That’s why I love this show, it’s fluid with the rules, these guys are grounded with reality to questions and helping the average person. I feel like this show is for people who have graduated financially.
When they had Caleb Hammer on they talked about the fact their “rules” are more like guidelines but they tell people it’s rules so it’s easier to follow and I like that about them
Another great show. Love how you focus on both the math (how) and the goal (why). As an immigrant who came to the states in my mid thirties,listening to Ramsey and then transitioning to you has been one of the most enriching parts of my financial journey. Thanks for all you do. Cheers!
I haven't heard much from these guys but they seem to know what they're talking about. Ramsey, however, you have to be careful with. I think some of his strategies that are more common sense are good, and commonly given, but then some of his lack of finance knowledge shows through, like the way he (incorrectly) calculates the average rate of return of investing in the stock market.
I like how they seem to have made their peace with FIRE and now take it into account in their answers. Also, talking of different types of FIRE 😄 Proud of you guys 👏👏👏😁
I would argue James will be in the 20-3-8 rule. It will easily be in his top 20 regrets, he will lose at least 3 nights worth of sleep as soon as he gets it, and be trapped for 8 years. 😅
Depending your age, goals and risk tolerance. I would absolutely tell you to get out of the target date fund. Whether young or old, you're losing valuable time in the market. Some might say this isn't factually correct, but you'll still feel the swings of the market whether you chose your investments yourself or target date fund. I would just say look at the returns of 10 years plus for your stock and bond options, and just lean towards the higher returns with longest time evidence, just breakup the portfolio % between stocks and bonds to your liking for protection. Hopefully that makes sense.
Regarding TDFs, I think the real question is, what is the specific function of bonds in a 20-year-old's portfolio? If you can give me a good answer to that question, I'll buy a TDF.
At 65 and planning to retire I don't have "time" to wait for the market to recover. Lived through many recessions and recovered but at this time I just don't have the luxury of time. Planning on selling portfolio and converting into cash and putting in CD's at 5.5%+ (rates continue to go up at this writing) at a fixed rate with NO RISK.
I wrote to my Congressman, Mike Garcia and one of my Senators, Alex Padilla (no point in Feinstein since she’s not really all here), to ask that they allow the IRA contributions be equal to a 401K if you don’t have a 401K. I also asked that they allow people with a pension to be able to contribute, at least something, to a pre taxed IRA because you have no control over that money in a pension so if they make bad decisions, you’re screwed. Also, I will have a pension but it will only be about $1,100/month but that excludes me from being able to participate into a PreTaxed IRA. Stupid.
@The Money Guy Show. I have a Roth Ira and a Roth 401k. My investments in the 401k are not that good I get employer match and I am maximizing that. When would you roll the 401k to the Roth ira to get better investment choices
@@keatondolan3 THIS is the answer. A single filler would need to earn 262k to have an effective (not marginal) tax at 25%. TMG added this addition information (state taxes) to their later video.
Does the 20-25% savings all need to be in 401k or tax advantaged? If I am low on emergency funds, does funding that fully with 20-25% of my gross income count? 140k in 401k, age 31, 22% tax bracket MFJ. If catching up, should I divert all tax advantaged funds, or only a portion?
2k car no loan liab., insurance. Advantage car solid (luck with that) repairs and worn part replacements. Savings yearly 2k -4k and up vrs car loan. ect. 60k - 80k income. Pluses minus factored it worked, car older so will not work much longer.
My Father worked in Executive Sales beginning with IBM in the late 70s until his retirement. He NEVER drove an expensive car and lived in one of the most expensive Zip Codes in the country. Then again, he was 6'3" 260 pounds and never had to compensate for anything
Does anyone know? I have a Roth 401k with employer; ready to switch to traditional… is that like starting over at 0? Does it continue to compound with existing funds in Roth?
I am not sure what exactly you mean. It doesn’t really make a difference because each dollar you put in can be looked at independently, so it doesn’t matter if it sits in the same account or not. But my Roth and pretax sit in the same 401k account, my provider just keeps track of what percentage of the portfolio is Roth vs pretax.
Our progressive tax bracket system is incredibly unfair to the middle class. The 10% jump at $44,750 is the largest tax increase out of them all at the time when you can afford it the least. It may be better to increase 401k contributions to stay below that bracket for as long as possible. It is unfortunate that no one is speaking up to change the bracket system, especially when the Trump tax cuts expire in '25.
Honestly disagree. Tax rates are easy to program. Working close to the industry though, brokers, HR, employers, there’s so many policies that need changed. Give you a great example. What happens when an employee making $120k and expecting a 20% suddenly finds out they got a 25% bonus? They contributed all year expecting to be under the threshold and now are above it because they did a good job. What’s the process? That often falls on HR, the employers, and the broker. That’s a ton of moving pieces and you can’t force tiny companies to figure this out overnight
@@RobWilliams007 oooohhh my friend you aren’t in finance. You have no idea how many forms we file daily for people who’s income passed too high to contribute to ROTHS and they need to take it out legally. It’s a huge deal and is very common. What you’re describing is how it SHOULD work. Welcome to America.
