@crazyguy “If a worker does not take a contribution in a year, that tax savings is permanently forfeited. As is the potential growth on that contribution.”
What part of “it’s a niche situation, but there are cases where it could work out for the best overall” don’t you understand? In any case, my main point is just that people who have access to a 401(k) plan who do not take advantage of that access are not necessarily stupid. And the niche case is an extremely small part of that claim.
The more important fact is that some people simply cannot afford to put the money into a 401(k) because they need the money right now in order to survive. Surely we can agree that there’s no point in saving for a retirement you will not live to see, right? And even for people whose situation isn’t quite so dire, there may be quality of life issues that make 401(k) contributions impractical or unwise. So as much as it may cost them in the long run, the alternative is worse.
Basically, what we see here is a version of the Captain Samuel Vimes ‘Boots’ theory of socioeconomic unfairness (as recounted by Terry Pratchett in Men at Arms):
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.”
It’s just another case of where you start having a profound effect on where you end up.