How to Build Wealth With the 3 Bucket Strategy [By Age!]
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- เผยแพร่เมื่อ 28 ก.ย. 2024
- How to Build Wealth With the 3 Bucket Strategy [By Age!]
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I love the Money Guy Show. I just want to add advice for people who feel like the markets aren't their friend right now. Back in 2008 my 401K went from $65K to mid $30K, and I made the "brilliant" decision to take my 401K contribution from 10% to 1%. Never do that in a market "crash"! Double down!!! I'm not broke, but I could have been RICH!
Not a Buffett follower, but I think there's room to learn from all parts of life. Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” This seems to work with most market downturns.
TOTALLY..I've NEVER bought the whole concept of "dollar-cost-averaging". BTW..neither does BUFFETT, or MUNGER!
There is potential for considerable wealth increase with the correct strategy. I want to know; How can one take advantage of compound interest and potentially grow your retirement savings/net-worth to about $3M over time?
What steps can I take to engage in this opportunity? I genuinely aim to secure my financial future and am enthusiastic about taking part.
New background!? When did you guys change the set up? It's nice but might need a touch more lighting in the front! Excited to see the rest of the video
Trying to appeal to the younger crowds
Definitely needs more light up front
Agreed Sara, I liked the more professional look previously
I agree.
New building?
I love your show, I started with nothing and used my tax free military deployment money to eventually break the six figure retirement break point! It has only continued to appreciate with the amazing advice you guys give.
Finally thank you for explaining differences between IRA and Roth IRA.
I was so confused before thinking it is a same thing.
Solid basic investing advice from these two. I guess I won't ever be the next Warren Buffet, but after 23 years, I have made it to the point I can enjoy a retirement rather than having to perform part time work, work longer than I want, etc.
This is my first comment for this show, even if I follow your channel for a year now. I am just amazed by the high quality of the content your offer. This is practical advice. Thank you very much !
Good advice is difficult to come by and this show is definitely a great example
It would be nice to see a video that focuses on parents trying to catch up! My youngest will graduate from high school in the spring. I'm divorced and got by on rental income to be a stay at home mom. I've given one rental away to my oldest daughter when her husband got out of the military. Im now paying off credit cards for my son.
Im contributing 6% to Roth 401k, $ for $ match. I put $10 a week in HSA(my employer contributes also). I have rental income but focus most on a taxable brokerage account.
I'm 50 and in good shape. I've been a stay at home mom. Now I'm not as focused on retiring as much as other people my age. Videos on investing without retirement in mind would be great! Extra income and growth now!
You are an amazing mother I would be careful on how much you “help” out. That is how most children get spoiled and/or get accustomed to mommy paying for everything. My brother is 36 years old and was given everything my parents paid off all his debt and all he does is live with parents and stay rent free i am 26 years old and just closed on my second house i was the ugly duckling and was never spoon fed or given anything because I had a problem with drugs so they disowned me but it was the best decision they made because it made me struggle and work hard to survive and now i am the most successful and its because of being left to strive alone
And yes i am 4 years clean 🙏 now
@@davidgarza995 good on u
Hey AA I’m ur age .. I’m totally focussed on retirement for three reasons .. one is that it’s inevitable .. the other is that time is my friend right now .. third is the tax break - I’d much rather give the money to myself than DC
What is your son learning if he spent the money on his credit cards and you are paying them off? Your willingness to help is admirable, but you may help him more by letting him grow-up by taking responsibility for his actions and the debts he created. - good luck
Can you do an episode where you 1) deep dive into draw-down strategies for those who plan to retire at different ages (FIRE/FI/regular ages 65-67) and episode on 2) deep dive into cash strategies? If I already have an emergency fund, why do I need cash in tax-advantaged accounts and/or after-tax accounts, and how much cash? I have about 4-5% cash in both traditional & Roth IRAs, but I feel like the money is just sitting there, since I can't touch it til 59, and not working to build wealth...
I would love a full episode on this. I second this, Linda!
Am I the only one that loves the more nerdy financial shows? I definitely need a show on what to put in each bucket.
Yes please! Me too! I have pieced together some notes from different videos but it would be great to get a holistic guide.
They probably can't tell you exactly what to buy, but in general you want high growth assets in your roth ira (because it grows completely tax free), high yielding investments in tax deferred/401k (because you don't pay tax on the yield at all), and then standard target date retirement funds in your after tax standard brokerage.
