Thank you for watching! If you enjoyed this video, you should watch - The TRUTH About Your 401k That No One Tells You: th-cam.com/video/4YdlcpxvF6c/w-d-xo.html
Minority Mindset can you make a video on steps you should take after filing chapter 7 bankruptcy and things you can do to build your credit .. Thanks Minority Mindset ..
@@blood_sausage9620 when you turn 70 1/2 you have to start taking money out each year from your 401k account, whether you have traditional 401k or a roth-401k doesn't matter. The amount required to take out is *not* a set numerical value for every person (e.g $2,000 a year). I'd be lying if i said i remember off the top of my head how your required amount you need to take out once you reach said age is calculated(i used to know it off the top of my head) Roth-IRA on the other hand, you are not required to take money out at any age. Often people (including myself in the past) confuse this peculiarity of the roth-ira as being a characteristic of all roth accounts which isn't the case unfortunately. That said if i missed any or further clarification let me know💪
@@blood_sausage9620 my pleasure, and yes I always hope I'm lucky enough to make it there but I'm dubious of that. And the language can be the hardest part of learning something knew. The concepts of a new subject of acquisition typically is 100% easier after learning the language.
I just retired, but I am uncertain that my 401k and IRA will ensure a stable future. I have $900k set aside, I am seeking an approach that matches my risk tolerance and financial objectives. Please I need advice, should I invest in stocks or real estate ?
You should explore rosters of dividend aristocrats and select six to ten from the compilation. These esteemed companies boast of a remarkable history of consistently paying dividends for over 25 years. Furthermore, it is discerning to engage a financial advisor to help in crafting a meticulously structured portfolio.
I quite agree. Which is why I prefer to entrust my day to day investment decision to a financial advisor. With their specialized knowledge, it is highly unlikely for them to underperform. Their expertise is focused on harnessing the asymmetrical potential of risk while employing measures to safeguard against unfavorable outcomes. I have been collaboting with a financial coach for the past two years netting over $800k profit in all my portfolio holdings.
The adviser I am working with is Jason Herman Pierce, he is a risk manager, financial advisor and a professional trader. You can choose to use someone else, but his strategy works for me hence my results. You can google him to get all the necessary information.
Another thing to consider, which I’ve rarely heard mentioned: tax deductions and credits. I have 5 kids under age 18 right now. That’s 5 large tax breaks I have right now, that I won’t have when I retire. So you better believe I’m doing Roth 401k contributions right now. My taxes are depressed right now because of those deductions and credits, which lessens the tax burden on my Roth contributions.
I am employed by a major bank in the U.S. and they offer both Traditional and Roth 401k. It's almost 20 years and I'm so happy I chose Roth. Great video! Ty
@@theGrayArea2 im 17 1/2, I just dont see the point in making an account where my father could drain it at any second if he wanted to, and have to jump through hoops in 6 months to get him off it. And I want to invest in mutual funds and index funds, not an IRA
Jaspreet . Just want you to know you are my favorite investment/ wealth planning badass TH-cam channel. Every single video is amazing. You explain everything perfectly and make the topics interesting and easy to follow. Thank you!!!!
My husband uses a Roth 401k at work, and get a certain match. ANY time we contact the brokerage firm about ANYTHING, there is high pressure to switch to a traditional 401k, and to move out of our chosen funds into a target age fund. Nope, those aren't for us, we're happy with what we've got! Great info as always.
@@Dgon200 A targeted age fund would make more $$ for the firm in the form of fees, but I'm not sure why he's so convinced traditional is the way to go.
Always remember if you change jobs or retire you can roll over that account. At least then you can find a more competent advisor to manage it or just do it yourself.
Traditional IRA is really for people who start investing late and/or don’t expect much growth in the IRA. If you’re young and invest long term, go with Roth.
Not every is able to identify lucrative positions to earn from, Investing is a marathon. My best piece of investing advice is to talk with an investing professional. Get someone on your team who’s well enlighten on the global market and it’s conditions at all times.
Absolutely David, this is exactly why I opted for an account manager years ago. Adam Slater guides my investment decisions, he makes research on stocks that will generate massive gains, and does the heavy lifting for me, covering every facet of investing including stocks and crypto. His investing decisions has earned me profits in hundreds of thousands.
What happens to the traditional 401k investment when you switch to a roth? Does the money get taxed and then transfers or does it all transfer in not taxed? Or does it not transfer at all?
Question: I haven't heard it mentioned in videos like this one, nor read it in the comments - Is a Roth 401k an option the employer gives folks instead of a traditional 401k, or is the method to find an independent investment firm that offers a 401k, then just put one's money in it after paying the taxes from the employer's paycheck?
Another angle to consider: You gotta know your bracket and for moderate income earners, there's very high value in the pre-tax savings since you are stretching the amount you earn at the 12% bracket. You can get up close to 70k earned income before you run out of easy runway. How? Maximum contribution to the 401k, HSA pretax investing and the 12k standard deduction. After that, you'll need taxable investment money to take advantage of other possible options such as charitable donations, tax loss harvesting, etc.
I cashed out the little I had on my 401k bought rental property and due to having more deductions paid very little to the fuzz. Also the property is worth a lot more now then the stocks ever would have been worth with limited choices in a company 401k.
Da Plan 1. 5 rental properties owned, 1 currently. Move headache to property mgmt when i retire. 2. 10% traditional ira 3. Max out Roth for wife and I 4. I'm in Iowa, so farmland in a location that will be in high demand 20-30 yrs down the road. 5. Create a trust for assets to pass along benefits to future generations.
@Minority Mindset I started watching this because I wondered if I could use part of my 401k for stock investments. When I saw the option, I started clicking through and it prompted me to convert my traditional 401k to a Roth 401k. Now I know the difference, I would actually prefer a Roth 401k but am unsure if my employer with continue to match my 4%. I guess I have to call l HR on Monday and get some questions answered. Oh, and you have a new sub here. Great work.
Sadly, mine was a pre-tax deduction so when I pulled out money, I had to pay tax on the entire amount. 😢 Rolled it over into an IRA before taking a distribution. I pulled out a large sum to purchase a rental property. Now I have to pay tax on the money I pulled out this year to pay the tax for what I took out last year. Live and learn. I should have bought the property inside of a self directed IRA.
Good Morning Jaspreet! I think having both are good especially if you have an employer that matches. Never leave money on the table is a valuable lesson that I have been taught. I think I could do better with my Roth. I need to max it out. I am almost there, but I need to get there. Almost is not good enough!
Having both is only good because the employer match is tax-deferred, otherwise Roth all the way. Besides the fact that growth is tax-free, a Roth IRA has no RMDs. People who have really saved for retirement in a traditional can get kicked up into high tax brackets with RMDs even if they don't need the money. That screws up your medicare premiums and everything else.
