).
The problem with spending money like you are going to die tomorrow is the reality that you probably aren’t. The writer seems to think she is better off having it now so she can spend it on French cheese and blow. Anyone agree?
Let’s see, the money isn’t taxed, your employer matches it, every finaincial person says it’s a no-brainer, but some 26 year old ditz says its not for her- who do you go with?
Granted if you are dire stratis and really need every penny you earn right this second to keep from being homeless, and don’t see yourself in any job for more than a year she may have a point, but most people at some point settle down in a steady job with a steady company.
She sounds like she is waiting for an inheritance or a family bailout.
Fortunately, her view is in the minority where I sit. I’m also a late twenties, NYC financial services type. And no one I have ever met here thinks that way.
I’m not making grade a NYC money, but goddamn, it is not too hard to have my Epoisses at $40/lb and my 401(k), too.
Well, there is a chance that the debt becomes so bad that they will have to raise the taxes so high that you will be in a higher tax bracket when you pull it out than when you put it in, even on a retirement income.
Even if you put it in a Roth, there is a chance that the debt will be so bad that the PTB will renege and tax them as well.
But besides that, it’s your own choice to decide to have a comfortable retirement or have what you want now and a bad or nonexistent one. Neither is really wrong as long as you don’t hurt anyone else doing it (i.e. drain public services, don’t have enough to give your children a decent upbringing.)
When I first saw this on the cover of the magazine, I thought there was going to be some kind of intelligent critique of the 401k. Then I read the article.
It’s such a bizarre attitude, I don’t even comprehend how a person who has disposable income would choose to avoid saving some of it when their employer is going to add 50% -100% to the amount saved. Ok, so you get charged a fee if you take some of it out, they already gave you 50% more than you started with! The lack of interest in financial security does not compute. I have a nice job, want a better job, partly to have more stuff, but also to have something socked away in case things go south.
Spending your money on French cheese and blow is only a wise investment if you’re willing to share with me.
Seriously, I’ve got saving somehow hardwired into my system (thanks Mom and Dad) so I just can’t not be frugal. And it seems the author is working pretty hard to paint 401Ks in a bad light to justify her decision. So each of her “well researched” comments seems very slightly lame, except for one…
It’s her money and if she wants to blow it, by all means go ahead. If the trade off between living hard in youth and eating dog food in old age seems attractive, have at it.
I can understand that, even if I don’t agree. While I don’t know about 401K’s specifically, I’ve had friends who seem to have a similar attitude in general. And I won’t pretend I haven’t had the periodic fantasy of cashing out the nest egg today to go somewhere nice and do nothing but have fun for 10 years or so. However, that “what’s next?” always stops me short.
she does realize that you can take a loan on your 401k and the interest you are paying is to yourself? She can still have her money now if she needs it.
I thought at first you had cleverly cited something from The Onion. The article is so stupid, it makes my teeth hurt! The earlier you can start a 401k, the more time it will have to make money for you.
In a Dilbert® strip from Apr. 2, 2001, Catbert, the evil HR director, asks the Pointy Haired Boss:
C: Why aren’t you signed up for the 401k?
PHB: I’d never be able to run that far. I did a 10k wheelchair race once. The guy who pushed me still has whip marks.
Same here. When you’re 85 and on your death bed, you don’t look back on your life and say, “Hey remember that time I sat in my apartment and ate beans and rice so I could fund my 401(k)? Good times!”
I can understand wanting to enjoy your youth. (Though I’m not sure expensive cheese is the best way to do that.) Will she regret her financial choices one day? Yeah.
The grasshopper may suffer in old age, but its youth is a lot more fun than the ant’s.
That isn’t necessarily true. My company plan does not allow loans. It depends on the way it is set up. That dollar put in today is in limbo until an employee leaves, dies or retires.
We do not offer a match in my company and yet, I encourage my employees to participate. Since it is pretaxed money, a small amount like $10 per week can be virtually unnoticed and it ads up quickly.
My gut reaction to this is that I wouldn’t consider for 5 seconds the financial advice of someone who proudly admits they would rather spend money on blow than save it.
Previously knowing nothing about TONY, this article suggests only that it’s a worthless rag. That was one sad, stick-your-head-in-the-sand attitude. I max out on 401 and the ESPP and the enjoyment of watching those grow beats the hell out of the taste of any cheese I’ve ever had… and I love cheese.
There really isn’t much else to say. I’ll say it anyway, though.
I have never in my entire life met a person above the age of 50 who DIDN’T tell me that they wished they had saved more money. Every person I have ever spoken with on the subject, every one, said “For God’s sake, start putting money away in retirement savings.”
I understand the notion that you might want to have some fun now. The problem with that theory is that the fun/saving tradeoff really doesn’t exist. It’s bullshit. If you assign a given percentage of your money to retirement savings,
You won’t really miss it, and
Since you get a truckload of tax benefits for doing it, it doesn’t actually cost as much as the deduction would make you think. Mathematically, you’re simply reassigning income in such a way as to pay less tax. “Pay less tax” are three words I personally am heavily in favour of.
People will generally spend what they can and have fun with it. Parkinson’s Law: expenditures will always grow to assume the resources available. Your entertainment budget will be maxed out no matter what it is, and the larger it is the lower your return on investment in terms of your dollars-to-fun ratio. Spending $900 a month on entertainment versus spending $650 a month is not really going to make a noticeable difference in how much fun you have.
Now, having said that, I live in Canada, and as near as I can tell our equivalents, the RSP and RRSP, are financially much better than the 401(k). As near as I can tell.
Well, I’m around 50, and my lifestyle is no different from when I was 25. I was no stick-in-the-mud then, and I’m not one now. It’s foolish to think that “youth” is something you only have in your 20s.
I guess the moral is you shouldn’t ready TONY for financial advice any more than you should read Kiplingers for advice on the best sushi bar in the West Village.
I like to enjoy my money too, but when I got laid off from my fancy management consulting job and was out of work 6 moths several years ago, I was pretty happy I had enough money saved up to cover my rent and expenses. It made the difference between being a 30 year old guy living with his parents in the suburbs and being and out of work guy bumming around with his buddies in East Village bars and coffee shops until he finds work.
I love the idea that a bunch of hipster 20-somethings are going to read that article and think, “hey, that chick is right, why the hell am I wasting my income on this 401k plan??” Really, anyone who takes their financial advice from TONY deserves to lose it all. A fool and his money, what?
She seems pretty ignorant of the whole 401K system and when she hears of exceptions in the plan she has a knee-jerk reaction.
“Employer’s matching is discretionary”
Well, yeah. But it’s not like after they’ve been matching you 50 cents on the dollar for 5 years they’re suddenly going to take that money back. All they can do is stop the contributions.
And as a 26 year-old she seems fairly naive about how old you are when you retire. She’s picturing being in a wheel chair and 90 years old wondering why she saved money for then. But when you retire at 65 it’s really not that old. And if you’ve been saving heavily from a young age you can even retire at 60 and have plenty of cash.
True, she can do what she wants with her money but I feel if there’s too many grasshopers like her I fear they’re all going to be 65 and crying that they have no money and want all the ants to bail them out.
There’s me. But only because I’ve saved a hell of a lot for a long time, and will save even more when my youngest kid is out of college - enough so I can cackle evilly when my statement comes.
I’m sure this dope will max out home equity loans when and if she ever buys a house, and then be shocked at not having money. I hope she is looking at boxes to live in when she retires - or maybe she has a fantasy about marrying a rich guy.