Money 😁
I like the catchup at 50, but most people can't max their 401k, they don't make enough to max it.
Not a fan of the new set. It’s too dark and I liked the screen in the background on the old set. I also loved the bent desk of the old set.
I like the design pretty well, but it is too dark.
Not being married and not having kids has allowed me to max out my 457b, Roth IRA, plus my pension, and invest in PMs.
Yeah people seem to forget how insanely expensive kids are. Even with tax credits and rebates and everything else, the cost over the first 18 years of the child’s life is anywhere from $100,000 to $300,000 PER CHILD. That’s a small house you’re buying on an 18 year mortgage essentially. No kids for me either,
I'm in my mid 20s but since MAGI reaches limit for full 6000 for ROTH IRA, I'm doing all pretax for 401k even though I have the option of ROTH 401K. This way I can lower MAGI (I max my 401k) and contribute full 6000 to roth. I think it's all about tax conditions now vs later. I live in CA and engineer in tech so taxes are very high for me. I love your new setup btw!
Great job Grace! But chances are taxes will only be higher in future years. You may want to consider Roth 401k and just pay those taxes now.
I do a mix of pre-tax and Roth - the pre-tax to bring my liability down and Roth since I'm erring on the side of caution with my future taxes. I'd like to think I'll have a lot more money/income by the time I'm getting close to retirement, but my income to this point has not been that much.
@@jeffb.4800Not necessarily. Grace lives in California right now. If she retires to any other state then her state income taxes will plummet. She would be throwing away money if she did Roth and paid Cali state income now but planned to move in retirement to a state with favorable taxes
Also you should ALWAYS have some tax-deferred funds since they're partially triple-tax advantaged. Tax free going in, tax free growth, and tax free income up to your standard deduction. Roth won't get you $27,700 free income every year
Excellent point. Focus on how you filled the buckets is different than how you withdraw from them.
Money really is simple understand but for a lot of people difficult to master
On average, millionaires invest 20% of their household income each year. Their wealth isn't measured by the amount they make each year, but by how they've saved and invested over time. a lot of people panic and hold on to money that should be working for them. leaving your money in a bank at the rates they give you it will take over 800 years to double your money lol best time to invest is now. Retired with a 7 figure portfolio and Receiving about $98k in dividends. I have been in the Stock market about 20 years. Passive income is quite possibly one of the most important and central ways that the rich get richer.
I really acknowledge your comment, I'm an amateur investor, i have 2 IRAs, I do not like the cookie cutter responses from Fidelity, Vanguard
Schwab, etc 7%-9% year on average, how do you go about your investments?
@@Offixial_cash I have my funds well diversified by using trad signals from a US regulated broke r. Mary Freed Lorenz who you might have heard about or seen doing some stock analysis in the news sometime and tbh it's been a huge relief. Her stock picks are top notch
I think you said it all. Investing money that is not needed to cover expenses and leaving it in market is the primary method for accruing wealth faster than any other single strategy. Ultimately, that's the secret of getting Rich
@@petergould282 You mean Copying her trades, as it is done in etoro? Do you just give her your money or copy manually
Yeah, so true I don't see any way you would want to get financial freedom if your expenditures is greater than your cash flow, you can't be living on paychecks to get financial freedom that's where investment comes in
First show I’ve seen in what looks like a new (or remodeled) studio. Looks great!
Not to mention that the difference in the Roth and the traditional - the traditional affects your income which affects your Medicare costs and could affect your Social Security if you take it early.
This is such an important point which a lot of people aren't aware of!
These guys are talking about an ENTIRELY different "bucket-strategy", than what I've understood the term to mean, in other presentations. They are talking about accounts with different TAX TREATMENTS, in terms of "buckets". What I'd like to hear them discuss, is their philosophy on how they view the whole notion of sequence of return risk, and withdrawing from TYPES of investments, sequentially; starting from least to most aggressive, which addresses the whole issue of "sequence of return risk", during one's withdrawl phase.
Glad you did a deep dive on the 3 tax bucket strategy. I was hoping there would be more guidance on how much should be in each bucket. At the beginning you said something about how people might think it should be 1/3, 1/3 and 1/3, and hinted that might not be the best solution, buy I don't think you elaborated on what the ratios should be.
