wily_old_vet said:
Trick-You misunderstood what I was saying. If I understood Browniehound correctly he was saying that the money UPS contributes to the pension plan + a 7% match be put into the 401k. What I was saying was that due to contribution level cutoffs you could NOT have both this money AND what you might be contributing to the 401k yourself.
You're correct Wiley but consider this scenario. At present, you have a UPS FT employee contributing the max level to his/her 401k but all of a sudden the change is made that all retirement portions of the weekly H&W contributions UPS makes on your behalf is paid into your 401K plan. Now you still have a little room for you to contribute the difference and make up to the max levels but you still have a chunk of change left over in your pocket that use to go into the 401k. Obviously, Uncle Sammy and his kissin cousin, the State, (where such applies) would take a nice bite since that money in no longer sheltered from taxes but you'd still have some left over. What better place then with this excess money than to invest it for example in a Roth IRA or use the money to invest in Real Estate of some other business venture to produce excess capital for the longterm. Who knows, that small initial business investment could grow to the extent that you could leave UPS much earlier than you had planned and focus on your other business interests. It's not a "goose that laid the golden egg" by any stretch and it does have risks but as we recently learned firsthand, union controlled and even company controlled plans aren't without their risks either. The question comes down to, "out of all parties invloved (union, company, yourself) who do you trust the most to take care of your interests?" The answer is obvious but it generates the even harder question that most people throw their hands up on and settle with one of the other 2 choices, "if given that responsibility, how hard am I will to work in order to have a reasonable chance of coming out a success?"
That the one where the rubber meets the road! Vast majority of folks will relent to the 2 other choices and sadly those willing to take the risk are left to have to follow the masses. I view the pension and Social Security as the gravy but my 401k as the means to buy the bread and my advice is for everyone who can to do the same.
One other caveat to consider as it's rarely discussed as I see it. If this transition to a 401k only does happen, that income in not outside the pale of taxation but rather on deferred like any normal 401k. It would be counted by law as part of your total income for the year and any ramifications concerning that should be considered. Although I've never had to deal with a divorce situation and hope I never do but 401k's generally aren't immune from divorce settlements as I hear from those who've experience such events in life whereas a pension longterm out may because of it's future event provide a degree somewhat of protection. Again, other may be able to give better details but it issomething to consider when discussing alternatives to the present pension system. Nothing is risk free.