@@OopsFailedArt I get that, but if they changed the law on Jan 1, 2024, there is plenty of time to tell people about the changes and they have a few months, even into next year to correct it. I completely understand what you’re saying. I have people come up to me all the time asking about how our pension and benefits work - because I watch the videos and read the material and they do not - even if they’ve been there 10 years longer
@@RobWilliams007 I get that. The problem is changing systems in particular though. The industry is switching to 1 fat settlements in March 2024. Brokerages have spent almost two years preparing for it with thousands of man hours. You’re updating hundreds of background systems. It’s incredibly labor intensive. They even started preparing before it was official because they knew how insane it would ve
I did everything right, I lived to save in tax deferred, Roth, personal and now I’m over 70 and god do I have a tax problem coming. I can’t complain but I have to pay the tax man. Be very careful saving in a tax deferred account because your day is coming.
Genuinely this has been a concern of mine. I decided from day one to place everything into my Roth 401k regardless of my tax bracket as I want to have as much tax free money down the road as I possibly can. Thanks for your comment
Im approaching retirement age. The average inflation of my working career is 3.6. Accumulate inflation is over 83%. The dollar I saved in 1980 is only worth 25 cents today. There have been half a dozen “crashes” that took the investors saving wealth from their pockets. Any 401k payments in retirement push your SS income into a taxable bracket. Work hard and enjoy life. Your not going to save and become rich in a Inflation based economy.
I am 48 y old. make $220000/y. I take 6 vacation, 10-12days at time, per year depending on my schedule. No debt except $180,000 at 3% for my apartment that I bought in 2021 Fist 4 moths of a year I max out ROTH 401k HSA IRA followed by Recaracterization to ROTH IRA & contribu $5000/moths to broker account. Total investment without equity in apartment i have $400000 across all accounts plus $30000 emergency fund. Not where i shud be at my age but getting there. I have 30% in VOO, 40% in SCHD and the rest in APPL MSFT ABBV GD PGR ADP PEP. at the moment i have 2.5% in dividend total payout per year . I am continuing to build my dividend position in SCHD(3.5%) VOO (1.6%)at evenly. When do I need to start to invest in bonds at what % if any do to dividend income.
@@brevinprince9826another words, traditional 401k & HSA contributions are pre-tax, and those taxes you mentioned are paid from your remaining, adjusted gross, income. Roth 401k contributions are post-tax paid after the taxes are taken. Withdrawals are a different story.
If your employer match is done in a Roth 401k, are there taxes on that? Who pays it? Does that come out of the contribution or additional? I wonder if employers would try to offset that.
I’d imagine you’d pay tax on it that year . For example, if you made 100k that year and the employer put 4K of match, your taxable income would be 104k for that year
It all matters how much it takes to get to 20-25% savings rate. You skip step 2 of the FOO, then max your Roth(s) at Step 5, then do some 401k/457 at step 6 to get to 20-25%. In calculating our savings rate (married), I count my contributions to my pension (but not my employer's portion) (7.3% of my gross income or 4% of our gross income), plus my wife's 401k contribution (9% of her income, 4.1% for us), plus her employer's match (1.9%), our Roths are maxed (8.4%), then I do a 457 (essentially a 401k is this example, 3.9%), then we do a little bit into an after tax account b/c we want to retire a bit early (2.3%) for a total of 24.5%.
I don’t have 401k match until after my first year should I still be putting money into my 401k or put it straight into my Roth IRA to try and max it out until the 401k match starts?
It is usually take-home pay, since that is what matters in those cases. 20/3/8 is based on what you bring in, as is 25% on housing. If it was pre-tax salary, you'd be at greater risk for getting over 100% of the money you have. In terms of retirement savings, since the whole goal there is to replace the lifestyle you have now, it can be tougher. If all your stuff is Roth (ignoring why that may be less than ideal), then you could look at take-home. Otherwise it can get messy. Here (especially since a lot of 401k are percentage-oriented anyway, ie save 3% and we give you 3%), it would be more conservative and may be easier to just consider pre-tax. Problem is, if some are considering salary while other look at take-home, you cant add the "rule" together (ie 25% retirement + 25% housing + 8% auto + X% taxes + ...
California is actually tax-friendly for retirees. Social Security is not taxed and retirement accounts are taxed at 2.5%. Their property tax still stinks, though.
This is the best time to be alive, as far as investing is concerned. Rates are sky high and they can only go down from here, which is the best thing for stocks. I’m piling in 150-200.00 every week into my Roth and another 8% into my 401k. The results have been astronomical and no matter up or down I just keep buying, Allah, Nick Maggiulli
what do we mean by 'add up your marginal federal and marginal state'? do we only care about the top combined marginal or the effective "true" tax rate for the roth vs trad 401k decision?
