Originally Posted by
Tropical
All of this makes my brain hurt. Can anyone boil this down to a few sentences, and explain it like we know nothing about investing?
I don't have time to go get an MBA in finance before this decision is required, nor do I want to. All of these typical APC "I'm right and you're stupid" rabbit hole debates on this topic aren't helpful for those of us trying to figure out what it means.
If only the union put out an easy to read guide.
Maybe we can get Home Depot guy to do a video. He seems to know a lot about RNAV approaches and stump grinders.
Your excess DC money will go into a tax advantaged account after you reach the IRS 401k limits. Our DC contributions have become more (for some) than the IRS allows in the 401k limited by 3 numbers $330K annual earnings, $66K total annual contributions and $22.5K annual personal contribution. This is the way to get more tax and dues advantaged money into retirement funds where it was meant to be. Some people are upset they will no longer get the excess as a cash payout which was spendable/investable cash. The investment is conservative and meant to maintain principle and a return below what some would like. This doesn't affect people who make less than $330K and that number increases annually along with the other limits.
Here's a high earner example for 2023. $400K earnings = $64K DC. $70K @16% = $11.2K into MBCBP. The company will deposit $52.8K on the first $330K earned into the 401K. The individual could make personal contributions up to $13.2K to max out the $66K limit. As the company percentage increases more $ will go to 401k . The same for the IRS limits, which increase annually. The problem most have with this is that there is no choice in which investment, all excess funds will be invested in the fund chosen for everyone. It is set up like a pension fund in your name, in that capital preservation and a modest return removes the risk from the funds being unavailable.