Newbies think that the best way to play the stock market is to buy stocks then sell them a day or few months later, than repeat the process. This method of investing usually loses money. The people who buy and hold for long periods are the people who make the most money.
Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. If you are like most people you will invest part of your money aggressively in stocks, and part conservatively in money market funds and bond funds. However, some young people will go all stocks, and some very conservative people will go all money markets.
You want to buy a diversified portfolio of stocks as individual stocks are too risky. Highly knowledgeable people can buy a properly balanced portfolio, but most folks have a difficult time balancing things on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Back in 2000, Some people bought all Internet stocks; they got burnt when they all crashed together. You have to diversify across industries. Unless you know what you are doing, it is best to buy mutual funds that will diversify for you. Buy no-load, low cost funds. Mutual funds should have expense ratios of less than 0.5%. Always grateful to Jennifer Elizabeth Boland for leading me through the right path❤️
Many investors are too lazy to do any research, or read financial statements. But this is what the pros do. Investing in stocks does not have to be gambling if you put some work in, are patient, and have realistic expectations.
Yes of course it is! But i will say don't do it yourself if you are inexperienced. Go get yourself someone good you can trust or better still check out *Sandra* *Yvonne* *Webster* she's good too.
Here are some go to’s to keep in mind: 1) Compare the MF’s of your 401 (k). There are some funds that overlap and thus as you grow your portfolio, make sure you know the MF options you are picking that are the best given your companies options. 2) If your company lets you go, now’s a perfect time to roll over that 401k in a tax free vehicle like a Roth 3) Invest up to the match. When you take money out and hit RMD (Require Minimum Dist.): age 70 1/2, the government dictates if the money you take out is sufficient (meaning if they are getting their tax money out). If not, then they force that money to come out and oh you have to pay taxes on each penny. If not then be happy with a 50% penalty. So invest in it, don’t overfund it like a cow. 4) use excess money to diversify your portfolio in different tax treatment accounts like the Roth IRA, 7702 IUL/VUL or other investment vehicles like the HSA. 5) Remember, you don’t know the tax rate of the future so diversify your assets such that you can take out money that bests the tax environment at that time. Utilize Rule of 72, 3.5-4% distribution to never let your nest egg go down, make sure you diversify, buy life insurance with LTC riders to cover medical bills outside of Medicare Part A,B, & D (combined LTC and medical expenses add up to 500k in total expenses in retirement), and buy annuities to provide Guaranteed lifetime income, diversify your portfolio with active and passive funds, and make sure you understand the tax treatments of your vehicles. Sit down with a professional to make sense of it all (make sure they are a broker and licensed in both insurance and investment industries to best help your situation). Hope this helps!
The creator of the 401k himself on NPR said that the 401k was never designed nor intended to be people's primary retirement vehicle. It was intended to be used along side other investments
Consider what your return or monthly income will be from your 401k vs your pension and SS. My 401k income will be greater than the two combined. I don't think he foresaw the growth of 30-40 years in a 401k, or that employers would do away with pensions. The question of whether to join your plan is no longer a question.
The problem with 401k’s is that people are responsible for managing it and to many people don’t know how. They just dump their money in it and hope ir makes money. During the recession I hardly lost any money because I moved my investments to bonds; everyone I work with lost nearly everything. I know people who lost $200k, a few lost 300k but they wouldn’t listen to me because I’m not a professional. Another thing you can do is buy cheap while the market was down, eventually when the market recovers, you will own the bank when your cheap stock multiply 30x’s
THROUGH THE STORM you can do this through fidelity 401k? I have previously pulled money from my 401k to reinvest in other assets, and it felt great to have diversification. As my 401k continues to build and take up a larger percentage of my net, I am faced with a question. Pull the money or let it diminish in value if/when we have a downturn. This right here sounds like the solution I’ve been looking for.
I max out a IRA and also contribute to my 457 plan (like a 401k) in edition I’m also lucky enough to have a pension, but I use those retirement accounts only as a baseline, my number one investment is me and my ability to KEEP HUSTLING 💪🏿💪🏿💪🏿
The whole point of retirement is to plan for when you CAN'T keep hustling. Just saying. You do seem to have that covered though, just don't minimalize the importance of your planning, it's counter productive.