I have a 401(k) topic for a future show that I do not believe has ever been covered: the 401(a)17 rule. I literally just found out about this because nobody ever talks about it. Basically, if you are a highly compensated individual, you (and your employer) are not allowed to contribute to an employer's 401(k) plan once your income for the year has reached $330K, regardless of whether or not you have reached the IRS contribution limit of $23K or $30K. I do have a question about this. Let's say that, for whatever reason, I accidently do not maximize my 401(k) contribution for the year before I reach the $330K salary cutoff. Does this mean that I can contribute whatever is left (up to the IRS limit) to my IRA on a tax deferred basis? I wish there was more information out there about how to deal with this $330K limitation. It seems like a ridiculous rule intended to harm normal people who are just trying to save for their retirement! Another question: if I receive part of my compensation in the form of RSUs, does this count towards the aforementioned $330K income limit if I just hold onto them (i.e., do not liquidate)? Thanks.
@@justthebrttrk My interpretation is correct: no more contributions are permitted to an employer-sponsored 401(k) plan once employee compensation hits $330K (in 2023; it goes up to $345K in 2024). Sure, you can max out your contribution before you hit the limit, say, in the first 3 months of the year. However, that means that you are missing out on employer matching after that point. Also, not everyone can take advantage of backdoor Roth; my 401(k) plan does not allow this. My company pays out bonuses in March, which means some of us will hit that income limit pretty early in the year, and earlier still if RSUs are factored in (and that's if RSUs count toward "payroll income"). Per my original point, this is an obscure, relatively unspoken 401(k) rule that has a lot of gray areas. It would be helpful to get some clarity on this, rather than Video Number 62,487 about the financial order of operations.
@@hejiranyc Your RSUs would only be taxable income in the tax year they vest. You can file a form to claim all of the taxes on receiving the RSUs, but there is a 30 day deadline on that filing with no grace period. In that filing, you have to pay taxes at that current year's value, which if the valuation goes down over time could lead you paying more taxes on that money. However, if it goes up substantially before vesting, you could save on taxes by paying on the value when you received the RSUs but are not vested yet.
somehow my employer sponsored Roth has like a 20K+ limit so I don't know on what planet you could max that out unless you make well into the 6 figures...
Looking at national debt and trajectory… i think its fair to say long term tax rates will be going higher bc the morons in office have no clue nor incentive to slow government spending
@heathercarpenter5793 also, if you can, a good idea (I am) to try to convert to a Roth. Rather pay the lower taxes on income now than later on my principal and gains...
I’m 18 and the Aston Martins seem like a poor man’s car. I was thinking of a Ferrari f50. I make 45k a year and can get a loan for 50 years. Does this seem like a good idea. The car is more of an investment than a liability in my opinion. 😂
It’s not trivial but it is about choices. Some people that make $70k wonder how anyone lives on $40k & some people making $150k wonder how people live on $70k. Meanwhile they are all living on what they make. Moral of the story is you can make yourself live on whatever you have to. Obviously there are differences in standard of living, so get used to the least you can when you’re young and don’t let lifestyle creep as you make more. Save first and live on what’s left, no matter what that amount is. Thing to remember is the less you make the lower the amount of money 25% represents, but there is a lower bound where one simply has to make more.
Definitely look at your expenses to see what's fixed and what's negotiable. For people who have kids, look at what activities they are enrolled. I know a lot of parents feel like their kids need to be in a bunch of activities so sometime they look at those expenses and don't realize those are negotiable expenses. Not saying the kids shouldn't be on anything but they also don't need to be in everything. And even if those expenses are fixed and not negotiable, it might be a good opportunity to look at where you are living and access if a move to a less expensive part of the country might be beneficial.
43:00 You still didn't explain why somebody shouldn't arbitrage rates. In fact, you literally said to not tie up your money in a car - then proceeded to tell me to pay off the car quickly. I think this is a weak point of the show...you guys are usually numbers based, but your car-buying rule seems dogmatic.
Guys ,most people become millionaires through real estate. The 401k is a great tax shelter while you are working. The problems begin when you make withdrawals. The withdrawals get hit by 40% taxes. If you die, your kids have to pay 40-50% taxes on it. Life insurance is a better vehicle.
I've come to realize that the key to amassing wealth lies in making sound investments. I purchased my first home at the age of 21 for $87,000 and sold it for $197,000. My second home, acquired for $170,000, was later sold for $320,000, and my third property, purchased at $300,000, fetched $589,000, with buyers covering all closing costs and expenses. Not reaching a million before retirement feels like an unfulfilled goal.||
I initially started my investment journey with the guidance of a financial advisor named *Jenny Pamogas Canaya.* Her transparent approach granted me full control of my investments, and her fees are reasonable, considering my return on investment. Nonetheless, it's crucial to conduct thorough research before engaging with any financial advisor.
Strange, almost every fast food restaurant offers a 401k. If they’re doing it I would think a majority of businesses are. Guess it depends on what you mean by “serving class”, and what year you turned 40.
