Number two "Fund Earlier" kind of surprised me. My gut reaction was, "But you're taking on more risk by not dollar cost averaging!" And while monte carlo sims do have the lump sum at the beginning of each year method resulting in a larger variance than dollar cost averaging, because you're repeating this over 45 years (as to only making a single lump sum then never contributing again) the risk is not significantly greater.
Sure but most of us would have had to save up that 7k ahead of time in a HYSA. I would have just DCA'd that 7k I a brokerage the previous calendar year...
It's still DCA just distributing differently. The main concern I have with recommending to not DCA is that people will see the market swings so much more. That can drag in some emotions making them worry that they have to withdraw.
Dividend reinvestment has been a key for me. I am into big tech companies, and reinvest their low percentage dividends. Decades of these low percentage reinvestments have made huge difference in the number of shares owned.
Great video. Been retired for 5 years and not touched my IRA, in fact tried to invest $7500 last year and got red flagged for not having any 'earned income'. Most of my income is rental incomes, pension and SS (now). It seems to be a trade-off, pay low taxes and not invest, or high taxes and not afford to invest.... I took what's behind door #1. I had a Fidelity 'adviser', I got tired of him doing his quarterlies with me from his "lake house" in up state New York. Been on my own for 6 years and better off.
Great information Erin. When I was young all we could add was 2K to the IRA account, I would wait till my refund came back from the Gov. and add the 2K. when I got to 30 I always added the money monthly. But always thought I should fund it the first of the year. Now I know.
I was in that 1/3 that leaves the employer match on the table... And it was because of vesting. I had to wait 3 years, and it would only vest my first year's contribution. I knew I was only staying at that job for 2 years... So I contributed nothing to my 401k. 2 years later I used my work experience to take a job with double my salary and a much higher 401k contribution. Leaving that money on the table is sometimes the best option.
Funding early in the year can have a drawback if (1) the person is putting it into a Roth IRA and (2) that person isn't yet sure whether or not their income for the year will be under the AGI limits for direct Roth contributions. But one way to get around that issue is to fund the same amount of money into a taxable investment account at the start of the year, and then use that to fund the IRA later in the year when it becomes more certain that the person will be under the AGI limits.
I have always enjoyed your offerings, but this one, you knocked it out of the park, 10 times in a row! I will share this again and again. To me it's like "Simple Path to Wealth" on steroids!!
Nice video. I think it's important to add that you should not simply chase the highest returns, but the best risk adjusted return. This means investing in some international stocks and bonds as well as a large number of US equities. Tax advantaged accounts are also a good way to increase your returns, since it lowers your tax liability.
Erin love your channel. Re: the example of investing earlier in the year in the Roth IRA, the money has to come from somewhere so the gain for example would be the difference between let's assume, the increase in the Roth IRA vs the after tax gain in a non-registered account. I get your point and personally always invested in the tax free accounts as early as possible in the year.
My effortless change to contribute would be to look at your house as an investment. I never tied myself to the philosophy of "forever" home. If you consider your house an investment, then you'll work upgrades, fix things faster, accrue less stuff, and plan for the next home much easier. 7-10 year time horizon until moving to the next house and renting the previous. That has done wonders for us so far.
6:10 The U.S. Treasury Department advertises APY of about 5.38%. As you buy these at a reduced rate and then have the PAR Value returned after maturity, it would seem that the only way you truly realize that APY is IF you are reinvesting the difference. So if I like working directly with the Treasury Dept website, what would be the best way to drop the difference into a (Fidelity?) account to purchase fractional shares from the increase?
I switched from a Traditional 403(b) to a Roth 403(b). It was pretty easy to do. I just changed my contribution from pre-tax to Roth and left everything else the same. I figure that paying a little more in taxes now will be worth it decades from now when I can withdraw the money tax-free. Switching to Roth is the equivalent of saving more money for retirement because you have to take into account the taxes you would have to pay on withdrawals from the Traditional retirement account versus the tax-free withdrawals from the Roth.