Many great points in this video, but one that is critical is understanding that 401k contributions are invested in Wall Street, but are taxed as ordinary income and not investment income.
speak to a tax professional and a financial professional! As a Certified Financial Planer, I appreciate the education but there are some things to clarify: 1. The reason advisors get charged a fee for managing the assets under the plan is because we are the people who are responsible for educating and guiding the investor in how much they should be savings and what investment option to pick based on risk tolerance - now disclaimer, not all advisors are the same (like saying all mechanics are shady), there are no hidden fees, they are all in the plan documents and it is also the advisors job to pick cost efficient funds. 2. The best thing about the 401(k) is the tax deduction and tax-deferred growth. Company matches are optionals, while free money is great (you get 50% or 100% return on your money instantly) the tax shelter is what makes it great as a retirement account. 3. Market Corrections (2008) are cyclical, they are bound to happen, Real Estate was the cause of 2008 crash and market based, while I do agree diversification is good, planning is better, having non-correlated assets. Having assets that are on and off the rollercoaster for these moments. 4.Taxes - we are in the lowest tax bracket we have ever been, so taxes may go up or they may go down in the future. You also want diversification on how your money is taxed. Investing in a non-qualified account is great, but your money gets taxed 3 times... it's post-tax money, taxed while it's growing (you will get a 1099 for income earned every year) and you pay taxes on the back end. Yes you pay at a lower tax bracket but your growth is significantly impacted by the taxes owed while the money is growing. My take on this is your 401(k) is not good and it's not bad. There are NO GOOD OR BAD financial products, they each serve a PURPOSE and are tools, what ends up happening people don't know how to use them properly or what their purpose is. Every product has it's own pro/con - there is no magical unicorn (sorry!) that will do everything you want it to do but a combination of products will, that's why you want to diversify your accounts among risk, liquidity, and taxes and have accounts that complement with one another NOT compete. To be a good carpenter you need to have a hammer and screwdriver and a flathead because not every job calls for a hammer, it depends what you're trying to do ;)
Can you clarify how much fees are for all the companies? Average is 1 % management fees minimum mostly. The hidden fees are true, not BS. Some charges for buying the funds are unbelievable & ridiculous. You know why these charges exist! Ofcourse you do !
401K is a modern day retirement plan where corporations are basically saying, "you are on your own, start saving up" since for the majority pensions are a thing of the past. These days we HAVE to be more CREATIVE in our retirement plan to get ahead and save up. Consider looking for ways to build PASSIVE INCOME, that way when you sleep you are still making money. If you can build up enough passive income, you can even retire early =)
Best mix is having a 401 K, well paying job as well as in my case took a city job with pension plan along with a 457 ( b) plan. House is already paid off Screw the gold “ asset” no credit card debts and all cars paid off. Live like a king even as a middle class person with good health and great family
Spot on advice, I try to explain this to my clients everyday. Most of them are so myopic, following bad online advice that it just doesn’t sink in. Great video!
Love how enthusiastic you are! Great take home message - blindly investing in a 401k is not necessarily right for everyone and that people need to understand their money and do financial and tax planning!
This video is misleading. It assumes that the you can't avoid fees, it assumes that the stock market is separate from the 401K which it's not, it assumes that ppl retire in a crash when actually you're supposed to move your 401K bonds 5 years ahead of retirement into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. It also assumes that pensions don't have fees, when in fact they have up to 18 charges. It claims that market trends don't go up forever. Of course they don't, they fluctuate, but historically they give you a net return of 8% to 12%. Even with a crash, you still come out with gains. This video claims the tax-deferred option means taxes will go up when historically most people reduce their income during retirement and your taxes will be while you're in a lower-income bracket. And the biggest error about this video is the claim that your income increases bc you pulled out your entire 401K at retirement. Nobody would do that. Nobody *should* do that! Experts recommend you pull out 4% of your retirement fund for your annual income. I suggest keeping it in a savings account with at least a high interest return and pull out whatever you need for your monthly expenses. The remaining 96% of your retirement savings should sit in the market to continue growing. My biggest pet peeve about this video was that he says he put everything into the stock market, which is where your 401K grows! And if you try to go with a brokerage firm, they charge way higher fees and they always lose. Study after study has shown that 97% of the time, those who bet against the market do not succeed. Not even the best brokers or computer algorithms can predict the market. As soon as he started selling a book at the end, that was all I needed to know to understand why he was being so misleading. Listen, go into 401Ks but BE SMART about it. Use the cheap *blooom* robo-advisor or the free Personal Capital fee analyzer to find hidden fees and adjust the necessary allocations to find the cheapest options (like index funds). Make sure to read your company's fee disclosures and your funds prospectus. Then look for lower cost options that charge fees below 1%. These fees will be equal or lower than pensions or Roth. Do your research on Vanguard, Fidelity, S&P, etc. But whatever you do, DON'T cut out the 401K. It shouldn't be your sole retirement fund, but 1 of many plans in your retirement portfolio. Nobody is immune to a stock crash, not even this guy in the video. That's why your portfolio should be diversified, and have a variety of domestic stocks, international stocks, treasury bonds, interest savings, assets like real estate or even REIT funds, etc. And even if there IS a crash, relax. Do not panic, do not sell. Again, markets fluctuate and it will bounce back up with greater gains. Look at the past 100 years, and you'll see it raises back EVERY SINGLE TIME. Warren Buffet himself will tell you. Invest and HOLD. Remember: *it's not about timing the market, it's about time in the market* Loss of money in the short term doesn't mean you won't reap benefits in the long-term. The only thing you need to be concerned about is inflation. That's why another tip I have is to retire in a no-income tax state, or live as an expat abroad so that your retirement savings doesn't get eaten by taxes or inflation rates. Anyhow, please don't listen to this video, this guy is very irresponsible. Do your research. Watch LeanFIRE style channels like *Next Level Life* or *Graham Stephen*
Some advice is good. But some other advice is not. He recommends Webull but he never told us it’s a Chinese company. We have to share our personal info like birthday and ssn with a Chinese company. Big mistake. He probably got paid by them for promoting them.