@@RATM1971 agree. There's RMDs if peeps leave their money in a company 401k/457b plan Roth after they retire...if you get your money out of employer plan and rollover outside you must liquidate assets to rollover 401k Roth funds to an individual Roth...also must already have an established individual Roth account opened so can rollover into and best if done as early as possible because have to hold funds in Roth IRA for 5 years before able to withdraw. funds. Bit of strategic planning needed but then can rollover and reinvest!
Informative video!The ROTH 401K is a super awesome opportunity for those people who cannot otherwise contribute to a ROTH IRA because they earn to much money according to IRS rules. These people are ALLOWED to contribute to the ROTH 401K nearly $20,000 every year and then their distributions are TAX FREE! Awesome opportunity that EVERYBODY should be taking advantage of. Great video! 😎
I have both also Roth 401k and 401k from Amazon. Seriously I've been googling trying to find out the difference a few months ago and by chance today I just came up on your video on TH-cam and by chance I say because wasn't looking for anything on the subject lol. I want to say thank you because I finally got my answer you made easy enough for me.
Contribute to a traditional/401k during your highest earning years (for lowering to tax bracket, but contribute to Roth when you have lower income (like when you are in school, on maternity, etc). Also then convert everything to a Self-Directed IRA
That used to be my thought, until I started calculating RMDs and medicare costs. There is a reason many retirees convert all of their traditional IRAs/401ks to Roth and pay the taxes involved out of pocket upon retiring. If you have the option to do the Roth, do it sooner rather than later.
Until a few years ago I was contributing to a 401K for several reasons, the main one being I didn't know about investing so never really touched the accounts until then. Sure wasted those valuable years spending every dollar on crap and contributing almost nothing to retirement (wasn't even receiving the full match).😮💨 I'm a different person today. I'm now contributing 100% to a Roth 401K. I'll switch back to contributing to a 401K closer to retirement.
We have a lot of old 401K standard $ but, now we are putting away all we can with ROTH! I think we are going to be lucky to have enough! We bought some Rental Houses a few years ago so, we are hopeful that will help!
@@TheFirstRealChewy They are doing better than I ever imagined they would do! One thing I’m lucky in> Not: Cards, Games, Sports, etc. but, I’m happy with this option!
Yes taxes if you convert from a IRA but no taxes on a regular investment account to a Roth assuming the taxes were paid. I thought the question was about fees though.
so i think you missed out on something here. The contribution from the match is taxed in an Roth IRA once you withdraw but the gains on the match are not taxed.
That's not correct. Your contributions are after-tax and the growth is tax-free. Your employer's match is tax-deferred as is the growth on that portion of the contribution.
Traditional 403b. Is a way to think of this as just income in retirement. if you make or if you withdraw 100K a year that is what you pay taxes on. It is a question of lifestyle in retirement and having enough to live off earnings without touching the actual contributions portion once you stop working.
It's not only that though... say I only need $40k a year in retirement, but I've done great saving in my 403b and have a sizeable amount. I could hit 72 and be forced (via RMD) to withdraw $140k when I only need $40k. What will that do to my taxes? To my medicare premiums?
I'm not planning on rolling my 401k into my Ira. I'm planning on retiring before 59 and you have the option of making withdrawals from a 401k at 55 if you retire then.
@@Andrew-it7fb I hope that your 401k administrator lets you withdraw your funds in increments at 55. Many require a lump sum withdrawal, which will hit you with high taxes.
@JNS TRUCKING INC. Setting it up as an employee? Contact the HR department. Employees usually qualify after a few months or a year. Setting one up as an employer? No idea. My business isn't big enough for that yet so I haven't looked into it.
@@djangomarine6658 I thought when doing a work 401k there was no fees? How do we invest in the lowest fee index fund, or better yet, how do we find out what those fees are?
@@phabeondominguez5971 There definitely are fees. I'd contract my HR department and find out who the brokerage is. If you're enrolled, you should get documents that show what the fees are for each fund that they offer. Then pick the lowest cost broad market index etf.
I invest up to the 4% match in a Roth 403(b) and the remaining retirement contributions go into a Roth IRA. I invest more in my HSA though. I love that thing.
Roth IRA + Traditional 401k. I will use up my tax free money (roth) first, before taking out of the 401k money (401k). I will also try to delay pulling out from the 401k as long as I can until the mandatory minimum kicks in.
@@noooddle You are correct. *Juan* *Jaramillo* seems to have placed the cart before the horse. Also curious is that more than one person agreed with him.
i dont usually comment. your videos are awesome and it is crazy and a sign. I just stopped my pre-tax contributions after it hit me that I rather put in my taxed money. yes my take home will be less but I will adjust.
MM you mentioned that while we are not taxed on the amount that our Roth 401k earns, we are taxed on the amount our employers contributed over time. My question is how does the IRS keep track of that amount over the years so they can tax us correctly and how do we know that the IRS is taxing us correctly? I've had several different employers 401k Roths and some employers have changed the amount they match from year to year. Great video. It made me consider things that I dont think I've considered before.
Your 401(k) account should show two balances, one for your Roth 401(k) balance and the other your traditional 401(k) balance. The latter is taxable upon distribution.
I like a combination of a Traditional 401K and a Roth IRA. That way I can pull money out of both during retirement, but the Roth money will keep me out of a higher tax bracket.
They wouldn’t classify it as how much income a individual person makes like when your employed and pay taxes at the end of the year or not since the Roth was already taxed and it’s your money outright? Does potential compound growth outweigh the retirement taxes you could get with the traditional 401(k)? I suppose it depends on how much you project your portfolio to be when retirement comes around...
@@RATM1971 you do realize for most people RMDs are not a big problem. And if they will be a problem you obviously should adjust for this. RMDs should be considered in the equation but for many they will not be a problem
Just opened two traditional IRA and two Roth IRAs for my wife and I. I was pleasantly surprised to see that I could still contribute for last year since the tax filing date ended July15. I immidiately maxed out all our IRAs for a total of $24K unvested. Plan to max out the 2021 contribution as soon as January comes around. I hope I'm not making a big mistake.
$24k for both years and both of you is a good plan however half t-IRA and half Roth IRA is less than ideal. Do you have access to 401(k)s and are you in a relatively high or low tax bracket?
@@alrocky I'm in a lower tax bracket than I will be when I retire. I also expect to be in a much higher tax bracket in six years. I have a 401K type account currently in addition to the IRA i just opened.
@@AB-tu3mz Since you are in a relatively low tax bracket now and expect to be in a much higher tax bracket in six years you should both have Roth IRAs now for the next five years. If your income and budget allows you should contribute as much as you can into your 401(k) [$19,500[ and her 401(k) [$19,500]. You could go Roth 401(k) but it's I'd lean toward maxing the 401(k). If you could contribute $19,500 Roth 401(k) that would be great. You want to favor traditional 401(k) when at your highest tax bracket.