Lol. I put 10% in my 401K and my company matches 10%. That means I literally get a 100% ROI the instant I add money. Let me know of another investment option that gives me an instant 100% return.
![[UNCUT] The Loyal Pin ปิ่นภักดิ์ EP.15 (1/4)](http://i.ytimg.com/vi/TLBjiHvkKtE/mqdefault.jpg)
That’s why I love this show, it’s fluid with the rules, these guys are grounded with reality to questions and helping the average person. I feel like this show is for people who have graduated financially.
When they had Caleb Hammer on they talked about the fact their “rules” are more like guidelines but they tell people it’s rules so it’s easier to follow and I like that about them
I like a lot of their guidelines, but 20/3/8 is silly. So much of what they say is based on cold hard numbers, but I feel like 20/3/8 is dogmatic.
Another great show. Love how you focus on both the math (how) and the goal (why). As an immigrant who came to the states in my mid thirties,listening to Ramsey and then transitioning to you has been one of the most enriching parts of my financial journey. Thanks for all you do. Cheers!
I haven't heard much from these guys but they seem to know what they're talking about. Ramsey, however, you have to be careful with. I think some of his strategies that are more common sense are good, and commonly given, but then some of his lack of finance knowledge shows through, like the way he (incorrectly) calculates the average rate of return of investing in the stock market.
Love that this is over an hour!! Keep up the long videos. Keeps me going at the desk
I like how they seem to have made their peace with FIRE and now take it into account in their answers. Also, talking of different types of FIRE 😄
Proud of you guys 👏👏👏😁
I would argue James will be in the 20-3-8 rule. It will easily be in his top 20 regrets, he will lose at least 3 nights worth of sleep as soon as he gets it, and be trapped for 8 years. 😅
My Roth is set up with an S&P 500 Vanguard index while my 401(k) is in a glide (2055 Target Retirement). I figured I'd try a bit of both.
I chose my own instead of a Target Date retirement plan because they had me in bonds when I was 23. Yea no thanks.
Depending your age, goals and risk tolerance. I would absolutely tell you to get out of the target date fund. Whether young or old, you're losing valuable time in the market. Some might say this isn't factually correct, but you'll still feel the swings of the market whether you chose your investments yourself or target date fund. I would just say look at the returns of 10 years plus for your stock and bond options, and just lean towards the higher returns with longest time evidence, just breakup the portfolio % between stocks and bonds to your liking for protection. Hopefully that makes sense.
Regarding TDFs, I think the real question is, what is the specific function of bonds in a 20-year-old's portfolio? If you can give me a good answer to that question, I'll buy a TDF.
Damn that first question, they just almost went on break & flipped the table 🤣 🔥
This first question had me cracking up 😂😂
What bank would even do that? lol
I hope that was a troll & not an actual dude.
At 65 and planning to retire I don't have "time" to wait for the market to recover. Lived through many recessions and recovered but at this time I just don't have the luxury of time. Planning on selling portfolio and converting into cash and putting in CD's at 5.5%+ (rates continue to go up at this writing) at a fixed rate with NO RISK.
How much money do you have invested in the stock market (between all your accounts)?
I’ve also been on the fence about the lower percentage rate for auto loan vs interest earned in high yield savings and paying off the loan sooner.
Same and it’s driving me crazy! We just managed to get our PMI removed so we have some extra money to employ but I can’t decide what its job should be
This their best video IMHO. They covered everything I needed to know.
Wow!!!!! Bo is "excited about this one." 😂😂😂😂😂😂
We can kid cause we love.😅
The total breakdown @35 minutes was HILARIOUS!!!
15:46 love when Bo loses it. That’s me now listening to people in my life.
17:11 Cutco is an MLM with bad business practices
you forgot to mention Roth 401k's no longer have RMD's
RMD?
@@jeffk3368required minimum distribution
@@jeffk3368 required minimum distribution
@@jeffk3368required minimum distributions
Required minimum distribution
I wrote to my Congressman, Mike Garcia and one of my Senators, Alex Padilla (no point in Feinstein since she’s not really all here), to ask that they allow the IRA contributions be equal to a 401K if you don’t have a 401K. I also asked that they allow people with a pension to be able to contribute, at least something, to a pre taxed IRA because you have no control over that money in a pension so if they make bad decisions, you’re screwed. Also, I will have a pension but it will only be about $1,100/month but that excludes me from being able to participate into a PreTaxed IRA. Stupid.
No. Employer based retirement plans should have benefits over individual retirement plans.
Why @@evr0.904
@@evr0.904 why?
@@paws315 Primarily, to provide benefits to people that actually work.
@@evr0.904 thanks, Im not sure I follow, are you saying IRAs allow contributions from unearned income?
But I’m 63 I no longer work and most of my money is in tax deferred 401(k) and IRA know how in the world am I gonna be getting that money out?
@The Money Guy Show. I have a Roth Ira and a Roth 401k. My investments in the 401k are not that good I get employer match and I am maximizing that. When would you roll the 401k to the Roth ira to get better investment choices
Great content very helpful.