@@Peppermon22 A lot more ocmpanies are offereing Roth 401ks, now. The latest figure I saw was about 70% of companies that offer a 401k have a Roth component.
I invest in a Roth Brokerage account along with my 401k, buying stocks which will grow tax free at retirement time also, building a fix account just in case the market dips, be blessed yall.
Contirbuting to your employer retirement (if you have one available) and getting the match money (if your employer offers) is not bad. IRAs (Roth or traditional), taxable investments and even real estate, all can assist in providing for you in the future. Blanket generalization (if followed) harm a lot of people. I started my first employer retirement plan, ira, taxable investments and real estate investments when i was in my 20s working hourly jobs. Now in my 50s, glad i did. Dont take this guys, mine or anyones else "opinion" for what "you" should do, Take the time to learn enough to invest for yourself or seek assistance to invest. Concepts like spend less then you earn and invest the surplus (in something) goes a long way. Just my thoughts from decades of life experience.
You think so now. ? Wait until you have to get the money OUT. Your in for a big surprise. I’ll let you find out on your own. Lol. I’m 53, been investing since age 18. Good luck
Most people should use the Roth IRA instead of or in addition to any 401K. You can't count on Social (In)security to keep you from starving when you are elderly. Saving something is far better than most retirees that have less than 60 K in savings.
401k is fine if you have match or allows you to put into low cost index funds. The tax savings of 10% basically means 10% + 7% annual return, which is amazing.
Wow, I don’t even know where to start. Tax deferred growth (meaning you don’t have to pay taxes if you decide to change investments (sell one fund/stock/bond and buy another)); compounding growth (meaning you constantly build on what you previously had), with money you technically owe to the IRS (the money you would’ve paid taxes on, had you not ‘invested’ it, growing in your account, where you get to make the decisions as to how it’s used). As for the fees, you as the employee, get no input as to where or who your 401k custodian is, or who the investment managers are, none of that. That’s up to the employer, because they’re bearing the burden/cost in setting all this up (it’s a lot of work and expenses). Then employees, most of the time, only get a tiny selection of investments to choose from (which they barely understand anyways, I blame public education, it’s hard to teach capitalism when you don’t believe in capitalism). Making the appropriate investment selections is key (diversification: small cap companies, large cap companies, international companies, well established companies and new ventures, commodities, bonds, etc... with proper percentages invested in all these different categories). Knowing which fund does what is important. Knowing that there’s an active manager overseeing and adjusting along the way isn’t, or at least shouldn’t be, a ‘free’ service. Granted, there are funds that are ‘all encompassing’ or funds that track an index extremely cheaply. But you shouldn’t label the 401k as some trick Wall Street pulled over on the public. It gave us all easier access to the world, lower overall costs, greater ability to save for retirement, whether in a retirement account or not, the ability to have an equity stake in something, the chance for a better rate of return (not sure if you heard but fixed rates are pretty low), and tons of other things. I get it, if I complain about I can create this victimization that sells so good right now.
It's great if you got a great match and you're with a company that you will stay will until you retire... but it still shouldn't be your ONLY long term investment tool.
Moses Emmet Your 401k belongs to you and you can take it with you whenever you move to a new employer, or roll it into an IRA if you start your own business. Still agree that it shouldn’t be the only investment.
jamie t Dotn have to be 59.5 to open a self directed plan, that’s when you can pull funds from it free of penalty like an IRA. Self directed can’t contain interests in anything you own basically. The idea is that when you have a 401k or ira or hsa through a company, you’re not stuck with that company is all I’m saying. You can take your retirement funds with you from job to job and not feel stuck. Any money you put in is yours forever. Company matches may be subject to a companies vesting policy but usually those terms are 3-6 years before fully vested, not 20+
@@LTJGHoot I am referring to an employee account. If you work for an employer, the only way to switch to a self directed account is to leave. You can take a loan, or a hardship distribution, but you can't take funds out and go self directed until 59.5. You can roll it over when ever your employment cease prior to that. If you are self employed, that is a slightly different 401k, plan and subject to different laws.