@@alrocky I'm no sure who you are or what you do, but that's great advice. I've been doing about 50% Roth 401K and 50% traditional 401K. Except for this year. I sold a house so I expect to be a higher tax bracket this year. For that reason, I am maxing out my 401K and opened traditional IRAs to put some more money in there. Thanks.
The important thing is to get into at least one or the other. As statistics show, people have a very difficult time saving money. A 401k requires very little effort...the money is invested without you lifting a finger, and you can't get to it very easily, meaning it will stay in your account, plus there is generally a match involved. A Roth requires you to write a check or set up direct payments, allows you access to the money, making it very tempting and easy to pull it out, defeating and eroding your retirement goals. We know how life gets in the way of our plans, many people intend to invest but somehow they never get around to it....a 401k is funded before you get your check. Taxes can change on the Roth also. The gov. is licking it's chops to tax the earnings, and don't think they wont pass a law to get to it. All the "free" stuff that is so casually tossed about, is not free to those who have to fund it. So you need to do something. The thing is you can do both. The more you save, the better off you will be. I have never complained about making money.
I did traditional 401k when I was younger and single. Now that I have kids and TCJA is in effect I put it all in Roth. If rates go back up and/or when the kids age out of dependency I will switch back...
I have a Roth IRA already that I've funded the last couple years.. I will be starting a new career and will choose a Roth 401k with 3% company match because my income will be low to start.
Hi Jaspreet, I have been watching your videos a few weeks ago it is very good information from you, my question is if there are some states where someone can move before retirement to avoid paying taxes on the traditional 401k?
Depends on age and individual tax situation, younger and/or lower earners should go for roth (because of longer growth time for compound interest), higher earners should go for 401k. Also, if you think you will have very little income in retirement (think 65 and older) (ie social security could be gone, or pension goes away) go for 401k in a middle income earning bracket (currently 22/24% and up). Also, if tax brackets change, it's also time to reevaluate your plan. There are so many factors, and you did a great job addressing the benefits and drawbacks of each option.
I have both an IRA and Roth IRA. The IRA is a transferred 401K and I don't plan on adding any money to it and focusing on growing my Roth IRA. I have a 401K that I'm contributing to thru my job and if I leave that going into my IRA. I'm also investing in index funds in both my retirement accounts.
It's interesting to compare American Tax-Advantaged accounts with Canadian ones. It seems like Roth accounts are like our TFSA and traditional accounts are like our RRSP. Always love listening to your videos!
I like this intro, keep this intro in all your videos. I think it’s very cool to have, but stick w the smash like button sound & the emphasized link “below”
Rolling from traditional IRA to Roth IRA is a taxable event. Rolling from a traditional 401(k) to a Roth 401(k) is a taxable event. Your 401(k) plan may or may not allow you to roll your t-401(k) to a Roth 401(k). With a t-401(k) from a previous job you may roll your t-401(k) to a t-IRA and then convert to a Roth IRA.
Sounds like it depends on the current tax rate. If you are taxed high at the moment then traditional is best. If next year you are taxed low, then Roth is best at that time. Reassess your situation when milestones appear which affect your tax rate.
It’s not about what your income will be in 40 years. It’s about how much you are going to draw in retirement. You could be investing much more now and take advantage of compounding interest. I’m able to invest 20% more due to it being pre tax so the real question is: will 40 years of higher contributions outpace a possibly higher tax rate?
@@calveryc1 Don't forget, if you're a savy investor, you will have dividend income and that factors into your overall income. You may argue that the dividend income is treated differently in terms of the tax rate, but that may change in the future with a more "liberal" president and congress. I don't have a crystal ball so having two buckets of money in a pretax and aftertax gives me flexibility in the future. If the tax rates are good, I would leave the aftertax money in the account so it can compound faster. If the tax rate is high, I can split a portion from the pre-tax and a portion from the aftertax. Options are always good when you have retired.
@@calveryc1 Yeah, but it's also not only that. In a traditional the growth is taxed, in a Roth the growth is not taxed. But even more importantly, the government requires you do RMDs at age 72. Do a great job saving in a Traditional while young and you could have RMDs far greater than what you need, pushing you into a higher tax rate. And that forced income will also make your medicare premiums much higher. Also, a traditional passed to heirs will have forced RMDs for the heirs, they are forced to liquidate in 10 years, which could really screw up their tax situation too. A lot more to consider than just your future tax rate. There is a legit reason many retirees are paying big money to do Roth conversions from their traditionals.
Not financial advice, but: Roth 401k is pretty good if you can do it. No taxes on gains, I think no taxes on dividends as well... That's the big difference between Roth IRA/401k investing and normal taxable account investing. Plus your money is not completely locked in until retirement.
Thoughts on my setup, please- Making $60k/yr gross. Goal is to bring taxable income down to $40,525 (top of 12% bracket) so none of my money is taxed at 22%. From $60k, standard deduction is $12,550, which means $46,450 taxable. So I put that $6k difference into traditional 401k and achieve a taxable income in the 12% bracket. (Federal, anyway). Then the remainder of contribution limit ($19,500 - $6000) into Roth 401k, as well as extra $6k into Roth IRA. I live frugally and I don't need that amount I'm putting away. Am I understanding tax brackets correctly, or any other feedback?
I question your assumptions on the principal investment in the Roth 401k in this scenario. A 10% discount (100k to 90k) seems way too optimistic. Income Tax rates are closer to 20-33%
His example is valid but since he uses 10% tax bracket it favors Roth contribution. One "flaw" here is that the Roth contribution is only $1,350 (traditional was $1,500) so employee didn't take full advantage of employer match.
Contribute 10000 + match 100000 over a 25 year career would be 400k only if you got a 5% return which is a rather low estimate there. The best advantage of the Roth over traditional is flexibility in retirement. If someone puts away 10K per year for 35 years and earns 7% which is a good estimate based upon the market's trend since inception you would end up with 1.5 M at the 35 year mark. 350000 of that money is the money you contributed and the other 1.15M is growth. Traditional saves on the highest tax bracket you are in for the 350000 which at the highest in the last 2 decades has been just under 40%. So you saved roughly 140K over 35 years assuming you are in the highest tax bracket, much less if you make say 50-100K. All of that 1.15M growth is taxable and if you decide to take 100K in a lump sum for some reason, you pay taxes on it. If you just try to live off of returns at say 4%, you'd recieve 60000 per year without touching the principle and any additional growth that is reinvested will also carry income tax burden when tapped. All that growth would be taxed. If you did Roth, you could take out any lump sum you wanted and not pay a cent of income tax. Also all returns you live off of for the rest of time is not taxed. If you die and it passes to a family member such as a child, there is no income tax burden. I'd say in this scenario the advantages of Roth in retirement are worth the 140K investment over 35 years.
Hey jaspreet, I’m 23 just learning about these. is it better to not do Roth IRA and 401k ? What if I use that money instead on other liquid investments ?