For the Roth decision: How do you have a tax bracket between 25-30% when the Federal tax bracket jumps from 24% to 32%?
Federal + State taxes
Make just over the limit for 24%. only the amount above will be taxed at 32%, not the whole amount.
Some of us pay state… and even city… taxes. But hey, the subway is still pretty cheap.
they are probably talking net tax rate (not tax brackets, some of your income is always tax free such as the first 12K or so)
@@keatondolan3 THIS is the answer. A single filler would need to earn 262k to have an effective (not marginal) tax at 25%. TMG added this addition information (state taxes) to their later video.
Does the 20-25% savings all need to be in 401k or tax advantaged? If I am low on emergency funds, does funding that fully with 20-25% of my gross income count? 140k in 401k, age 31, 22% tax bracket MFJ. If catching up, should I divert all tax advantaged funds, or only a portion?
Can you guys make an updated video for roth conversion? Thanks
They have gone over this many times. The process has not changed.
2k car no loan liab., insurance. Advantage car solid (luck with that) repairs and worn part replacements. Savings yearly 2k -4k and up vrs car loan. ect. 60k - 80k income. Pluses minus factored it worked, car older so will not work much longer.
My Father worked in Executive Sales beginning with IBM in the late 70s until his retirement. He NEVER drove an expensive car and lived in one of the most expensive Zip Codes in the country. Then again, he was 6'3" 260 pounds and never had to compensate for anything
I'm losing money in IRA compared to 401K company match. I'm thinking of transferring to 401K. I have no losses in 401K.
Does anyone know? I have a Roth 401k with employer; ready to switch to traditional… is that like starting over at 0? Does it continue to compound with existing funds in Roth?
I am not sure what exactly you mean. It doesn’t really make a difference because each dollar you put in can be looked at independently, so it doesn’t matter if it sits in the same account or not. But my Roth and pretax sit in the same 401k account, my provider just keeps track of what percentage of the portfolio is Roth vs pretax.
No it’s not like starting over. You have the same contribution max (Roth 401(k) + Traditional 401(k)
The insistence on a company matching your contribution is frustrating to us self employed peasants
National Lampoon's Christmas Vacation.... priceless! Well said, gentlemen and Ma'am... well said.
Better to have it and not need it, than need it and not have it.
So what happens when the currency crashes before i retire in 30 yrs. ?
Great video ❤
Could you guys possibly do a summary video?
😂 Loved the grunting joke. My wife and I watch it with our kids now.
Our progressive tax bracket system is incredibly unfair to the middle class. The 10% jump at $44,750 is the largest tax increase out of them all at the time when you can afford it the least. It may be better to increase 401k contributions to stay below that bracket for as long as possible.
It is unfortunate that no one is speaking up to change the bracket system, especially when the Trump tax cuts expire in '25.
Thank the Republicans. 2016
The progressive tax system is unfair to everyone. It should be abolished.
Trump's TCJA screwed the middle class, resident of blue states whose taxes already subsidize red states, got screwed even more.
Vote!
@@SamuelClemente7718imagine getting mad at the group that said you can keep more of your money and pay less in taxes.
@Corn_Pops_Rusty_Razor only an illusion. Ask the blue collars folks who left California for Texas. What a rude awaking !!!!!!
Right when the old tax rates come back into existence! That’s why they waited. They change tax code all the time and don’t need years to implement.
Honestly disagree. Tax rates are easy to program. Working close to the industry though, brokers, HR, employers, there’s so many policies that need changed.
Give you a great example. What happens when an employee making $120k and expecting a 20% suddenly finds out they got a 25% bonus? They contributed all year expecting to be under the threshold and now are above it because they did a good job. What’s the process? That often falls on HR, the employers, and the broker. That’s a ton of moving pieces and you can’t force tiny companies to figure this out overnight
@@OopsFailedArt they wouldn’t change it in the middle of a year so that employee can adjust all that on Jan 2.
@@RobWilliams007 oooohhh my friend you aren’t in finance. You have no idea how many forms we file daily for people who’s income passed too high to contribute to ROTHS and they need to take it out legally. It’s a huge deal and is very common. What you’re describing is how it SHOULD work. Welcome to America.
@@OopsFailedArt I get that, but if they changed the law on Jan 1, 2024, there is plenty of time to tell people about the changes and they have a few months, even into next year to correct it. I completely understand what you’re saying. I have people come up to me all the time asking about how our pension and benefits work - because I watch the videos and read the material and they do not - even if they’ve been there 10 years longer
@@RobWilliams007 I get that. The problem is changing systems in particular though. The industry is switching to 1 fat settlements in March 2024. Brokerages have spent almost two years preparing for it with thousands of man hours. You’re updating hundreds of background systems. It’s incredibly labor intensive. They even started preparing before it was official because they knew how insane it would ve
When does this go into effect?! I would love to have employer match as ROTH!🎉
^ +1
Are you guys thinking temporary tax cuts ending in 2025 are a significant consideration as to whether to do Roth in 2023/2024?