I have built up several 401k's while having worked for just as many employers. No need to stay at one place. So I now have a current 401k and an IRA that contains previous 401k's rolled in.
Many 401K plans have an unmanaged option, and I have always taken that. It's still tax deferred and all that, but by investing in index funds it allows me to diversify internationally and in many cases (like Vanguard) the fees on those funds are below 1%. Although, I also roll that money over to an IRA every few years whenever I switch jobs, and I maintain Roth and regular investment accounts as well. I have found that a 401K with employer match is much better use of my investment dollars than the Washington State Pension that I get through my current employer. For example, right now, I have a 457 Deferred Compensation account, a Roth 457 account, and a Pension through my employer (King County.) I make a 7% contribution to the 457 and Pension accounts, for a total of 14% retirement contributions. The County determines how much my pension contribution is, which means they could raise or lower it at any time (let's assume they don't change it); if I choose to stay at the county for at least 3 more years, then I will qualify for collecting the pension some time between 2043 and 2053. If I stay 5 years then leave, I would be able to collect $840 from the pension for the rest of my life, but when I die I won't have anything to pass to my wife and children; in contrast, with the 457 account, I will be able to safely withdraw (I.E. < 4% per year) about $830 per month, but then leave my family nearly $250,000 when I die. That inheritance for my children is the difference between a defined benefit like a pension and a private retirement account. I have obviously made several assumption including: I will retire in 2048; that I would contribute equally to both the personal retirement account and the pension for a period of 5 years; and the investments in the personal retirement account will grow at a rate of 5% each year - meaning the market will perform much worse in the future than the past 30 years.
I manage a multiple Employer plan (MEP) 401k. I see what people of average salaries can save over time. Here are the benefits of a 401K that are unmatched simply by investing in a personal brokerage account. 1) company match and 2) deferred taxation. The Roth IRA is truly a marvel and is by far the superior option - Here is why: Do a mortgage calculation on a home worth 350K at 5% interest. What you will see is that the interest you pay over 30 years is almost equal to the actual cost of the home. Well, for long term investing this principal works for you, not against you. If you ultimately contribute 350K to your 401K over the years, the compounding interest (stock gains, or bond interest payments) means that your 350K has grown into 700K, 1 million or more (depending on the rates of return earned). In a Roth 401K you already paid taxes on the 350K you contributed, but you do NOT pay taxes on the growth of that 350K, 700K or 1 million that was earned (Company match portion is taxed upon withdrawal for both traditional and Roth IRA). Your personal brokerage account does not offer this. If your company matches, has a low fee structure (ETF stock or bond funds have almost no fees) and solid investment choices, start contributing today. If your company does not offer a 401K plan. Go set up your own personal ROTH IRA and start today. Consistent contributions + time is the formula for almost 100% success.
If your employer has any kind of match, it is in your best interest to have a 401k to get that free money. Only contribute as much so you are not leaving any free money on the table, if you have excess money beyond that find a home such as regular stock market s&p500 fund, real state, gold, etc. Read about traditional vs roth 401k. When you leave a job, you can move the 401k into an IRA by Vanguard where fees are very less or move it into a self-directed IRA where you are in control. So, 401k is great to get your free money but don't put all your eggs in one basket.
I guess the beginning and what's relevant to most is the standard deduction and brackets for income tax depending on your filing status; Single, Married Filing Jointly, etc. Also learn the difference between, Federal, State and Local tax. There's so much more depending on whwther you have kids, the type of assets you have, whether you own a business, inherit money, etc. It's not worth learning it all unless that's your business, and even then, there is so much (which keeps changing BTW), that you usually find people who specialize in specific areas.