I'm in my mid 30s and I'm doing it a bit backwards from what you outlined, because in my 20s I didn't have a Roth option in my work 401k and I didn't understand the Roth IRA rules. So I have a ton in my tax deferred bucket and I'm trying to build up the tax-free Roth bucket with my Roth 401k and Roth IRAs for me and my wife. Tax wise it actually works out because in my 20s I was single and tax rates were higher. Between getting married and the TCJA tax cuts, my marginal rate is now lower than it used to be so I'm doing as much into Roth as I can. Is there an ideal ratio of tax deferred to tax-free? My plan is to use both so that I can pull out just enough deferred money each year at the low rates and then use Roth and taxable for everything else. Depending on how my tax deferred accounts grow I may already be facing a high tax rate due to RMDs.
My second year working I opened a traditional IRA at a credit union and put it into a 5 year CD because I didn't know what Roth meant and was scared it was something complicated. Then when I filed my taxes TurboTax informed me that I made too much to deduct it because I had a 401k at work, and then I just forgot about it. At the end of last year I did a Roth conversion and moved the money to Fidelity so I could finally get it invested. Wish I knew better a decade ago, it would have been worth so much more. Thankfully my 401k from that job was really good and I put in a decent amount, even if I didn't max it out.
It really depends on your situation, and you don't want to hit target "ratios" as much as prioritizing certain buckets under certain circumstances.
They gave a nice guideline for when you want to contribute to your tax-free vs tax-deferred, for example. Under 25% marginal tax rate, tax free is the best bucket to fill. Above 30% marginal tax rate, prioritize tax deferred and then tax free. Roth vs Traditional is (and always is) a question of what you think your future tax rate will be. If you think your future tax rate will go up, you want to "pay taxes now so you pay less in the future" with a Roth. If you're making great money now, you might want to defer the taxes to when your tax rate goes down.
And tax advantaged vs non-advantaged accounts is all about how do you avoid paying penalties when you go to withdraw. Well, that and also reducing your marginal tax rate. If you're within 5 years of retirement, spreading your contributions out in order to reduce your tax bracket might help. If not, definitely focus on maxing that retirement account first and after-tax account at the last possible second (plus a few years margin, for comfort).
Whoa!!! New studio setup! Looking good! 👌👌
Retirement is wonderful if you have two essentials - much to live on and much to live for. Invest wisely and get good returns.
thank you, can you give a pointer the best investment now ? i am thinking of getting stocks or cryto
The key to making money in stocks is not to get scared out of them. An important key to investing is to remember that stocks are not lottery tickets. get a financial assistant
I currently work with VIVIAN KLAINE MORGAN a financial expert i met in a seminar
I recently watched VIVIAN KLAINE MORGAN on TV , such a great speaker . but have you made any profit whatsoever working with her ?
i just added $230,000 to my portfolio
Nifty new set up, but I miss seeing the subscriber counter, lol. Maybe add a little light up front, so you guys aren't so shadowed?
when cash management strategy video?
The new set is awesome!!
Love the new set, guys!
Exactly. 52 now and have been going exclusively with ROTH 401K, Catch Up ROTH 401K and backdoor ROTH IRA contributions since 2014. It is huge to see about 400K in ROTH money sitting there and growing with the more than 1 million in pre tax and matching contributions I still owe taxes on in the 401K . I take a minor tax hit this year to save a fortune decades later as a legacy plan. Walking away at 55 in 3 years. Mutants rule!
How do I get a $1 to $88 Koozie!?
If I haven’t started a Roth yet but I have 160k in a 403b at age 35, should I start maxing out a Roth on the side now while continuing to max out tge 403b.
Thank you for pushing me to pay off my CC. I feel done with & free:)))) Never Again on senseless spending
Good for you Sheryl!! I never got caught in that trap, but saw many friends who were paying 15%-20% or more in interest. They were constantly transferring balances to get 6 months at 3%, then bounce up again to 24%. You have the monkey off your back, never let it back on. Congratulations🎈🎆
I am so much invested in my personal finance and probably know everything there is to know about it, have taken all the steps, now just need to make more money and invest more LOL. Send help or perhaps send money 😂
Any plans to provide an Apple Numbers version of your Net worth tool?
Clarification on RMDs for Roth accounts. RMDs are required for Roth 401ks but not for Roth IRAs. If the 401k Roth funds are rolled into a Roth IRA prior to reaching RMD age, then no RMDs will be required.
You got a great point. If RMDs are required for Roth 401k, should I roll my Roth 401k to Roth IRA every year?