Can I ask you a question, if you don’t mind? My wife has a 403B, with a company match, but the investment choices are very limited, and don’t produce the returns that I think they should. Did your 403B have a company match? And if i did, I assume you lost the company match with the switch to Roth, or were you able to keep it?
@@blongshanks77 My workplace has its 403(b) through Fidelity and I am lucky enough to have a decent selection of low-cost index funds to choose from. I am still getting the full employer match I was getting before I switched to Roth. It is labeled as a Roth employers contribution on my pay stub now. I think I am paying taxes on the Roth employer match money but I am not exactly sure how taxes work in this situation. I an sorry your wife's 403(b) has a disappointing selection of choices. Maybe she could suggest that her employer add some low-cost index funds to the list of choices available. It might be worth a try.
Usually the match will stay in the 403b and your contribution goes into the Roth 403b, basically funding both accounts. Still, very well worth it. You can always roll it over to the Roth after the fact.
Thanks Erin! I really liked the video because I believe in the power of small, daily habits for things like health, but I realized that small habit changes in finances can also drastically change the overall outcome of lots of things, including investing over time!
Hi Erin, you mention advisory fee of 1% - 1.5% on average does that include the management fee as well or is that just investment management? I am new to this and is trying to get an advisor. His fee is $1000 and 1.5%, I thought it is a bit steep and wonder is that normal or should there be just I overall fee?
Hi Erin Looking for advice for someone about to turn 18. Going to college in fall, radiology program. Tuition will cost roughly 6k-7k after scholarships. She has no credit cards or debt and has saved 7k in cash. What would you do if this was you?
I like to put money in first part of the year like you mentioned. You just don't want to do that with 401k where you contribute up to max before the end of the year so you miss out on that free employer match.
Another good video. I would say that at what point during the year you max out your Roth IRA really doesn’t make that much difference, as some of the gains you mentioned can boil down to sheer luck.
Those funding your account earlier in the year are symatecs. I started school at four years old, so I was younger than most in my class when I started my career. So, I began my career and investing nearly a year earlier than my classmates. So, every year I'm investing a year ahead. Another consideration, if you put the full year contribution in at the beginning of the year, where did that funding come from? Likely money that you already had invested somewhere else. Also, in order to get my company match, I had to make equal contributions throughout the year.
Thank you! I'm having a hard time finding a one time fee advisor. Just spoke to another one today that wants to charge between 2,500-4,500 a year. Ugh ..thats 208 monthly 😕
I’ve had some really good conversations from individuals who have been able to find one time fee only financial advisors. Unfortunately, I don’t have anyone personally that I can recommend. But I would just suggest continue to ask around. Ask other business people in your community, friends, or other professionals near you. The person you might be a community or away from you, but it might be well worth the drive if you find someone you like.
Erin, I know I’m not your target audience, being old enough to be your dad. But I enjoy your presentations and occasionally pick up an idea to pitch to younger people I come in contact with. Keep up the good work!
Good video and great discussion Erin. Based on my personal experience I can absolutely confirm your comments are spot on. Keep up the great content Erin and have a good week. Larry, Central Valley, Ca.
2:07 You should include the extra amount for the last 15 years in your calculations. Sadly the government makes this option available on the end of our investment years when it will mean so much less. IRS - [And for 2024, the Roth IRA contribution limit is $7,000 for those under 50, and $8,000 for those 50 and older.]
Also, you can fund an IRA up to tax day the following year, making the ability to delay even longer, causing even lower earning than shown for those that choose to delay to April the following year.
unless purchasing funds in december is ALWAYS cheaper than in january ( or vice versa), except for the starting year, it makes little difference between contributing in january or in december. example- two individuals, exactly the same age, contributes the max amount every year for exactly the same number of years. both also invest in the exact same fund(s). everything is the same for these two except that one contributes in december and the other contributes in january. and both contribute the same amount every year for 20 years, always in december and january, respectively. using the current year as the starting point, investor 1 makes the first contribution in december 2024 and investor 2 makes the first contribution in january 2025. following this pattern, i would hardly expect that one month earlier or one month later (depending on your perspective) makes a significant difference. and again, this is assuming that ALL conditions are equal except for december vs january.