I did everything right, I lived to save in tax deferred, Roth, personal and now I’m over 70 and god do I have a tax problem coming. I can’t complain but I have to pay the tax man. Be very careful saving in a tax deferred account because your day is coming.
The tax time bomb is real for a lot of people. RMDs are ridiculous. But as far as problems I guess it’s better than the alternative.
Genuinely this has been a concern of mine. I decided from day one to place everything into my Roth 401k regardless of my tax bracket as I want to have as much tax free money down the road as I possibly can. Thanks for your comment
Paying taxes means you made money. It’s not a real problem.
Sounds like it may be time to talk with a financial advisor. There are some things you can do to mitigate.
@@Logan_12G that is the government does not change tax laws!
Im approaching retirement age. The average inflation of my working career is 3.6. Accumulate inflation is over 83%. The dollar I saved in 1980 is only worth 25 cents today. There have been half a dozen “crashes” that took the investors saving wealth from their pockets. Any 401k payments in retirement push your SS income into a taxable bracket. Work hard and enjoy life. Your not going to save and become rich in a Inflation based economy.
I am 48 y old.
make $220000/y. I take 6 vacation, 10-12days at time, per year depending on my schedule.
No debt except $180,000 at 3% for my apartment that I bought in 2021
Fist 4 moths of a year I max out ROTH 401k HSA IRA followed by Recaracterization to ROTH IRA & contribu $5000/moths to broker account. Total investment without equity in apartment i have $400000 across all accounts plus $30000 emergency fund. Not where i shud be at my age but getting there. I have 30% in VOO, 40% in SCHD and the rest in APPL MSFT ABBV GD PGR ADP PEP. at the moment i have 2.5% in dividend total payout per year .
I am continuing to build my dividend position in SCHD(3.5%) VOO (1.6%)at evenly. When do I need to start to invest in bonds at what % if any do to dividend income.
Are 401k and HSA contributions exempt from social security and Medicare tax? Or just income tax?
Social security/Medicare taxes is deducted from wages
@@TopShot501st please elaborate
@@brevinprince9826another words, traditional 401k & HSA contributions are pre-tax, and those taxes you mentioned are paid from your remaining, adjusted gross, income. Roth 401k contributions are post-tax paid after the taxes are taken. Withdrawals are a different story.
If your employer match is done in a Roth 401k, are there taxes on that? Who pays it? Does that come out of the contribution or additional? I wonder if employers would try to offset that.
I’d imagine you’d pay tax on it that year . For example, if you made 100k that year and the employer put 4K of match, your taxable income would be 104k for that year
employer contributions/matches to roth401k are held separately in a separate 401a account. they are taxable when you withdraw them.
I was wondering the same
Now fund managers don’t have to invest on behalf of the investor.
I’d like to know a ballpark percentage to save/invest into a 401k if there is no match but a pension instead?
It all matters how much it takes to get to 20-25% savings rate. You skip step 2 of the FOO, then max your Roth(s) at Step 5, then do some 401k/457 at step 6 to get to 20-25%.
In calculating our savings rate (married), I count my contributions to my pension (but not my employer's portion) (7.3% of my gross income or 4% of our gross income), plus my wife's 401k contribution (9% of her income, 4.1% for us), plus her employer's match (1.9%), our Roths are maxed (8.4%), then I do a 457 (essentially a 401k is this example, 3.9%), then we do a little bit into an after tax account b/c we want to retire a bit early (2.3%) for a total of 24.5%.
does this apply to solo 401k, as self employed?
70 years old and still waiting for my C8- writing a check of course..
Looked for the story post of shoes ... didnt see it.
Investing is a priority!!!
yes
I don’t have 401k match until after my first year should I still be putting money into my 401k or put it straight into my Roth IRA to try and max it out until the 401k match starts?
Save all you can or 10 percent of your pay regardless of match. I like a combination of 401k and Roth. Invest ever month.
When they reference “income” do they mean pre tax income like is on my W2 or do they mean income after taxes are taken out? Thanks!
They are referencing Gross in some things, net in others. They kinda flip flop the numbers based on the situation.
It is usually take-home pay, since that is what matters in those cases. 20/3/8 is based on what you bring in, as is 25% on housing. If it was pre-tax salary, you'd be at greater risk for getting over 100% of the money you have.
In terms of retirement savings, since the whole goal there is to replace the lifestyle you have now, it can be tougher. If all your stuff is Roth (ignoring why that may be less than ideal), then you could look at take-home. Otherwise it can get messy. Here (especially since a lot of 401k are percentage-oriented anyway, ie save 3% and we give you 3%), it would be more conservative and may be easier to just consider pre-tax.
Problem is, if some are considering salary while other look at take-home, you cant add the "rule" together (ie 25% retirement + 25% housing + 8% auto + X% taxes + ...
@@General8675 thanks!