I think this has been changed now, so there aren't RMDs for Roth IRAs or Roth 401Ks. May still be a good idea to roll over a Roth 401K into a Roth IRA after leaving the job though as the fees may be lower and there may be more investment options.
One thing that I wish was included when they talked about the HDHP and HSA is that often these plans have an extremely high deductible ($5000 - $8000 average) and a monthly fee ($300 - 600 / month average) in order to use. Average and median people in their 20s - 30s do not have that much disposable income and if they did, then they would be way better off just investing in a Roth (IRA, 401K, 403B) or taxable account with low-cost index funds tracking the S&P 500 or Total Stock Market.
I miss the old background... I think I am getting old. I resist change lol. Thanks for the advice, guys!
I love the index target-date fund. It takes the guesswork and anxiety out
I like the new setup! Lately, I have been listening to you guys on the podcast. What's up with the blue light tho?
So. If we take into account the $6k contribution per year and we assume that we are taking advantage of the full $6k deduction every year for 40 years, that is $240k. Now, if we got an employer match at the average rate of 6%, that means you essentially got an extra 6% in cash since you took full advantage of the tax deduction. We take 6% of $240k which is $14,400 bringing us to a total of $254,400. So if we add those "savings" and free money from the employer back to the value of the traditional IRA. it ends up being $1,580,983. Which is still less than the ROTH IRA, but not as bad assuming you do all the little steps and dont miss a single one.
I’m not digging the mic sound. It’s too bassy. And when you talk away from it can’t really hear you
Love the new set
I do too but it seems just a bit dark
Congress should amend laws to open HSA for all regardless of plan enrollment. I understand the idea is with an HDHP you have a higher potential risk should you have a health event which requires you satisfy the annual deductible. But the HSA encourages long term health savings which is a net good for the citizenry. They could enact a lower annual contribution limit to an HSA if you are enrolled in an HMO or PPO plan
HSAs are taxed in California though.
B+B.
It’s clear that if I invest 50k in a Roth vs 50k 401k, the roth is a better option.
The math I struggle with the same 50k I would invest in my 401k is actually around 37,500 invested in to a Rot(assuming 25 percent tax bracket). Which is better. I am guessing there is a time period that one would be better that the other. It wouldn’t always be the Roth. I would also like to consider the in year tax break I get for donating to 401k.
In this situation the outcome is the same.
IF your tax rate stays the same then there is 0 difference between ROTH and trad.
The benefit of ROTH is that hopefully when the money is coming out you'll be in a higher tax bracket, in that situation you'll be saving money on taxes.
If when pulling money out of a ROTH you're in a lower tax bracket, you will actually be better off with a traditional account.
@@sebastianmartin315 That's the #1 benefit mentioned (compare tax burden later vs. now... if higher later, go for Roth now). However, the #2 benefit of Roth IRA or Roth 401k now is that if you have enough money to MAX out the Roth, then you should go Roth even if your tax rate later is lower. Why? Because the alternative to invest your extra money after you've maxed out Roth is a brokerage account -- these will get 'double taxed' with a capital gains tax of 15-20% on earnings later. So, as long as your tax rate doesn't go down in retirement by 15-20%, you'll be better to max out Roth vs. brokerage. Summary = if you have so much money to invest that you can completely fund the Roth, then go with Roth.
If I'm doing 4 percent pre-tax in my 401k and decided to switch it to Roth 401 k... will that affect my tax filings next year to a LARGE tax hit ? My family makes 87, 300. Thanks !
A little less than $800. Worth it. Use pretax funds first so that there’s extra time for these funds to grow tax free. You’ll likely be in a lower tax bracket anyway (pre-tax funds won’t be taxed highly)
Just subscribed and began watching the videos. Great content, and very motivating, especially when it comes to contributing to the retirement accounts early
That feel good moment when you enter into your 30s and come across these videos and need to skip to the age 40s to have it be applicable advice. This is the first year I can't contribute to my Roth IRA even a partial contribution due to the income requirements.
Backdoor Roth broski
@@Rew123 thanks for the reply!! i do want to FIRE though. So when I do retire early (by 40) my taxes will be lower than they are now. I pay so much in taxes right now. If I could do backdoor Roth I'll pay at this higher tax bracket. My employer does not have our 401k setup for after tax contributions so I'm unsure how I'd be able to do a backdoor. I was thinking about Roth conversions from old IRAs, but that's only from my first few years of work so not much there. I'm 30 so 10 years to go and I'm in the whopping 35% percent tax bracket. When I reach 40 and retire, I plan to live off my expenses adjusted for inflation so about 55k in a low cost area. I figure if I put money aside to pay for the Roth conversions I can pay in the 22% tax bracket. Still trying to learn more. I have a lot more research to do
@@CH-bi8tl Nice. I assume you're prioritizing a brokerage account then.