Her point is if you are both contributing in 2024, one has an additional 11 moths to grow. 11 months vs one month will defiantly make a difference over time.
If you get into the habit of maxing out a Roth IRA at the start of the year, which I also recommend, just remember to keep an eye on the income limit to contribute to a Roth IRA. If you are getting married, get a big bonus or raise then you could end up going over the income limit which is a hassle to rollback.
Number two "Fund Earlier" kind of surprised me. My gut reaction was, "But you're taking on more risk by not dollar cost averaging!" And while monte carlo sims do have the lump sum at the beginning of each year method resulting in a larger variance than dollar cost averaging, because you're repeating this over 45 years (as to only making a single lump sum then never contributing again) the risk is not significantly greater.
The fact that you end up with more money again comes down to the fact that time in the market beats timing the market.
Sure but most of us would have had to save up that 7k ahead of time in a HYSA. I would have just DCA'd that 7k I a brokerage the previous calendar year...
In a way it’s still dollar cost averaging, but with an annual as opposed to monthly interval.
Market is up more years than it’s down, so most years it’s a great boost.
It's still DCA just distributing differently. The main concern I have with recommending to not DCA is that people will see the market swings so much more. That can drag in some emotions making them worry that they have to withdraw.
Dividend reinvestment has been a key for me. I am into big tech companies, and reinvest their low percentage dividends. Decades of these low percentage reinvestments have made huge difference in the number of shares owned.
Great video. Been retired for 5 years and not touched my IRA, in fact tried to invest $7500 last year and got red flagged for not having any 'earned income'. Most of my income is rental incomes, pension and SS (now). It seems to be a trade-off, pay low taxes and not invest, or high taxes and not afford to invest.... I took what's behind door #1.
I had a Fidelity 'adviser', I got tired of him doing his quarterlies with me from his "lake house" in up state New York. Been on my own for 6 years and better off.
Can't you set up an LLC for your properties and make yourself the property manager, salaried at $7k/year?
Thanks for the link to your tax loss harvesting video!
Great information Erin. When I was young all we could add was 2K to the IRA account, I would wait till my refund came back from the Gov. and add the 2K. when I got to 30 I always added the money monthly. But always thought I should fund it the first of the year. Now I know.
Very well balanced flowing video. Thank you!
I was in that 1/3 that leaves the employer match on the table... And it was because of vesting. I had to wait 3 years, and it would only vest my first year's contribution. I knew I was only staying at that job for 2 years... So I contributed nothing to my 401k. 2 years later I used my work experience to take a job with double my salary and a much higher 401k contribution. Leaving that money on the table is sometimes the best option.
Funding early in the year can have a drawback if (1) the person is putting it into a Roth IRA and (2) that person isn't yet sure whether or not their income for the year will be under the AGI limits for direct Roth contributions.
But one way to get around that issue is to fund the same amount of money into a taxable investment account at the start of the year, and then use that to fund the IRA later in the year when it becomes more certain that the person will be under the AGI limits.
Excellent editing! You're stepping it up!
I have always enjoyed your offerings, but this one, you knocked it out of the park, 10 times in a row! I will share this again and again. To me it's like "Simple Path to Wealth" on steroids!!
ERIN you are so cool and collect in your approch to financial planning. I have become a total fan
Thanks so much!! 😊
Nice video. I think it's important to add that you should not simply chase the highest returns, but the best risk adjusted return. This means investing in some international stocks and bonds as well as a large number of US equities. Tax advantaged accounts are also a good way to increase your returns, since it lowers your tax liability.
New effects! Love the camera flashes, Erin!
How is Peanut? We never see him in the background anymore. Great video !
Erin love your channel. Re: the example of investing earlier in the year in the Roth IRA, the money has to come from somewhere so the gain for example would be the difference between let's assume, the increase in the Roth IRA vs the after tax gain in a non-registered account. I get your point and personally always invested in the tax free accounts as early as possible in the year.
Great video. Love your channel. I always try to invest as early as possible.🏦
Love these simple ways to boost investment returns with minimum effort.
9:05 Safe Harbor is another method out there that will apply to some people. Keep up the great work!