Eventually yes but not usually at the same time. Favor contributing to Roth 401(k) when at a relatively low tax bracket and traditional 401(k) when at a relatively high tax bracket.
I set up a Roth 401k that invests my money in an index fund to keep expenses low. Now I'd like to know what to do, in the future, to reduce the taxes on the match from my job.
@@r4ym1n13 I just figured it out. The employer match can be rolled over into a traditional IRA then I would be able to do a tax-free direct transfer into my HSA.
Seems like less hassles with regular 401k to get employer matching then invest in a regular Roth IRA with the brokerage company of your choice. Don't think most people will be in the high tax rate when it is time to distributions.
Compare total taxes paid instead of tax brackets. However, most should be fine with a 401K. Afterall, it's been working fine for many people for awhile now.
What's your effective tax rate right now? Have you calculated what you think your expenses will be in retirement, including luxury expenses? Have you run through an RMD calculator to see what you will be forced to withdraw from the traditional in retirement whether you need it or not?
Many people will have lower expenses, and lower income, once retired. Lower income will equal a lower tax bracket, making a traditional 401K A better option.
@@charlesbickel4295 you don’t need as much income in retirement as you needed when you were raising a family, building your retirement, saving for college education for kids, and so forth. For most people, retirement income is less than what they earned during their peak earning years. This fact should put most people in a lower tax bracket during retirement then they were in during their peak income years, this making a traditional 401(k) plan more attractive.
You might take a look at the many RMD calculators out there and plug in your numbers for traditional. Also look at the Medicare premium calculators. Sure would suck to be in a high tax situation when you don't need the money that year.
I have a quick question that might not be related to this video: Is it better to invest in a global fund or one that follows the S&P 500? The US fund has higher highs, and higher lows compared to the global fund. Global one costs 0.11%, and the US one costs 0.21%. I don't live in the USA, so this is what I can choose from. Which one would be better to invest in? The way I see it is that it's the US stocks that weigh the most in the global fund. Some say US stocks are overvalued and that's why a global fund is better. Thoughts?
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Thank you for watching! If you enjoyed this video, you should watch - The TRUTH About Your 401k That No One Tells You: th-cam.com/video/4YdlcpxvF6c/w-d-xo.html
Minority Mindset didn’t see any videos linked below
Minority Mindset can you make a video on steps to doing a chapter 7 bankruptcy . To fix your credit score. Thanks Minority Mindset
Minority Mindset can you make a video on steps you should take after filing chapter 7 bankruptcy and things you can do to build your credit .. Thanks Minority Mindset ..
Can I hire you for my buiness taxes Jaspree?
Thank you 🙏🏻 I will have to be serious about my retirement
Roth is much better because there are no required distributions. If you live beyond the life expectancy, your traditional 401k or Ira will run dry 👎
Roth 401k also require minimum distributions at 70 1/2, But don't take my word for it.💪😉
@@Je.rone_ I don't understand, could you explain? I'm in both but I'm trying to figure which one is gonna be the main one, thank you
@@blood_sausage9620 when you turn 70 1/2 you have to start taking money out each year from your 401k account, whether you have traditional 401k or a roth-401k doesn't matter. The amount required to take out is *not* a set numerical value for every person (e.g $2,000 a year). I'd be lying if i said i remember off the top of my head how your required amount you need to take out once you reach said age is calculated(i used to know it off the top of my head)
Roth-IRA on the other hand, you are not required to take money out at any age. Often people (including myself in the past) confuse this peculiarity of the roth-ira as being a characteristic of all roth accounts which isn't the case unfortunately.
That said if i missed any or further clarification let me know💪
@@Je.rone_ thanks brother!! I need to learn this language haha. Living to that age alone is a great accomplishment these days🙏
@@blood_sausage9620 my pleasure, and yes I always hope I'm lucky enough to make it there but I'm dubious of that.
And the language can be the hardest part of learning something knew. The concepts of a new subject of acquisition typically is 100% easier after learning the language.
I just retired, but I am uncertain that my 401k and IRA will ensure a stable future. I have $900k set aside, I am seeking an approach that matches my risk tolerance and financial objectives. Please I need advice, should I invest in stocks or real estate ?
You should explore rosters of dividend aristocrats and select six to ten from the compilation. These esteemed companies boast of a remarkable history of consistently paying dividends for over 25 years. Furthermore, it is discerning to engage a financial advisor to help in crafting a meticulously structured portfolio.
I quite agree. Which is why I prefer to entrust my day to day investment decision to a financial advisor. With their specialized knowledge, it is highly unlikely for them to underperform. Their expertise is focused on harnessing the asymmetrical potential of risk while employing measures to safeguard against unfavorable outcomes. I have been collaboting with a financial coach for the past two years netting over $800k profit in all my portfolio holdings.
I need advice on how to rebuild my portfolio and develop more successful tactice. Please who is the advisor you're using?
The adviser I am working with is Jason Herman Pierce, he is a risk manager, financial advisor and a professional trader. You can choose to use someone else, but his strategy works for me hence my results. You can google him to get all the necessary information.
@@EthanRaynolds
Thanks. I just googled him. He is quite the subject matter expert. I have book an appointment with him. Thanks again.
Another thing to consider, which I’ve rarely heard mentioned: tax deductions and credits. I have 5 kids under age 18 right now. That’s 5 large tax breaks I have right now, that I won’t have when I retire. So you better believe I’m doing Roth 401k contributions right now. My taxes are depressed right now because of those deductions and credits, which lessens the tax burden on my Roth contributions.
Agreed. Once I had kids I changed my contributions to Roth.
What deductions? Kids only give u 2000 tax credit that's nothing? Am I missing something
@@ziaulislam87 Well fill lucky, Because i was only getting about 800 a kid in early 2000s with 8% home interest rate and 4.00 a gallon gas 🙄
@ziaulislam87 That's a fair amount for middle and upper middle class people
I am employed by a major bank in the U.S. and they offer both Traditional and Roth 401k. It's almost 20 years and I'm so happy I chose Roth. Great video! Ty
Thank you 😪.
My advice to younger folks when it comes to investing is, just start.
Im a minor, I cant invest yet but im saving so I will have some to invest
@@philtheboi358 your parents could start a Roth IRA for you still and they’d be on account as well
@@theGrayArea2 im 17 1/2, I just dont see the point in making an account where my father could drain it at any second if he wanted to, and have to jump through hoops in 6 months to get him off it. And I want to invest in mutual funds and index funds, not an IRA
@@philtheboi358 understood
@@philtheboi358 wait then
Jaspreet . Just want you to know you are my favorite investment/ wealth planning badass TH-cam channel. Every single video is amazing.
You explain everything perfectly and make the topics interesting and easy to follow. Thank you!!!!
:)
Same here!
Thank you, Jaspreet! 👍👍
Totally Agree. I learn so much from Jaspreet. Thanks a ton.