For me, I do a backdoor Roth every year (after maxing out a trad 401k, HSA, and two 529s) despite my 41% combined marginal tax rate. Then I put everything else into a brokerage account. Not FIRE though.
@@Rew123 yes. I max out 401k and HSA. I have multiple brokerage accounts that every dollar goes to after my expenses. I just feel like it's not the best route, but I don't see other options available that I can do right now that make sense. I just throw all the extra in brokerage so it's not sitting in a savings account.
NICE MUG BP!
The lighting took an L again..
Also, please do a full show on the asset location as relates to the bucket strategy
You all are awesome. Great information. Listening to this for years (on youtube or podcast). The new setup is great too!
I learn more about the split between accounts. It would be nice to have more detail info on this. The other subject is when do we have enough. I heard about another 3 buckets strategy, at retirement to have more protection of the capital (short, middle term and long term) against the variation of the market, the ups and downs. Enjoy the video, thanks
@ 24:25 LOL! Not when you're in a socialist structured industry, like I am... Public Education. With that being said, I am looking for industry change to break that six-figure income and and start maxing my potential. Any directional opinion(s) is greatly appreciated.
At 44, we currently max our our Roth 401k and do $12,000 backdoor Roth(s). If the backdoor closes- we would transition a portion of the 401k to a traditional to drop us below the Roth threshold. Contribute 5,200/7300 into HSA investments (3 kiddos and making sure to have enough liquidity to cover full $5,000 deductible). Next step is to contribute to a non-governmental 457b after cash reserves are topped off. Any thoughts to better optimize? Marginal combined tax rate is 28.5%
So you acknowledge the front end tax impact of the Roth vs. Traditional but do not account for it? Why? Why tell a story that is not true?
Bo: studies, and analytics, and analysis 😂
Thank you so much for the great contents! Wife and I are working on our after tax bucket in our 30s.
Can you use an HSA to pay Medicare premiums?
Hi guys. I really appreciate your videos.
Why do you never show on the chart the difference that the initial taxes make?
You mention that "assuming the traditional investor doesn't invest that difference"... But that doesn't make sense. If I want to invest $6000, I can put $6000 tax free into a traditional IRA, but if I put it in a Roth, it gets taxed and I only end up depositing $4500.
Your chart never show what that huge difference means. Especially with compounding interest of that $1500 difference.
Talk about free money - I can invest ~25% more and get that compounding interest by going traditional and that makes a huge difference at the end.
Even assuming I'm in a lower tax bracket when I start to withdraw from it, I cannot find math that shows a Roth is actually better than traditional.
Please help me with this. I feel like I'm missing something.
In their defense, the typical 401(k) saver probably DOESN'T invest the difference, they just set some amount of their paycheck to go in and don't even think about it any further. Many don't even know that there is a difference. That being said, they do gloss over the true apples to apples comparison, which is odd considering their audience is composed mostly of money savvy people, or people trying to become money savvy.
And to your point, withdrawing from traditional in a lower tax rate than you contributed IS in fact better than Roth. So, to use your numbers, at a 25% tax rate, for every $4,500 you put into Roth, you could have put $6,000 into traditional instead. And if you withdraw those traditional dollars at, say, a 20% tax rate, traditional comes out ahead. Example: plug those numbers into a compound interest calculator at 7% return for 30 years, and here's what you get:
Roth: $4,500 invested, resulting in $36,740. No taxes on withdrawals, so the tax adjusted true value of the account is $36,740.
Traditional: $6,000 invested, resulting in $48,987. Apply a 20% tax to withdrawals, and the tax adjusted true value of the account is $39,189.
So, in a situation like this, traditional wins. Period. But it's kind of a catch-22 that requires some strategizing to get the optimal balance. Because the inverse of that is also true; if you are withdrawing in a HIGHER tax bracket than you contributed, Roth wins. Period. When you're young, that's (hopefully) when your working tax rates will be lowest, so it makes sense to hit Roth hard while you are in those low tax rates. That's the point where Roth is probably going to win out. As you start making more and climbing into higher tax brackets, the math may start shifting, and the amount of money you could withdraw from traditional in a lower tax bracket than you contributed grows as well.