Love the new visuals. Took a bunch of screenshots, great infographics, well done!
My effortless change to contribute would be to look at your house as an investment. I never tied myself to the philosophy of "forever" home. If you consider your house an investment, then you'll work upgrades, fix things faster, accrue less stuff, and plan for the next home much easier. 7-10 year time horizon until moving to the next house and renting the previous. That has done wonders for us so far.
6:10 The U.S. Treasury Department advertises APY of about 5.38%. As you buy these at a reduced rate and then have the PAR Value returned after maturity, it would seem that the only way you truly realize that APY is IF you are reinvesting the difference. So if I like working directly with the Treasury Dept website, what would be the best way to drop the difference into a (Fidelity?) account to purchase fractional shares from the increase?
I switched from a Traditional 403(b) to a Roth 403(b). It was pretty easy to do. I just changed my contribution from pre-tax to Roth and left everything else the same. I figure that paying a little more in taxes now will be worth it decades from now when I can withdraw the money tax-free. Switching to Roth is the equivalent of saving more money for retirement because you have to take into account the taxes you would have to pay on withdrawals from the Traditional retirement account versus the tax-free withdrawals from the Roth.
Can I ask you a question, if you don’t mind? My wife has a 403B, with a company match, but the investment choices are very limited, and don’t produce the returns that I think they should. Did your 403B have a company match? And if i did, I assume you lost the company match with the switch to Roth, or were you able to keep it?
@@blongshanks77 My workplace has its 403(b) through Fidelity and I am lucky enough to have a decent selection of low-cost index funds to choose from. I am still getting the full employer match I was getting before I switched to Roth. It is labeled as a Roth employers contribution on my pay stub now. I think I am paying taxes on the Roth employer match money but I am not exactly sure how taxes work in this situation. I an sorry your wife's 403(b) has a disappointing selection of choices. Maybe she could suggest that her employer add some low-cost index funds to the list of choices available. It might be worth a try.
Usually the match will stay in the 403b and your contribution goes into the Roth 403b, basically funding both accounts. Still, very well worth it. You can always roll it over to the Roth after the fact.
@@breehartley1627 That’s good to hear. Thank you.
Thanks Erin! I really liked the video because I believe in the power of small, daily habits for things like health, but I realized that small habit changes in finances can also drastically change the overall outcome of lots of things, including investing over time!
Thanks 😊 Julia! The little things up!
So, auto escalation doesn’t mean buying or leasing a more expensive auto when you get a salary increase?
Haha…maybe it has two meanings 😂 🤔
Hi Erin, you mention advisory fee of 1% - 1.5% on average does that include the management fee as well or is that just investment management? I am new to this and is trying to get an advisor. His fee is $1000 and 1.5%, I thought it is a bit steep and wonder is that normal or should there be just I overall fee?
Hi Erin
Looking for advice for someone about to turn 18.
Going to college in fall, radiology program. Tuition will cost roughly 6k-7k after scholarships. She has no credit cards or debt and has saved 7k in cash. What would you do if this was you?
I like to put money in first part of the year like you mentioned. You just don't want to do that with 401k where you contribute up to max before the end of the year so you miss out on that free employer match.
depends on the employer 401K plan - some plans have a trueup if you max out the 401K earlier in the year.
Just to explain a trueup is where your employer adds their match lump sum to match what they would have if you did it evenly per paycheck
@@MyExcellentOpinion Wish my employer had that!
Another good video. I would say that at what point during the year you max out your Roth IRA really doesn’t make that much difference, as some of the gains you mentioned can boil down to sheer luck.
Fees: spot on. Once one learns about the effect of fees...he/she will go for the lowest cost possible. "Money Doesn't Grow on Fees".
Those funding your account earlier in the year are symatecs. I started school at four years old, so I was younger than most in my class when I started my career. So, I began my career and investing nearly a year earlier than my classmates. So, every year I'm investing a year ahead.
Another consideration, if you put the full year contribution in at the beginning of the year, where did that funding come from? Likely money that you already had invested somewhere else.
Also, in order to get my company match, I had to make equal contributions throughout the year.