My husband uses a Roth 401k at work, and get a certain match. ANY time we contact the brokerage firm about ANYTHING, there is high pressure to switch to a traditional 401k, and to move out of our chosen funds into a target age fund. Nope, those aren't for us, we're happy with what we've got! Great info as always.
Why do they pressure you into switching into traditional... and a targeted age fund??
@@Dgon200 A targeted age fund would make more $$ for the firm in the form of fees, but I'm not sure why he's so convinced traditional is the way to go.
K H-C why would they pressure you to change to a traditional if it’s already a Roth 401k
Always remember if you change jobs or retire you can roll over that account. At least then you can find a more competent advisor to manage it or just do it yourself.
I watched 3 videos on youtube trying to explain this to me. I finally got the difference when I watched you! TY
Same! Jaspreet does a great job!!
"ROTH" "Thank you very much" Respectfully many blessings n Well being to you n your family.
Traditional IRA is really for people who start investing late and/or don’t expect much growth in the IRA. If you’re young and invest long term, go with Roth.
I always tell people, It's never too late to start investing. The best time to invest was always yesterday and the second best is always today.
Absolutely Emilio, particularly if the goal is to retire early and rich.
Not every is able to identify lucrative positions to earn from, Investing is a marathon. My best piece of investing advice is to talk with an investing professional. Get someone on your team who’s well enlighten on the global market and it’s conditions at all times.
Absolutely David, this is exactly why I opted for an account manager years ago. Adam Slater guides my investment decisions, he makes research on stocks that will generate massive gains, and does the heavy lifting for me, covering every facet of investing including stocks and crypto. His investing decisions has earned me profits in hundreds of thousands.
Investing is worth the hard work. If you don’t save and invest now, you won’t have anything to live on in retirement.
Why isn't this channel called Sikh-ing Wealth?!?!
Damn bro 😂
Genius!
👐😂👐
This
Cousin Bunti approved
I started with the Roth and went to traditional when I had higher income but I switched back to the Roth because tax rates are lower.
Smart woman!
What happens to the traditional 401k investment when you switch to a roth? Does the money get taxed and then transfers or does it all transfer in not taxed? Or does it not transfer at all?
@@reyreyes5182 doesn't transfer just stays there
Good plan.
Question: I haven't heard it mentioned in videos like this one, nor read it in the comments - Is a Roth 401k an option the employer gives folks instead of a traditional 401k, or is the method to find an independent investment firm that offers a 401k, then just put one's money in it after paying the taxes from the employer's paycheck?
Another angle to consider: You gotta know your bracket and for moderate income earners, there's very high value in the pre-tax savings since you are stretching the amount you earn at the 12% bracket. You can get up close to 70k earned income before you run out of easy runway. How? Maximum contribution to the 401k, HSA pretax investing and the 12k standard deduction. After that, you'll need taxable investment money to take advantage of other possible options such as charitable donations, tax loss harvesting, etc.
I cashed out the little I had on my 401k bought rental property and due to having more deductions paid very little to the fuzz. Also the property is worth a lot more now then the stocks ever would have been worth with limited choices in a company 401k.
Chat me up ☝️☝️
My company offers both traditional 401K with a match, and a Roth 401K. I do both 👍
I contribute to both a traditional and Roth 401 through my employer. Also contribute to a Roth IRA outside of my employer
Good plan. I'm gonna try to do that and make my traditional Roth a divided account
Da Plan
1. 5 rental properties owned, 1 currently. Move headache to property mgmt when i retire.
2. 10% traditional ira
3. Max out Roth for wife and I
4. I'm in Iowa, so farmland in a location that will be in high demand 20-30 yrs down the road.
5. Create a trust for assets to pass along benefits to future generations.
@Minority Mindset
I started watching this because I wondered if I could use part of my 401k for stock investments. When I saw the option, I started clicking through and it prompted me to convert my traditional 401k to a Roth 401k. Now I know the difference, I would actually prefer a Roth 401k but am unsure if my employer with continue to match my 4%. I guess I have to call l HR on Monday and get some questions answered. Oh, and you have a new sub here. Great work.
Sadly, mine was a pre-tax deduction so when I pulled out money, I had to pay tax on the entire amount. 😢 Rolled it over into an IRA before taking a distribution.
I pulled out a large sum to purchase a rental property. Now I have to pay tax on the money I pulled out this year to pay the tax for what I took out last year. Live and learn. I should have bought the property inside of a self directed IRA.
Good comment
Yeah, those taxes do get you when you need to pull more than planned.
Good Morning Jaspreet! I think having both are good especially if you have an employer that matches. Never leave money on the table is a valuable lesson that I have been taught. I think I could do better with my Roth. I need to max it out. I am almost there, but I need to get there. Almost is not good enough!
Having both is only good because the employer match is tax-deferred, otherwise Roth all the way. Besides the fact that growth is tax-free, a Roth IRA has no RMDs. People who have really saved for retirement in a traditional can get kicked up into high tax brackets with RMDs even if they don't need the money. That screws up your medicare premiums and everything else.
@@RATM1971 agree. There's RMDs if peeps leave their money in a company 401k/457b plan Roth after they retire...if you get your money out of employer plan and rollover outside you must liquidate assets to rollover 401k Roth funds to an individual Roth...also must already have an established individual Roth account opened so can rollover into and best if done as early as possible because have to hold funds in Roth IRA for 5 years before able to withdraw. funds. Bit of strategic planning needed but then can rollover and reinvest!
I am watching Jaspreet's video on valentine's day with his pink turban.
Informative video!The ROTH 401K is a super awesome opportunity for those people who cannot otherwise contribute to a ROTH IRA because they earn to much money according to IRS rules. These people are ALLOWED to contribute to the ROTH 401K nearly $20,000 every year and then their distributions are TAX FREE! Awesome opportunity that EVERYBODY should be taking advantage of. Great video! 😎
I have both also Roth 401k and 401k from Amazon. Seriously I've been googling trying to find out the difference a few months ago and by chance today I just came up on your video on TH-cam and by chance I say because wasn't looking for anything on the subject lol. I want to say thank you because I finally got my answer you made easy enough for me.
@Bd from the 213 well I actually have both of them still. At my age I don't know if I should just leave it like that
If you go with a Roth 401k, open a Roth IRA so it will be mature when you need to roll your money over.
Contribute to a traditional/401k during your highest earning years (for lowering to tax bracket, but contribute to Roth when you have lower income (like when you are in school, on maternity, etc). Also then convert everything to a Self-Directed IRA
That used to be my thought, until I started calculating RMDs and medicare costs. There is a reason many retirees convert all of their traditional IRAs/401ks to Roth and pay the taxes involved out of pocket upon retiring. If you have the option to do the Roth, do it sooner rather than later.