Because of the US's progressive tax system, there will basically always be some amount that you can withdraw from traditional in a lower tax bracket than you contributed it. That's the amount you want to aim for in retirement. And this is where the assumptions you make start to really matter. If you're aiming to keep your retirement tax rate in, say, the 22% bracket (to use today's tax rates), that let's you know what your cut-off point for for Roth versus Traditional is. This is an over-simplification, but it's mostly right: "I'm aiming for for the 22% bracket, so any money I'm currently saving that's taxed in a bracket lower than 22% should go into Roth, and any money I'm currently making that's being taxed in a bracket higher than 22% should go into Traditional". It can get more involved than that, but as a rule of thumb, that's a pretty good one to go by.
However, tax rates change (likely in the upward direction) which is why leaning slightly more in favor of Roth might not be the worst idea, as Roth withdrawals are not affected by tax rates, while Traditional are. Social security is also taxable income, which will further affect your traditional withdrawals. Those things have to be taken into account to get the balance right, which requires some guesswork. Which is why I could see leaning a bit more heavily in the Roth direction, even if the math says you should be doing a bit more Traditional.
@@Alan-jk1yi Thanks so much for validating my thoughts. I appreciate the homework and math you put into it.
@@Alan-jk1yi man..what clear cut explanation! I love the Money Guy show but, this "three bucket theory" has to be one of the most confusing concepts in regards to building wealth. I see now that your buckets depend on your tax situation. The less you make the more beneficial roth is(due to taxes)..the more you make the more beneficial traditional 401k will be.
@@Sjohn1107 Both are potentially good, even for people in a low tax bracket, it's just a question of finding the right balance. For people in low tax brackets, the balance will lean heavily in favor of Roth, but there may still room for at least a small amount of traditional, depending on what assumptions you make. Really, the assumptions you make will probably affect what is optimal more than anything else. Roth for lower income people is probably the 95% correct answer for 95% of people, but a little bit of traditional in there in the form of an employer match or HSA withdrawals may eek out that extra 5% optimality.
trying to save money on electricity?? turn the lights on!
I asked this in an older video but figured I'd get more feedback here - so if I am understanding correctly: trying to retire early &
have enough in retirement accounts = can move future contributions to brokerage INSTEAD of retirement? let's just assume that with current income you cannot contribute to both significantly (maxing out retirement would mean little contribution in brokerage)
Is the 1M or the 50K dividends taxable when i get to 65?
Depends what bucket it's from
Let's seem some content on executive deferred compensation and how they should fit into our overall strategy.
* cries in PhD student w/ no benefits *
I just heard Brian use the word "unrealistic" as I was listening to this episode for the second time. I understand that that the show is trying to cover a wide range of individuals, but I often find it very unrealistic or heavily positioned to the affluent. Am I the only one here that thinks that way? I feel pretty good about our position but we will never accomplish step 5 of the Financial Order of Operations for both myself and my wife. Nor do I feel we really have to.
Oh, you're going to hit 6 figures in your 30s. Bah!!! Wow.
"Likely maxing out your retirement plan for the first time..." LOL
Since when does a net worth statement entail your buckets?? I have software available to me but it's not with my net worth, but under taxes.
You don’t need to be in a 401k in your 20’s if you don’t have any savings for yourself first. Sacrifice 2 years out of 40+ to grow your savings today, and then do the 3 buckets. And all of your buckets being in investments isn’t the best idea for stability.
3 bucket strategy:
Max out 401k
Max out ROTH IRA
Rest into BTC/ALTcoins (80/20%)
I appreciate you for sharing such video with good content here and i will keep following you because you're the best.
When you read articles about financial freedom, you may hear people drone on and on about how they are spending practically nothing so they can retire at a younger age, like 30. Conversely, they may have already achieved financial freedom and are bragging about how frugal they were so they could retire well before the typical retirement age.
Planning for retirement, or even financial freedom, is a marathon and not a sprint, as the saying goes. Breaking up your financial independence goals into small chunks can help keep you on track while making the process a bit more manageable and, hopefully, a little less stressful. Even if you are starting small, the important thing is to get started.
Investment creates a safe haven for the future, Everyone needs it so you don't go bankrupt when you stop working.