Thank you! I'm having a hard time finding a one time fee advisor. Just spoke to another one today that wants to charge between 2,500-4,500 a year. Ugh ..thats 208 monthly 😕
I’ve had some really good conversations from individuals who have been able to find one time fee only financial advisors. Unfortunately, I don’t have anyone personally that I can recommend. But I would just suggest continue to ask around. Ask other business people in your community, friends, or other professionals near you. The person you might be a community or away from you, but it might be well worth the drive if you find someone you like.
Same here. I can’t find a fee-only “advisor” to just give advice. They all seem to want to directly manage your money.
Erin, I know I’m not your target audience, being old enough to be your dad. But I enjoy your presentations and occasionally pick up an idea to pitch to younger people I come in contact with. Keep up the good work!
Thanks for sharing!! 😊
wow interesting
Good video and great discussion Erin. Based on my personal experience I can absolutely confirm your comments are spot on. Keep up the great content Erin and have a good week. Larry, Central Valley, Ca.
Thanks Larry! I hope you have a great weekend 😊
2:07 You should include the extra amount for the last 15 years in your calculations. Sadly the government makes this option available on the end of our investment years when it will mean so much less.
IRS - [And for 2024, the Roth IRA contribution limit is $7,000 for those under 50, and $8,000 for those 50 and older.]
I’ll have to watch this when I get back. Did I tell you I’m on another cruise?
Retirement in Florida offers so many low cost options 😎
Have fun!!! 🚢
Also, you can fund an IRA up to tax day the following year, making the ability to delay even longer, causing even lower earning than shown for those that choose to delay to April the following year.
OMG! Erin!
OMG 😊
unless purchasing funds in december is ALWAYS cheaper than in january ( or vice versa), except for the starting year, it makes little difference between contributing in january or in december. example- two individuals, exactly the same age, contributes the max amount every year for exactly the same number of years. both also invest in the exact same fund(s). everything is the same for these two except that one contributes in december and the other contributes in january. and both contribute the same amount every year for 20 years, always in december and january, respectively. using the current year as the starting point, investor 1 makes the first contribution in december 2024 and investor 2 makes the first contribution in january 2025. following this pattern, i would hardly expect that one month earlier or one month later (depending on your perspective) makes a significant difference. and again, this is assuming that ALL conditions are equal except for december vs january.
Her point is if you are both contributing in 2024, one has an additional 11 moths to grow. 11 months vs one month will defiantly make a difference over time.
Not sure if it was intentional, but the background kept reminding me of Krispy Kreme boxes and now I want some donuts.
Hahaha! I had to go back and look. Now I want one.
This whole video is an elaborate scheme to get Erin's KrispyKreme stock to go up. She tricks us by claiming to be all about index funds!
That’s part of the ‘invest in yourself’ element!
Erin, you inspired me to make a lump sum contribution to my Roth IRA for the remaining balance of the annual limit. Thanks for the push!
I don't think my employer retirement plan allows me to choose when to invest the money... I'll have to look into it...
Cost reduction is key! People lose a lot of money paying higher fees that in the end compound to a serious amount of money.
At certain stage, protect what is there is more important than high returns. As they said, once you won the game, why keep playing.
If you get into the habit of maxing out a Roth IRA at the start of the year, which I also recommend, just remember to keep an eye on the income limit to contribute to a Roth IRA. If you are getting married, get a big bonus or raise then you could end up going over the income limit which is a hassle to rollback.
I like that you’re iterating and trying new things, but I don’t think you need to start including sound effects in your videos.
i wish my employer would match at least 7%
Put yur like and subscribe in the middle not the end
Wtf vanguard never sent me anything about maxing out my Roth IRA
Oh no! 😂 Maybe it was in the junk folder?
@ErinTalksMoney haha maybe. Google warned me I had too many emails/used too much space so I just purged like 20k emails. Will never know now!
Imagine losing out on a 401k match because you went crazy at the beginning of the year. Then stocks tanked the rest of the year.
I hate when u give example of 45 yrs no fun for 25 yrs no 20 yr old is investing