Until a few years ago I was contributing to a 401K for several reasons, the main one being I didn't know about investing so never really touched the accounts until then. Sure wasted those valuable years spending every dollar on crap and contributing almost nothing to retirement (wasn't even receiving the full match).😮💨
I'm a different person today. I'm now contributing 100% to a Roth 401K. I'll switch back to contributing to a 401K closer to retirement.
Very good explanation. 👍 These are great if someone doesn't have time to spend watching the markets every day.
I was hoping you’d break down the difference in compound interest gains vs tax losses between tradition and Roth investments.
I have Roth 401K, employer match and 17 years more to go!
We have a lot of old 401K standard $ but, now we are putting away all we can with ROTH!
I think we are going to be lucky to have enough!
We bought some Rental Houses a few years ago so, we are hopeful that will help!
That will surely help unless the rentals are nit performing.
@@TheFirstRealChewy They are doing better than I ever imagined they would do!
One thing I’m lucky in>
Not: Cards, Games, Sports, etc. but, I’m happy with this option!
Doing traditional now. Gonna switch to Roth soon as I pay off my debt.
@@EdgerDelgado Usually no if you stay with the same fund family
@@timm7098 Yes, you pay the taxes on the traditional If you decide to roll that account balance into a roth.
Yes taxes if you convert from a IRA but no taxes on a regular investment account to a Roth assuming the taxes were paid. I thought the question was about fees though.
Best explanation hands down!👏
Great explantion amd sweet disclaimer.😂"I am not your attorney"😂
I always like when he says "I am an attorney, but I am NOT YOUR attorney" lol.
I’m investing 30 percent of my income in a Roth 401k. I have it all in an index fund SnP 500. I get a 2 percent match
so i think you missed out on something here. The contribution from the match is taxed in an Roth IRA once you withdraw but the gains on the match are not taxed.
"contribution from the match is taxed in an Roth IRA once you withdraw" --- That doesn't seem to make sense.
That's not correct. Your contributions are after-tax and the growth is tax-free. Your employer's match is tax-deferred as is the growth on that portion of the contribution.
Back when the BELOW was so soft and cuddly.
Traditional 403b. Is a way to think of this as just income in retirement. if you make or if you withdraw 100K a year that is what you pay taxes on. It is a question of lifestyle in retirement and having enough to live off earnings without touching the actual contributions portion once you stop working.
It's not only that though... say I only need $40k a year in retirement, but I've done great saving in my 403b and have a sizeable amount. I could hit 72 and be forced (via RMD) to withdraw $140k when I only need $40k. What will that do to my taxes? To my medicare premiums?
Skih always such badass and smart people! never met one who doesnt provide such great life advice.
Chat me up ☝️☝️
I know I subscribed to you for a reason when you only had 1500 subscribers. Your videos had changed my life!
It still sounds like a guess as to what will happen in the future , either way...
When leaving your employer, transfer the Roth 401k over to a Roth IRA, all withdraws tax free at retirement age, the better investment.
Yes!!
Ideally yes, unless you have financial issues as 401ks often are protected from garnishment and iras may not be.
I'm not planning on rolling my 401k into my Ira. I'm planning on retiring before 59 and you have the option of making withdrawals from a 401k at 55 if you retire then.
@@Andrew-it7fb
I hope that your 401k administrator lets you withdraw your funds in increments at 55. Many require a lump sum withdrawal, which will hit you with high taxes.
Roth 401K all the way! Also make sure you're invested in the lowest fee index fund that your employer offers. 🍻
@JNS TRUCKING INC. Setting it up as an employee? Contact the HR department. Employees usually qualify after a few months or a year. Setting one up as an employer? No idea. My business isn't big enough for that yet so I haven't looked into it.
@JNS TRUCKING INC. It is. It's like getting an instant 50% profit on your investments.
@@djangomarine6658 I thought when doing a work 401k there was no fees? How do we invest in the lowest fee index fund, or better yet, how do we find out what those fees are?
@@phabeondominguez5971 There definitely are fees. I'd contract my HR department and find out who the brokerage is. If you're enrolled, you should get documents that show what the fees are for each fund that they offer. Then pick the lowest cost broad market index etf.
Agreed
I invest up to the 4% match in a Roth 403(b) and the remaining retirement contributions go into a Roth IRA. I invest more in my HSA though. I love that thing.
Roth IRA + Traditional 401k.
I will use up my tax free money (roth) first, before taking out of the 401k money (401k). I will also try to delay pulling out from the 401k as long as I can until the mandatory minimum kicks in.
You really might want to talk to someone about this idea. I don't know your situation, but in general, that's a very weird strategy.
@@noooddle You are correct. *Juan* *Jaramillo* seems to have placed the cart before the horse. Also curious is that more than one person agreed with him.
It totally depends on your income. I already lost access to my Roth IRA because of income limits. Super wack!
@@InOrlando *backdoor* Roth IRA allows you to contribute to Roth IRA.
Why in the world would you do this? Have you run an RMD calculator?
I’m doing both and my company matches 10%
Need to add the effects of marginal vs effective tax as well as the effects of AGI based credits and deductions to your analysis.
I converted to the Roth 401k. Dividend stocks all the way
i dont usually comment. your videos are awesome and it is crazy and a sign. I just stopped my pre-tax contributions after it hit me that I rather put in my taxed money. yes my take home will be less but I will adjust.
Hey Jaspreet, I dont have anything to add to this, but wanna let you know you inspired me to start monetizing my side hustle!
MM you mentioned that while we are not taxed on the amount that our Roth 401k earns, we are taxed on the amount our employers contributed over time. My question is how does the IRS keep track of that amount over the years so they can tax us correctly and how do we know that the IRS is taxing us correctly? I've had several different employers 401k Roths and some employers have changed the amount they match from year to year. Great video. It made me consider things that I dont think I've considered before.
Your 401(k) account should show two balances, one for your Roth 401(k) balance and the other your traditional 401(k) balance. The latter is taxable upon distribution.
I like a combination of a Traditional 401K and a Roth IRA. That way I can pull money out of both during retirement, but the Roth money will keep me out of a higher tax bracket.
They wouldn’t classify it as how much income a individual person makes like when your employed and pay taxes at the end of the year or not since the Roth was already taxed and it’s your money outright? Does potential compound growth outweigh the retirement taxes you could get with the traditional 401(k)? I suppose it depends on how much you project your portfolio to be when retirement comes around...
What about RMDs?
@@RATM1971 Have you looked into what the actual RMD rate would be when you hit 72 and beyond?
@@robertblake60 Extensively, have you? It can become an unmanageable tax and medicare premium situation depending on how your investments do.
