The human factor is that people are lazy, they like the shiny thing and sometimes fear takes over. 85% of companies offer a match in their 401K and I think the vast majority, if not all are set up through payroll deduction. Kind of fire and forget and you’re on your way. Adjust it as you get raises until you max out. So basically get that match because it’s an instantaneous 100% return on your money. It’s true that you usually cannot get your money out until you retire (though some plans have it where you can borrow from your account), but that’s a really, really good thing. If you start raiding your RothIRA to get that shiny car or go on vacation, then you’re shooting yourself in the foot. Also, if things are a little tight, you might just stop your contributions. 401K is ore-tax and so if your income is $100K+ then doing 401K might reduce your tax liability considerably and drop a big portion from the 22% bracket. (Equal money in the 401K and Roth IRA will be equal at your retirement, IF YOUR TAX RATE STAYS THE SAME) So, do you think the rates will be more/the same/or less for you 25 years in the future? However, for most retirees in the middle class, I believe you’ll be in a lower tax bracket. This is what happened to me when I retired. As far as tax implications that are rarely discussed in these videos, do you intend to move after retirement to a state with no income tax or no tax on retirement income? This could easily give another 7%+ advantage to using the 401K over the Roth IRA.
Great video. I would like to add that investing in a Roth 401K provides legal protection that a Roth IRA cannot provide (I.e. in the event of a law suit). In regards to withdrawals, you can just roll it over to the Roth IRA when you retire and eliminate the RMDs.
Interesting that he said Charles Schwab has the best customer service because when I was first starting out (three years ago) they were extremely rude to me for three months. So I ended up going with Vanguard and their customer service has always been outstanding to me. I guess it just goes to show how people can have very different experiences
So if I contribute$5000 in Roth 401k TSP. Then is it ok to invest remaining $18000 in the Roth IRA or there is a limit there. 401k limits for 2024 is $23000
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The human factor is that people are lazy, they like the shiny thing and sometimes fear takes over. 85% of companies offer a match in their 401K and I think the vast majority, if not all are set up through payroll deduction. Kind of fire and forget and you’re on your way. Adjust it as you get raises until you max out. So basically get that match because it’s an instantaneous 100% return on your money. It’s true that you usually cannot get your money out until you retire (though some plans have it where you can borrow from your account), but that’s a really, really good thing. If you start raiding your RothIRA to get that shiny car or go on vacation, then you’re shooting yourself in the foot. Also, if things are a little tight, you might just stop your contributions. 401K is ore-tax and so if your income is $100K+ then doing 401K might reduce your tax liability considerably and drop a big portion from the 22% bracket. (Equal money in the 401K and Roth IRA will be equal at your retirement, IF YOUR TAX RATE STAYS THE SAME) So, do you think the rates will be more/the same/or less for you 25 years in the future? However, for most retirees in the middle class, I believe you’ll be in a lower tax bracket. This is what happened to me when I retired. As far as tax implications that are rarely discussed in these videos, do you intend to move after retirement to a state with no income tax or no tax on retirement income? This could easily give another 7%+ advantage to using the 401K over the Roth IRA.
Always retire in a state with no state income tax
I have loved the ROTH IRA since the first day I discovered it. It's my priority to max it out every year.
Love it!
Great video. I would like to add that investing in a Roth 401K provides legal protection that a Roth IRA cannot provide (I.e. in the event of a law suit). In regards to withdrawals, you can just roll it over to the Roth IRA when you retire and eliminate the RMDs.
Yes thank you for pointing that out but it is also state dependent for the wider audience reading this.
Time IN market is top. So I max out Roth IRA in January. Then put my tsp at 10% which includes the match
Yes it is definitely better, more options, TSP is only good for cost, period
Interesting that he said Charles Schwab has the best customer service because when I was first starting out (three years ago) they were extremely rude to me for three months. So I ended up going with Vanguard and their customer service has always been outstanding to me. I guess it just goes to show how people can have very different experiences
I do think the Roth IRA is great for people that are worried about needing the contributions back due to life instability.
So if I contribute$5000 in Roth 401k TSP. Then is it ok to invest remaining $18000 in the Roth IRA or there is a limit there. 401k limits for 2024 is $23000
@@303topgun The annual limit for a Roth IRA is $7000 for people under the age of 50 and $8000 for people over the age of 50
There's also an income limit on being able to contribute to ROTH IRA. If you make too much money, you have to do a backdoor ROTH