I'd stick with practicing law. You obviously don't know that much about personal finance. For one thing what you call paper assets isn't what financial analysts call an asset class. Sure, real estate and gold are asset classes. But you can hold title to those things as "paper certificates" as well. In fact as an example I hold a REIT index in my 401(k) plan. That index holds shares of companies that invest in and manage real estate. The term "asset class" is just referring to a type of asset that moves in a manner that is relatively uncorrelated with other asset classes. It usually does this because that asset performs differently depending on where we are in the business cycle... Second, your assertion about tax rates illustrates a pernicious innumeracy problem prevalent in the US. In particular if you invest pre-tax dollars in a 401(k) plan and compare that with an investment with capital gains in an after-tax account, you have to start the after-tax account with less money. For instance if you are in the 24% tax bracket and invest $1,000 in a 401(k) plan pre-tax, only $760 would be available to you as an investor in a taxable account. You don't get to ignore that fact just because its inconvenient. And that fact tends to mean that about the best a taxable account can do is match the performance of a 401(k). But in practice it rarely does. That's because most investments spin off some kind of income - that thing you said people like to have. And in a taxable account you have to pay taxes on that income each year, even if you just re-invest it. Suppose your $1,000 investment spins off 10%/year (to make the math simple) and the investment doesn't grow in value otherwise and let's assume it's a qualified dividend costing you 15% in taxes in the taxable account. In that scenario after 10 years in the 401(k) plan you would have $1,000 * (1.1 ^ 10) = $1,000 * 2.59374 = $2,593.74. In a taxable account you would have $760 * (1.085 ^ 10) = 2.26098 = $1,718.35. At the end of the 10 years your 401(k) is worth something more like $1,971.24. That's an improvement of 14.7% over 10 years. Of course my example is neither the best case nor the worse case scenario. More often investment portfolios spin off a combination of interest, dividends and capital gains. Also some of the capital gains will remain deferred, so you wouldn't pay taxes on them in years that they are not realized. This makes the value of this part of the tax advantage less significant; but in general deferring the recognition of gains just makes the resulting tax efficiency of your investment approach that of a tax-advantaged account without ever actually exceeding it. (Unless you count the step-up of cost basis your heirs get when you die. But technically you didn't actually benefit from that - your kids did.) There is one more tax advantage for 401(k) (or IRA) accounts that hold pre-tax money. The US income tax code is progressive. That is to say it's tiered. And for most retirees the bulk of their taxable income actually comes from their retirement accounts and perhaps some interest income. But for a retired couple 65 and older, it takes $27,000 in ordinary income just to fill the standard deduction! That money is tax-free. The next $19,400 pays only 10% and then from $46,400 to $105,950 you pay only 12%! Even the 12% rate is probably half your marginal rate when you were contributing! This is the most significant benefit of having some pre-tax savings! So you can easily keep an additional >12% by making pre-tax retirement contributions... There is one exception that you mention earlier on: fees. The cost of 401(k) specific fees can eat away at any tax advantage. If your plan charges fees in excess of 1% of assets for all fees, you should probably just contribute to get the match if any. (Be sure to stick to simple, low-cost funds to keep the costs low.) Beyond that IRAs and taxable accounts are superior. But not all 401(k) plans are like that. My employer subsidizes our plan and my investment costs are as low or lower than what I could get outside of the plan in an IRA. In my case my 401(k) is a superior investment vehicle. BTW, notice I say "investment vehicle", not investment. A 401(k) is not an investment. The investments are the things the 401(k) holds... People shouldn't confuse the two.
Some companies (like the ones I've worked for) will cover the 401k fees and also offer Roth 401k's, which is post-taxed dollars. So, when you withdraw those funds, I believe only the company match portion will be taxed.
I pulled my money from my 401k and I paid no taxes on it. I was paying high fees in my old 401k I did a rollover and paid much much lower fees. It did cost me a $150 penalty but will save me thousands of dollars.
Roth 401k is The Best.. 6% match dollar for dollar at my job. Plus, profit sharing dividends which total approx 3000. 00 additional money into the 401k yearly. It's the best.
yes i read his book as well. i learn how to open his way of business where cash flow is king, i just disagree with him because he dislike stock market and he talk nonsense about stock market which he barely understand.i swing trade stock market and make quite well profit.
I pay $8/year in 401k fees, in my 401k I can invest in everything I have access to in a brokerage account, my 401k is plenty diversified in mutual funds, my company matches over 100% in my 401k, I have a Roth option for my 401k. I see nothing wrong with my 401k
- Not all 401Ks are high cost. If your employer uses Vanguard or Fidelity, for example, they both have several very low cost index funds. This is where you should be investing. With that said, it is kind of misleading to point out the fees in 401K without mentioning that you will have also fees in most of any other kind of investments, from real estate to just investing in your personal brokerage account. - If your company provides a good match (25%>), you should absolutely try to max at least to the amount that they match. This is an instantaneous and guaranteed return like no other. Free money. - You don't pay the penalty for withdrawal after you reach a certain age or if you are under difficult circumstances (like disability). This is good. The purpose of the 401K is so that you have money for your retirement. The penalty prevents you from spending frivolously. - Yes, having all your money in 401k is not diversified enough. You should probably have different kind of savings and investment accounts. With that said, when you retire you are not taking out all the money from your account at the same time. You have flexibility on how much you want to withdraw each year. That would allow you to withdraw more or less during periods of crisis or bonanza. Compared to real estate, your 401K is probably much more secure. - The taxes part is pretty bad and misleading. Let's say that you have $1000 that you can chose between investing in 401K or invest in your brokerage account, you are at the 30% marginal tax rate (local + federal) and that by the time you retire you are still at the same rate (maybe more, maybe less). If you decide to use it for your 401K, you will pay right away 7.5% on FICA and the rest ($925) go into your account. After 30 years that money has increased 5 times to $4625. You decide to withdraw all that money so you pay income tax (30% * $4625 = 1387.5) which would leave you with $3237.5. If in the other hand you want to put that into your brokerage account you will pay right away 37.5% on taxes (federal + locale + FICA). The reminding $625 also increases 5 times in 30 years leaving you with $3125. On top of that you pay capital taxes on your profit which could be from 0 to 20%. Let's say 10% which would mean that you pay an additional $250 on taxes (10% * $(3125 - 625)) leaving you with $2875. That means that in this scenario your 401k has 12% more. Of course this can be more or less depending if your income taxes are lower or higher than the current or if capital taxes might increase also in the future. Additionally, people say that you will have lower income when you retire because normally you don't need as much money at that time. Presumably, you already have a bought house, no child care, no student loans and no need to save for retirement. Yes, you will probably have more health cost but still overall you should be needing less and as such you might be at a lower tax rate. As I said before also, the video tries to scare you that income taxes might rise in the future while not saying that capital taxes might do the same. Overall, the video is pretty negative and in some ways misleading against 401k. If you are able to afford it, 401Ks can be one of the best ways to ensure for your retirement and it is better to start now than later.