@@RATM1971 you do realize for most people RMDs are not a big problem. And if they will be a problem you obviously should adjust for this. RMDs should be considered in the equation but for many they will not be a problem
*Common mistake is thinking Roth 401k doesn't require minimum distributions at age 70 1/2. The Roth-ira doesn't require minimum distributions.* 💪
My man. I see you everywhere 😂😂. I guess we watch the same stuff🤣
@@kingkongz84 most likely, i don't own a t.v so TH-cam is where I be at💪
Roth 401k is easily rolled into a roth ira though..
@@snakeonia7542 Nothing but truth has been spoken by you jake 💪😀
@@Je.rone_ same bro. A TV is a loss. TH-cam is a free investment in yourself.
Thanks for posting in the morning right before I head on my commute lol
MeowMerch Same! It’ll get me thinking through out the day 😄
MeowMerch honestly so convenient lol
MeowMerch I love your cat videos 😸😸
Resident Advisor thanks for checking meowwwtt 😻😻
Thank you for putting in work on your videos. I am watching and liking your vids.
Thank you for making this video. It was very easy to understand and the visuals really helped.
Good video,easy to understand
I love your videos. They are so informative and easy to understand. Thanks so much for doing them.
Thanks for the explanation!
Thank you so much! You explained this clearly!
Chat me up ☝️☝️
I love the concept of this channel. The Hustle-mindset of today extends beyond identity. And this channel is taking a leadership role. Bravo 👏
Chat me up ☝️☝️
Man you are awesome you inspired me to create this channel i have only 22 subs now but i hope one day i'll succeed like you, thank you!!
Roth IRA for me. Also I do contract work now but even when I had a standard 9-5 I had a Roth as my employers didn't have a 401K yet being a startup.
Just opened two traditional IRA and two Roth IRAs for my wife and I. I was pleasantly surprised to see that I could still contribute for last year since the tax filing date ended July15. I immidiately maxed out all our IRAs for a total of $24K unvested. Plan to max out the 2021 contribution as soon as January comes around. I hope I'm not making a big mistake.
$24k for both years and both of you is a good plan however half t-IRA and half Roth IRA is less than ideal. Do you have access to 401(k)s and are you in a relatively high or low tax bracket?
@@alrocky I'm in a lower tax bracket than I will be when I retire. I also expect to be in a much higher tax bracket in six years. I have a 401K type account currently in addition to the IRA i just opened.
@@AB-tu3mz Since you are in a relatively low tax bracket now and expect to be in a much higher tax bracket in six years you should both have Roth IRAs now for the next five years. If your income and budget allows you should contribute as much as you can into your 401(k) [$19,500[ and her 401(k) [$19,500]. You could go Roth 401(k) but it's I'd lean toward maxing the 401(k). If you could contribute $19,500 Roth 401(k) that would be great. You want to favor traditional 401(k) when at your highest tax bracket.
@@alrocky I'm no sure who you are or what you do, but that's great advice. I've been doing about 50% Roth 401K and 50% traditional 401K. Except for this year. I sold a house so I expect to be a higher tax bracket this year. For that reason, I am maxing out my 401K and opened traditional IRAs to put some more money in there. Thanks.
You put after tax investments in your traditional IRA? That defeats the point. I hope you converted them immediately?
The important thing is to get into at least one or the other. As statistics show, people have a very difficult time saving money. A 401k requires very little effort...the money is invested without you lifting a finger, and you can't get to it very easily, meaning it will stay in your account, plus there is generally a match involved. A Roth requires you to write a check or set up direct payments, allows you access to the money, making it very tempting and easy to pull it out, defeating and eroding your retirement goals. We know how life gets in the way of our plans, many people intend to invest but somehow they never get around to it....a 401k is funded before you get your check. Taxes can change on the Roth also. The gov. is licking it's chops to tax the earnings, and don't think they wont pass a law to get to it. All the "free" stuff that is so casually tossed about, is not free to those who have to fund it.
So you need to do something. The thing is you can do both. The more you save, the better off you will be. I have never complained about making money.
Many employers offer a Roth 401k, so it's as little effort as a traditional 401k.
I like your head wrap
I did traditional 401k when I was younger and single. Now that I have kids and TCJA is in effect I put it all in Roth. If rates go back up and/or when the kids age out of dependency I will switch back...
I have a Roth IRA already that I've funded the last couple years.. I will be starting a new career and will choose a Roth 401k with 3% company match because my income will be low to start.
Hi Jaspreet,
I have been watching your videos a few weeks ago it is very good information from you, my question is if there are some states where someone can move before retirement to avoid paying taxes on the traditional 401k?
Depends on age and individual tax situation, younger and/or lower earners should go for roth (because of longer growth time for compound interest), higher earners should go for 401k. Also, if you think you will have very little income in retirement (think 65 and older) (ie social security could be gone, or pension goes away) go for 401k in a middle income earning bracket (currently 22/24% and up). Also, if tax brackets change, it's also time to reevaluate your plan. There are so many factors, and you did a great job addressing the benefits and drawbacks of each option.
And the answer is real estate! 🏠
Is your opinion still the same?
I have both an IRA and Roth IRA. The IRA is a transferred 401K and I don't plan on adding any money to it and focusing on growing my Roth IRA. I have a 401K that I'm contributing to thru my job and if I leave that going into my IRA. I'm also investing in index funds in both my retirement accounts.
what do you think about strategies for paying less taxes, cant you save on teaxes by using 401k and therefore having less income?
subscribed !
It's interesting to compare American Tax-Advantaged accounts with Canadian ones. It seems like Roth accounts are like our TFSA and traditional accounts are like our RRSP. Always love listening to your videos!
Yes!!! Thanks for the explanation!!!
Currently in a roth pretty satisfied with it
Thank you SO much for your informative videos! They are easy for me to understand 🙂
I like this intro, keep this intro in all your videos. I think it’s very cool to have, but stick w the smash like button sound & the emphasized link “below”
Enjoy your video, have traditional 401k right now and can This be roll over to Roth 401k? Or is it to late? Will there be a charge?
Rolling from traditional IRA to Roth IRA is a taxable event.
Rolling from a traditional 401(k) to a Roth 401(k) is a taxable event.
Your 401(k) plan may or may not allow you to roll your t-401(k) to a Roth 401(k).
With a t-401(k) from a previous job you may roll your t-401(k) to a t-IRA and then convert to a Roth IRA.
Great knowledge brother love ur videos
Sounds like it depends on the current tax rate. If you are taxed high at the moment then traditional is best. If next year you are taxed low, then Roth is best at that time. Reassess your situation when milestones appear which affect your tax rate.
I use a roth 401k because I know my income will be much higher in 40 years
It’s not about what your income will be in 40 years. It’s about how much you are going to draw in retirement. You could be investing much more now and take advantage of compounding interest. I’m able to invest 20% more due to it being pre tax so the real question is: will 40 years of higher contributions outpace a possibly higher tax rate?