Investors should be cautious about their exposure and be wary of new buys, especially during inflation. Such high yields in this recession is only possible under the supervision of a professional or trusted advisor.
I will share with you an expert i know about on IG.
Love the new set!!! Definitely an upgrade
Way back during my first 401k experience, my employer matched $5 for every $1 I put in. That match was capped at 2.5% of my gross income. Today, thinking back, I can't believe how many people I knew who said they weren't taking full advantage of the match.
I’ve been a subscriber for a long time, lots of great info, best on TH-cam in my opinion. The new set reminds me of an 80’s spaceship for some reason. I really liked the old set, bright, brick wall seems comfortable. Maybe I’m just used to it. Great content regardless.
please delete the bot ads in the comments
They can't, that's TH-cam being a horrible company
Yall should do a show on sequence of return risk at retirement. I know it's a general rule of thumb to de risk as you approach retirement but I'd love to see a good visualization as to why that's so important. Love the show!
Oh yes!👏🏿👏🏿👏🏿
Yes, contribute as much as you can to your Roth when you are young because: 1) time is on your side; 2) you probably have a lower income so you qualify for the Roth and you may not once you get into your mod 30’s or 40’s; 3) you want to be grandfathered in if they change the laws; 4) it reduces your income in retirement because it isn’t considered income and 5) no RMD’s.
I recently found your show and I love listening to it. I have subscribed to the channel, so I am up to date on all of your current videos. I am 53 with very little saved for my retirement. Could you do some episodes advising people in my shoes on how to get caught up or what they can do to fix their situation? Have you aired any episodes like these?
Video quality since they went into this new studio is really bad. Can't read the resources onscreen at all, fuzzy picture quality in general. Hope this improves.
so, the third tax bucket (taxed money you do what you want with), do you suggest building an emergency fund first then funding an investment account? Or just using an investment account as an emergency fund. I have always thought.... you money isn't growing very much in a savings account for an emergency fund, but the same time,, it only takes a day or two to transfer that money to checking in case of emergency,, whereas with an investment account, it could take 1 to 2 days for funds to settle from a sale and then you have access to the money to transfer (which can take another day or two).
Since the Net Worth Tool only goes from 2006 to 2025, does that mean I would only get less than 3 years’ worth out of it at this point?
If your employer offers a traditional and Roth 401k isn't Roth generally the better option, even if you're high income, because the tax free benefit on the growth? That should generally be better dollars at work than tax savings up front shouldn't it?
I'm confused by the definition of the 3 buckets they describe here. Is the bucket referring to the investment or the withdrawal money? "Tax-Deferred" makes sense to me (no taxes now, pay taxes later). If rothIRA is in the "Tax-Free" bucket, that investment is taxed first and then is tax-free on withdrawal; OK that makes sense, the buckets refer to the withdrawal. But then what is an "After-Tax" investment? I can use after-tax dollars to invest in stock or business, but that money will be taxed upon withdrawal, so that isn't After-Tax money, that's money to be taxed. So it seems to be like there are really 4 types discussed here referring to the investment money--withdrawal money:
Tax-Deferred (Tax-free investment--Taxed withdrawal): traditional 401k/IRA
Taxed-First (Taxed investment--Tax-Free withdrawal): roth 401k/IRA, savings
Tax-Free (Tax-Free investment--Tax-Free withdrawal): HSA
Taxed-Twice (Taxed investment--Taxed withdrawal): investments in stocks/business/property/etc.
Where am I wrong here? I know the categories are supposed to be oversimplified, but I just don't see how savings is in the same category as stocks nor how both savings and stock money is in the "After-Tax" category.
Maybe think of their after tax category as the no tax advantage category instead. That explains how savings accounts are in the same category as taxable brokerage accounts even though the nature of the assets can be so different.
Best financial channel hands down.
Great videos. I think a good point would be to state that if you no longer qualify for a Roth IRA, you can do a “non deductible” contribution to an IRA, and then roll it over to a Roth IRA. By doing this, you can still co tribute what $6,000 per year, just make sure to fill out the form 8606 when you do your taxes.
Guys, I would LOVE to hear your thoughts on spending down the three buckets in retirement. Specifically, how to treat your after tax bucket that acts a lot like your ROTH if\when you keep taxable income below $80,800 a year (married filing jointly.)
Some retirement calculator I used suggests taxable first then pretax, Roth last, leaving tax free growth to the last. I personally think mix and match for marginally tax bracket makes sense.