False comparison about the 10k. The 10k in a regular brokerage is done with post-tax money and the 10k in the 401k is done with pre-tax money. That's a huge difference right there. Would love to see you properly analyze that in another video.
Nice content, Fortunately, you can take control of your investment process by directing all of your contributions into a conservative investment option that is offered in your retirement plan. Then, when the time is right, you can make a strategic investment allocation to one or more of the less conservative funds offered in your 401(k) plan.
I want to take my money in my 401k account and reinvest it on something profitable like Options, index funds and stocks. I need guidance on how to go about it as a beginner.
This is why it's very important you acquire financial freedom and intelligence, so you don't have to work all your life. I want to retire by the time I'm 40. I would be very happy if any tips or recommendation here😊
I actually made huge amounts of money in my 401K. I paid the taxes and penalties to buy rental properties. My 401K is now back over 1 million, I will have lots of taxes to pay in retirement. You have to save somewhere if you ever expect to have real big amounts of money, the 401K is at least easy.
I feel like I’m so lucky. I have a 401k with a company match, and a pension. My wife and I plan on opening a small side hustle business in the next year or so. So between my 401k, my pension, her 403b, our money market savings account, both our social security checks, and our eventual small business, we should be good for retirement.
Good luck with that. Your 401k and 403b as well money market accounts on based on compounding interest formulas. Any interruption to the compounding interest formula results in loss. I.E if the market was to go down 2020 and not recover 2022 you will feel a significant loss. Not my opinion just math.
Only use it to get the match put the minimum in. You can direct your 401k and pick the investments that have the highest dividend and lowest management cost.
Ok, for some people who work for non profits, there’s no matching (403B). If you have the income, you should definitely maximize your deferred tax investment plan!! And you should start this plan as early as possible!!!! Maximum for 2019 is $19,000 ($25,000 for individuals over 50). The benefit to just about any investment is time, your interest is compounding!
For those of you that can get a 401k Roth I would highly suggest it. Pay the taxes up front, let the interest grow over 20-30 years so when you pull it out its fully tax free!
Thats assuming the government and Wall Street won't change the rules and regulation on you. They got you by the balls, and there's nothing you can do about it.
I live on much less than I make and max out my 401k. I have a passionate dislike for loans, if I can 't afford to pay in full then I don't want it. Modest but paid for home. Getting ready to retire soon and this life style has paid off incredibly. My path is contrary to this video but it has lead to wealth. Slow and steady wins races, at least it did for me.
@@scorpion8rage lol, I swear I thought that way for a good part of my life. Used to day trade, thought I was the sht. Lost everything, twice, it was horrible. Spent like money was free. You do you and good luck, zero hate from me. I would not have listened to anyone in my youth, I was way too dumb. Had to learn the hard way. Cheers : )
I even went thru a short phase in life where I thought I could have made it as a professional gambler. My god I was so dumb, might still be dumb and not know it. Certainly is not only possible but likely.
@@coniccinoc Ah no man, you misunderstood what I said. 🤣 I meant earn more and save more = faster. I've always gone the fast route (again, read definition above), and it has paid off very well for me. Always keep output far below input, and one will grow wealth very quickly.
@@scorpion8rage The key is to save what you can, when you can, while you can, and invest those savings. A little adds up to a lot over a lifetime, and a lot adds up a whole lot. The average working Joe/Jane can easily hit that million mark if they keep at it steady with even a modest amount of saving and investing, and still live a life that is fun and interesting. Oh yeah, don't forget to live a little, you only get once trip through. Watch you pennies for sure, but take a handful now and again to live life. Peace!