@@BenFranklin1776 thanks for the in-depth answer. I appreciate it!
First question was definitely a troll, lol
Ya think? 😂
*Grunts* oh oh oh *grunts* More financial power!!! *Grunts in financial mutant!*
California is actually tax-friendly for retirees. Social Security is not taxed and retirement accounts are taxed at 2.5%. Their property tax still stinks, though.
Places like Texas have far far worse house taxes 😂
This is the best time to be alive, as far as investing is concerned. Rates are sky high and they can only go down from here, which is the best thing for stocks. I’m piling in 150-200.00 every week into my Roth and another 8% into my 401k. The results have been astronomical and no matter up or down I just keep buying, Allah, Nick Maggiulli
what do we mean by 'add up your marginal federal and marginal state'? do we only care about the top combined marginal or the effective "true" tax rate for the roth vs trad 401k decision?
marginal means the top bracket you are in
Should you contribute to both? I currently do 3% to 401k and 7% to Roth 401k
The government always has their hand out for more $$$$.
I have a 401(k) topic for a future show that I do not believe has ever been covered: the 401(a)17 rule. I literally just found out about this because nobody ever talks about it. Basically, if you are a highly compensated individual, you (and your employer) are not allowed to contribute to an employer's 401(k) plan once your income for the year has reached $330K, regardless of whether or not you have reached the IRS contribution limit of $23K or $30K. I do have a question about this. Let's say that, for whatever reason, I accidently do not maximize my 401(k) contribution for the year before I reach the $330K salary cutoff. Does this mean that I can contribute whatever is left (up to the IRS limit) to my IRA on a tax deferred basis? I wish there was more information out there about how to deal with this $330K limitation. It seems like a ridiculous rule intended to harm normal people who are just trying to save for their retirement! Another question: if I receive part of my compensation in the form of RSUs, does this count towards the aforementioned $330K income limit if I just hold onto them (i.e., do not liquidate)? Thanks.
It doesn’t get talked about cuz less than 5% of people make 330k
Great show topic idea! I would like them to expand on this and include other high income limitations like IRAs, HCE, Employee Deferred Compensation
@@justthebrttrk My interpretation is correct: no more contributions are permitted to an employer-sponsored 401(k) plan once employee compensation hits $330K (in 2023; it goes up to $345K in 2024). Sure, you can max out your contribution before you hit the limit, say, in the first 3 months of the year. However, that means that you are missing out on employer matching after that point. Also, not everyone can take advantage of backdoor Roth; my 401(k) plan does not allow this. My company pays out bonuses in March, which means some of us will hit that income limit pretty early in the year, and earlier still if RSUs are factored in (and that's if RSUs count toward "payroll income"). Per my original point, this is an obscure, relatively unspoken 401(k) rule that has a lot of gray areas. It would be helpful to get some clarity on this, rather than Video Number 62,487 about the financial order of operations.
@@hejiranyc Your RSUs would only be taxable income in the tax year they vest. You can file a form to claim all of the taxes on receiving the RSUs, but there is a 30 day deadline on that filing with no grace period. In that filing, you have to pay taxes at that current year's value, which if the valuation goes down over time could lead you paying more taxes on that money. However, if it goes up substantially before vesting, you could save on taxes by paying on the value when you received the RSUs but are not vested yet.
Ok question, I love to follow you. I have my money sitting in a High yield savings account. How do I contact you for a one on one?
Did you look in their description?
“We’ll figure it out” 😂 best line ever.
Secure 2.0 is mostly disgusting. The federal handout match to retirement savings for low income earners; just more welfare.
Didn’t even see that, but the 529 to Roth IRA rollover is amazing
KatieLover is getting their tumbler next week
somehow my employer sponsored Roth has like a 20K+ limit so I don't know on what planet you could max that out unless you make well into the 6 figures...
Yes, that means you're poor, I'm not joking it's just a fact
Had me crying laughing at 35:00 Katy lover or whatever 😂
Any speculation what future tax rates may be? Say 10 years from now?
Looking at national debt and trajectory… i think its fair to say long term tax rates will be going higher bc the morons in office have no clue nor incentive to slow government spending
I expect future tax rates to go up, but always a guess
They will be higher. Likely in the near future when the tax cuts ending 2 years. The Govt hasn't lowered their need for $$.
I figured they would be going up. Will have to focus more on my ROTH then my 401k
@heathercarpenter5793 also, if you can, a good idea (I am) to try to convert to a Roth. Rather pay the lower taxes on income now than later on my principal and gains...
I’m 18 and the Aston Martins seem like a poor man’s car. I was thinking of a Ferrari f50. I make 45k a year and can get a loan for 50 years. Does this seem like a good idea. The car is more of an investment than a liability in my opinion. 😂
He is James and buying an Aston Martin …😂 he must be James Bond .. 😂🤣 with a credit card …
Make investing a "Prohrty"
❤❤❤
401K are dinosaurs.
James is also gonna borrow the down payment or do a credit card advance. I am guessing he’s new to the Money Guy show.