I’m really struggling to understand the benefits of a Roth over a 401k. Or any tax deferred retirement account. Tax deferred I can afford 8000 contributions in a Roth that may only be 6000 after tax to equal the same amount of 10:58 money. And who is liquidating their account at retirement? What happened to 4 percent. I’d be in the same tax bracket I am now. 8000 compounds to more than 6000 I’m going to out on a limb. You sort of mentioned it but went on like it was apples to apples and it’s not. 6000 before taxes doesn’t equal 6000 after. Help me understand. Show me some numbers with a higher contribution if it’s tax deferred than if it was a Roth, compound it out and show me tax on a safe withdrawal rate and liquidation. Is it not that simple? Am I missing some financial knowledge that makes these numbers make sense? 2328500 if 8000 tax deferred 40 years, 8%. About the same amount of money after 25%tax
Break 3 figures salary in 30s. Ha not in my area without an advanced degree/specialized certification (ND). 😢 Still working on those skills... slowly
Leeeegallllly hide money. These guys said "legally" 5 times. Funny financial advice
I also liked the older setup and I thought the audio was not as good. It sounded like there was an echo or not as much sounded deadening material. Content is still great as always.
HSA is overrated
I loved the old setup. The brick wall setup felt warm and welcoming. This new setup felt more like a big Axx infomercial. Your content is sold but the delivery felt too formal. Keep adding personal experiences and please don’t forget the humor. I would love to see an episode on Roth conversations after early retirement(Age 55). Taking money from your 401k/457b and converting to Roth account. Make assumptions that we want to convert all assets from 401k/457b to Roth. To reach tax free millionaire status. Thank you
I agree, I prefer the old set up.
I'm bummed that the sub counter disappeared
@@georgewright5747 it's still there, you can see it at 21:15
@overflow1789 hey! Look at that, just not in the main camera view anymore
In regards to HSA contributions, you said if you're not able to do it through your employer you will not get the payroll tax deduction. But you should still break even on it when you file your taxes yes? It's still deductible.
Roth is not tax FREE, it's taxes PAID. There are benefits to it but let's describe it accurately
They are describing the tax status when it's withdrawn, which is what matters most for planning purposes. Yeah, it's an incomplete description, but giving a full explanation every single time isn't very pithy.
It really bugs me when they assume family and kids. That is the minority of Americans now
According to the 2020 census, over 80% of people over age 55 have at least one biological child. While trends are shifting, over 80% still fits very comfortably into the "majority" category.
Why not take out a car loan at 4-6% and put more in your brokerage account or 401k? You would save more in taxes than the interest payment. Also, you will hopefully have gains. Put it into a REIT or a Dividend ETF or good solid dividend stock that pays you 4-6%. Your brokerage account, as a long term capital gain, will only be taxed at 0,15,20% - think of the tax savings by leaving the money in an account to grow rather than plop it all down at once for a car that loses value on day one. This is having your cash flow pay for your lifestyle.
can you run the numbers, let's say you invest in roth IRA in you erlier years since you are younger and have more time to grow and in 30 still invest in it because now you are married, have dependants and write off mortgage, then when you get closer to retire and don't have those dependents anymora your taxes hit you worse than before now is better to consider taxable 401k, IRA over roth?
So Bo said ‘if’ you use HSA funds for healthcare expenses the $ is still tax free. I thought you have to use the $ for health related expenses. You can reimburse yourself for health expenses no matter when they were incurred but you have to have the bills or receipts.
Just learning now about HSA accounts once I switched employees who now offer that account. Glad I don’t use my insurance much now.
I’ve got three buckets going into retirement, different buckets than what this video is about. In my opinion all positives and no negatives to protect yourself and have a little fun moving money around in retirement 🎉
Been watching you for several years. The new studio has a bit of an echo. It’s sounds a little weird and hollow…
What percent is recommended in each bucket when retirement age is reached? 60/20/20?
need some sound dampers on the walls... the echo since the refab
The slide for the 40s was never shown with all 3 buckets. Is there a way to share that? Maybe FYE Daniel could include it sometime for those of us getting his newsletter/email.
Is there a limit on contributions of a Roth 401K based on income?
No
But there's an annual contribution limit for everyone
Yes if you make more than 137k as a single filer you are intelligible.
@@greg6909 that’s only for Roth IRA, not Roth 401k
@@jeremywertz7278 you are right my mistake