I just max out my 401k and borrow money against it to purchase rental properties without a loan hitting my credit report. I then get a home loan and purchase another house. I then use the rent from the rental properties to supplement my income from the 401k loan for the year... then i do the whole thing again.
You do know that you could have just rolled your 401k into real estate instead of borrowing against it? Avoiding the fees and penalties. Please look into this for future reference .
@@domesticviolencemastery3609 thats the beauty of it! Because its only a 401k loan, there are minimal fees. 75 dollars total. I get the money pretax... then i repay it pretax. Best of all, i make repairs to the house with that money, and claim them as a tax deduction... so now, my income taxes are minimized as well. :-)
My 401K is doing fantastic. It is not the only thing I have going, but it was my first thing 35 years ago. If you would have told me then that my meager weekly contribution of $24 plus a $12, would now be worth well into seven figures, I would not have believed you...but here we are. But hey, just because you don't understand your plan, doesn't mean it is a bad investment, and there is simple way to correct that...learn about it.
@Thot Slayer I started at a major oil company on a packaging line for $6hr back in the mid 80's. I switched jobs a couple of times within the industry, rolling my 401K into my new job's plan, and have been operating chemical reactors with a petrochemical company for the last 20. Good old blue collar union worker.
@will edwards Sure, things happen. That is why I have moved the bulk of my plan to safe and secure, though lower returns, in my self directed account. So yes, I'm very well protected and I am licking my chops. At some point it becomes about protecting your assets versus growing them. What I have and the returns I get, will be more than enough to see me through. Thanks for worrying, but like I said, my 401K is not the only thing I have going. But do your thing. Don't join one, do join one. Spend it all as you earn it, or save every penny if that is your desire. I've had much success doing what I did. You may not. We both could get hit by a bus tomorrow, but if you want to cross the street, that is a risk you must take. Good luck with whatever you do. Peace!
@will edwards - This video is misleading. It assumes that the you can't avoid fees, it assumes that the stock market is separate from the 401K which it's not, it assumes that ppl retire in a crash when actually you're supposed to move your 401K bonds 5 years ahead of retirement into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. It also assumes that pensions don't have fees, when in fact they have up to 18 charges. It claims that market trends don't go up forever. Of course they don't, they fluctuate, but historically they give you a net return of 8% to 12%. Even with a crash, you still come out with gains. And the market HAS moved up *overall* if we look at charts from a century ago to today. This video claims the tax-deferred option means taxes will go up when historically most people reduce their income during retirement and your taxes will be while you're in a lower-income bracket. And the biggest error about this video is the claim that your income increases bc you pulled out your entire 401K at retirement. Nobody would do that. Nobody *should* do that! Experts recommend you pull out 4% of your retirement fund for your annual income. I suggest keeping it in a savings account with at least a high interest return and pull out whatever you need for your monthly expenses. The remaining 96% of your retirement savings should sit in the market to continue growing. My biggest pet peeve about this video was that he says he put everything into the stock market, which is where your 401K grows! And if you try to go with a brokerage firm, they charge way higher fees and they always lose. Study after study has shown that 97% of the time, those who bet against the market do not succeed. Not even the best brokers or computer algorithms can predict the market. As soon as he started selling a book at the end, that was all I needed to know to understand why he was being so misleading. Listen, go into 401Ks but BE SMART about it. Use the cheap *blooom* robo-advisor or the free Personal Capital fee analyzer to find hidden fees and adjust the necessary allocations to find the cheapest options (like index funds). Make sure to read your company's fee disclosures and your funds prospectus. Then look for lower cost options that charge fees below 1%. These fees will be equal or lower than pensions or Roth. Do your research on Vanguard, Fidelity, S&P, etc. But whatever you do, DON'T cut out the 401K. It shouldn't be your sole retirement fund, but 1 of many plans in your retirement portfolio. Nobody is immune to a stock crash, not even this guy in the video. That's why your portfolio should be diversified, and have a variety of domestic stocks, international stocks, treasury bonds, interest savings, assets like real estate or even REIT funds, etc. And even if there IS a crash, relax. Do not panic, do not sell. Again, markets fluctuate and it will bounce back up with greater gains. Look at the past 100 years, and you'll see it raises back EVERY SINGLE TIME. Warren Buffet himself will tell you. Invest and HOLD. Remember: *it's not about timing the market, it's about time in the market* Loss of money in the short term doesn't mean you won't reap benefits in the long-term. The only thing you need to be concerned about is inflation. That's why another tip I have is to retire in a no-income tax state, or live as an expat abroad so that your retirement savings doesn't get eaten by taxes or inflation rates. Anyhow, please don't listen to this video, this guy is very irresponsible. Do your research. Watch LeanFIRE style channels like *Next Level Life* or *Graham Stephen*
@@chuckwalla2967 I started at 5%, and that was a struggle for a young family. I bumped it up every time I got a raise, to hit 10% in order to get the max company match. I have kept it there ever since. My asset allocation was all equity funds and aggressive growth.
crash 08 poeple who lost money was mostly in 401k . Remember your 401k traded in the stock market. Anyone who have job should be invested in the stock market .