FOOVOO!
In the Q&A can you guys address whether or not I should move out of my mom’s basement? Thanks
I still dont get how people can save 25 percent unless you make over $150, 000 per year. Especially when you have 2 kids !! Nearly impossible !!
You must be the poster child for consumerism.
It’s not trivial but it is about choices. Some people that make $70k wonder how anyone lives on $40k & some people making $150k wonder how people live on $70k. Meanwhile they are all living on what they make. Moral of the story is you can make yourself live on whatever you have to. Obviously there are differences in standard of living, so get used to the least you can when you’re young and don’t let lifestyle creep as you make more. Save first and live on what’s left, no matter what that amount is. Thing to remember is the less you make the lower the amount of money 25% represents, but there is a lower bound where one simply has to make more.
Definitely look at your expenses to see what's fixed and what's negotiable. For people who have kids, look at what activities they are enrolled. I know a lot of parents feel like their kids need to be in a bunch of activities so sometime they look at those expenses and don't realize those are negotiable expenses. Not saying the kids shouldn't be on anything but they also don't need to be in everything. And even if those expenses are fixed and not negotiable, it might be a good opportunity to look at where you are living and access if a move to a less expensive part of the country might be beneficial.
@@chemquests Great Points !!! We're slowly trying to get to 20 -25 percent but its difficult with all the expenses we're dealing with.
@@CaraMarie13 Thank you for your input !! :)
43:00 You still didn't explain why somebody shouldn't arbitrage rates. In fact, you literally said to not tie up your money in a car - then proceeded to tell me to pay off the car quickly. I think this is a weak point of the show...you guys are usually numbers based, but your car-buying rule seems dogmatic.
What happens if stock market returns turn negative for next 5, 10 , 29 years? 🤔🤯😳
Make all 401ks, 403bs and 457b plan self directed. Tired of mutual funds.
Interesting topic. Just don’t have an hour plus to watch. Can we have a highlight clip?
Try 2x speed bro
They always release highlight clips for every single livestream, just wait for them to come out.
The actual 401k information is only the first 15 minutes. The other hour and 15 mins is questions from the audience.
Thanks. All helpful
👍👍
Yes it is
I know
Right
Guys ,most people become millionaires through real estate. The 401k is a great tax shelter while you are working. The problems begin when you make withdrawals. The withdrawals get hit by 40% taxes. If you die, your kids have to pay 40-50% taxes on it. Life insurance is a better vehicle.
Real Estate has a step-up basis, so your statement on taxes is likely incorrect.
I've come to realize that the key to amassing wealth lies in making sound investments. I purchased my first home at the age of 21 for $87,000 and sold it for $197,000. My second home, acquired for $170,000, was later sold for $320,000, and my third property, purchased at $300,000, fetched $589,000, with buyers covering all closing costs and expenses. Not reaching a million before retirement feels like an unfulfilled goal.||
You have done great for yourself. I’m trying to get onto the housing ladder at 40. I wish at 55 I will be testifying to similar success!
I initially started my investment journey with the guidance of a financial advisor named *Jenny Pamogas Canaya.* Her transparent approach granted me full control of my investments, and her fees are reasonable, considering my return on investment. Nonetheless, it's crucial to conduct thorough research before engaging with any financial advisor.
I've come across several positive endorsements of Jenny Pamogas Canaya on various platforms, including TH-cam channels, seminars, and more.
Thanks to these recommendations, I successfully located her online profile and have already reached out to her with a message
@@tahirisaid2693 That woman cost me every penny I was worth. Avoid Jenny Pamogas Canaya like the PLAGUE....
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Bros, retirement accounts are ok, but what do you do when they already maxed out?
🤔🤔🤔🤣🤣😘😜😉
Never had a job that offered a 401k until I was 40. This show is meaningless for those in the serving class.
Strange, almost every fast food restaurant offers a 401k. If they’re doing it I would think a majority of businesses are.
Guess it depends on what you mean by “serving class”, and what year you turned 40.
Bro serving class is not watching videos about how to built wealth🤣
Starbucks offers a 401k with a great match....
I wouldn't take this comment seriously folks. Clearly a troll.
Just open a taxable brockerage account and a Roth you can contribute to those on your own
401k are a scam
What’s it like being the dumbest person in every room?
Lol. I put 10% in my 401K and my company matches 10%. That means I literally get a 100% ROI the instant I add money. Let me know of another investment option that gives me an instant 100% return.
@@brianmcg321 dumb and RICH
@@sd0753 pensions
Then tell us what we should invest our money in for retirement
Stay away from 401k
What do you invest in and what is your issue with 401k’s?
@Chobiefi 401k don't work. For the middle class.
If you owe your HOME, car, and credit cards . Then your wasting your money
Let me guess🤔 Do you sell whole life insurance or did you fall for a whole life plan pitch? Or annuities?😂
@@Olivia-2019 I'm not a republican to fa for that trap! Lol
Worst advice ever