@@calveryc1 Don't forget, if you're a savy investor, you will have dividend income and that factors into your overall income. You may argue that the dividend income is treated differently in terms of the tax rate, but that may change in the future with a more "liberal" president and congress. I don't have a crystal ball so having two buckets of money in a pretax and aftertax gives me flexibility in the future. If the tax rates are good, I would leave the aftertax money in the account so it can compound faster. If the tax rate is high, I can split a portion from the pre-tax and a portion from the aftertax. Options are always good when you have retired.
@@calveryc1 Yeah, but it's also not only that. In a traditional the growth is taxed, in a Roth the growth is not taxed. But even more importantly, the government requires you do RMDs at age 72. Do a great job saving in a Traditional while young and you could have RMDs far greater than what you need, pushing you into a higher tax rate. And that forced income will also make your medicare premiums much higher. Also, a traditional passed to heirs will have forced RMDs for the heirs, they are forced to liquidate in 10 years, which could really screw up their tax situation too. A lot more to consider than just your future tax rate. There is a legit reason many retirees are paying big money to do Roth conversions from their traditionals.
@@RATM1971 I believe Roth’s will require RMDs as well after death.
@@calveryc1 A Roth IRA does not. The Roth 401k does, but you can easily and taxfree, roll a Roth 401k into a Roth IRA so you won't have any.
Reg 401k. 6% match + 5% in lieu of a pension. Total 17% into my plan.
What employer are you with that gives 6 %match + 5%? I’d love to come work for your employer
Not financial advice, but: Roth 401k is pretty good if you can do it. No taxes on gains, I think no taxes on dividends as well... That's the big difference between Roth IRA/401k investing and normal taxable account investing. Plus your money is not completely locked in until retirement.
Thoughts on my setup, please-
Making $60k/yr gross. Goal is to bring taxable income down to $40,525 (top of 12% bracket) so none of my money is taxed at 22%.
From $60k, standard deduction is $12,550, which means $46,450 taxable. So I put that $6k difference into traditional 401k and achieve a taxable income in the 12% bracket. (Federal, anyway).
Then the remainder of contribution limit ($19,500 - $6000) into Roth 401k, as well as extra $6k into Roth IRA.
I live frugally and I don't need that amount I'm putting away. Am I understanding tax brackets correctly, or any other feedback?
Keep in mind even he said he can’t tell what the taxes will be when it’s for you to pull. 401k is the way to go
I question your assumptions on the principal investment in the Roth 401k in this scenario. A 10% discount (100k to 90k) seems way too optimistic. Income Tax rates are closer to 20-33%
His example is valid but since he uses 10% tax bracket it favors Roth contribution. One "flaw" here is that the Roth contribution is only $1,350 (traditional was $1,500) so employee didn't take full advantage of employer match.
Contribute 10000 + match 100000 over a 25 year career would be 400k only if you got a 5% return which is a rather low estimate there. The best advantage of the Roth over traditional is flexibility in retirement. If someone puts away 10K per year for 35 years and earns 7% which is a good estimate based upon the market's trend since inception you would end up with 1.5 M at the 35 year mark. 350000 of that money is the money you contributed and the other 1.15M is growth. Traditional saves on the highest tax bracket you are in for the 350000 which at the highest in the last 2 decades has been just under 40%. So you saved roughly 140K over 35 years assuming you are in the highest tax bracket, much less if you make say 50-100K. All of that 1.15M growth is taxable and if you decide to take 100K in a lump sum for some reason, you pay taxes on it. If you just try to live off of returns at say 4%, you'd recieve 60000 per year without touching the principle and any additional growth that is reinvested will also carry income tax burden when tapped. All that growth would be taxed. If you did Roth, you could take out any lump sum you wanted and not pay a cent of income tax. Also all returns you live off of for the rest of time is not taxed. If you die and it passes to a family member such as a child, there is no income tax burden. I'd say in this scenario the advantages of Roth in retirement are worth the 140K investment over 35 years.
Hey jaspreet, I’m 23 just learning about these. is it better to not do Roth IRA and 401k ? What if I use that money instead on other liquid investments ?
My company offers both. Would it be smart investing in both?
Eventually yes but not usually at the same time. Favor contributing to Roth 401(k) when at a relatively low tax bracket and traditional 401(k) when at a relatively high tax bracket.
I set up a Roth 401k that invests my money in an index fund to keep expenses low. Now I'd like to know what to do, in the future, to reduce the taxes on the match from my job.
You cant its pre tax
@@r4ym1n13 Doesn't mean that taxes can't be reduced. I never said reduced to nothing.
@@r4ym1n13 I just figured it out. The employer match can be rolled over into a traditional IRA then I would be able to do a tax-free direct transfer into my HSA.
Then use that money for medical expenses as I get older and it'll be tax free.
@@mthomas503 give me a link to this source please
Seems like less hassles with regular 401k to get employer matching then invest in a regular Roth IRA with the brokerage company of your choice. Don't think most people will be in the high tax rate when it is time to distributions.
Compare total taxes paid instead of tax brackets. However, most should be fine with a 401K. Afterall, it's been working fine for many people for awhile now.
You are really knowledgeable love your personality and hustle
Keep up the good work
Can you do more videos on options for Self Employed people and small business owners?
What is my employer doesn't match? How much should I contribute percentage wise? 401k and roth?
I invest in both 401k and Roth 401k do you think is a smart thing to do ? please let me know
Thank yoy
TommyGunnz Night safe and keeps options open later and life. Much better than being 100% traditional. My personal goal is 70-roth 30-traditional.
What's your effective tax rate right now? Have you calculated what you think your expenses will be in retirement, including luxury expenses? Have you run through an RMD calculator to see what you will be forced to withdraw from the traditional in retirement whether you need it or not?
Gold!!
Both & stock market and Treasury’s and precious metals
And real estate
Hopefully it’ll work out
Many people will have lower expenses, and lower income, once retired. Lower income will equal a lower tax bracket, making a traditional 401K A better option.
Tax rates will be higher. You should have income in retirement. If you don’t you shouldn’t retire.
@@charlesbickel4295 you don’t need as much income in retirement as you needed when you were raising a family, building your retirement, saving for college education for kids, and so forth. For most people, retirement income is less than what they earned during their peak earning years. This fact should put most people in a lower tax bracket during retirement then they were in during their peak income years, this making a traditional 401(k) plan more attractive.
I have higher expectations for myself, Roth is the way to go
You might take a look at the many RMD calculators out there and plug in your numbers for traditional. Also look at the Medicare premium calculators. Sure would suck to be in a high tax situation when you don't need the money that year.
I have a quick question that might not be related to this video: Is it better to invest in a global fund or one that follows the S&P 500? The US fund has higher highs, and higher lows compared to the global fund. Global one costs 0.11%, and the US one costs 0.21%. I don't live in the USA, so this is what I can choose from. Which one would be better to invest in? The way I see it is that it's the US stocks that weigh the most in the global fund. Some say US stocks are overvalued and that's why a global fund is better. Thoughts?