But those people recovered their losses overtime. The ones who panicked and sold were the ones who hurt the most. Always invest and HOLD. That's the Warren Buffet way to invest. It's not about timing the market, it's about time in the market. Short-term pitfalls don't mean you can't have overall net gains overtime of 8% to 12% ROI.
Good video. But there are a lot of things you can do as an informed consumer. If you think you will be making more money during retirement time, invest in a ROTH 401k (post tax money). If your ROTH 401K grows from $1000 to $5000, you do NOT pay tax on the $4000 you earned from interest (whereas in a traditional 401k you have to pay tax on the entire $5000 when you withdraw). Also, login to your 401k manager website and look at the statement to figure out your fees. If you move to a different employer, shop around for money managers with the lowest fees. You can always do a free 401k rollover to a company that has lower fees. My company uses fidelity, and when I look at my yearly statement, I can see I was charged about $5 in fees.
@@kadive25nyc Those that sold in a panic, yes they lost. Those of us who held and invested more, mad out fantastically. Gold on 10/08 $857 (the low point of the year) Gold on 5/18 $1270 Dow on 3/09 7600 (low point of the crash 10/08 10,500) Dow on 5/18 26,500 You tell me who was better off? A clue - it is those that held and didn't panic and buy gold.
@@kadive25nyc - The common length of recovery for most market crashes is 1 to 2 years, there have been 2 market crashes where it took 7 years and 1 crash that took 5 years. And usually the loss is balanced out and then exceeded by the market highs, so that you still end up with an overall net gain of 8% to 12% ROI. That's bc markets are always going up over time. Even if you retire with a loss during a market crash, you had past gains prior to that (which help to counteract or protect against unexpected future losses). But let's say all your gains were meant to balance out previous losses, not future losses. That would only be true if you came into the market by getting hit with a big loss from the start, which is unlikely for most investors. And if for whatever reason this is true for you, you can still have your investment recover, and that's bc you don't withdraw from your savings in one lump sum. In fact, regardless of market activity, most advisors suggest being very frugal your 1st year of retirement. You can pull out 2% to 4% of your savings for the year, and deposit it into another growth account as you withdraw monthly. If you want to play it safe, then 5 years before you retire, transfer 5 years worth of savings into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. The rest of your retirement funds, that you hadn't yet withdrawn, will sit there to recover and continue to grow. Stop being afraid of short-term losses. They're expected. Focus on long-term NET gains. If you retire during a crash, and you still have an income to live off of from another savings account, then you can also ask your employer if you can hold off on withdrawal, or see if you can rollover into an IRA or ROTH. This is why it's important to diversify your portfolio, and not depend on 1 retirement plan to withdraw from.
All you need to do is do the math for someone that starts at a company @age 22 and retires @63 to quickly see the troubling numbers. All this when you account for inflation that is.
All 401K, 403b, etc. are not created the same. Even within the funds being offered by a company the fees can vary big time in the fees they charge. Years ago, companies got paid for offering certain funds. They were basically making money off their employees' money. If your company's 401k plan offers index funds, these tend to be the least expensive. It will probably be less than 20-40 basis points. The fees in a 403b plan tend to be the worst. At the end of the day, the 401k is probably the best investment option for most people. It is convenient and you could get rich. Later in life, you will have to explore tax planning strategies. For those who want to put in the effort, the stock market with IRAs, Roths, and a brokerage ac are options. For the more involved investor, s/he could buy properties and rent them out. This is a ton of work.
Raj Beekie can you explain to me what I just got into? I was a Walmart employee for 8 years and was terminated in 2009 the company put in but I didn’t. Never thought anything about it. Fast forward to now i am a school bus driver and was able to roll over the $18000 dollars that was sitting in the 401k to a 403 b plan and was told that they were a non profit agency because I am an employee of the public school system. Did I mess up or was this a good thing to do going forward?
@@davemontano3790 Hi Dave, first off, I am not a licensed financial advisor. However, before rolling the 401k into a 403b I would have had you compare fees in a brokerage IRA account. Now, that you are rolled into the 403k I don't think you can reverse that decision. Talk to the advisors at your brokerage company. If and when you change jobs, I know you can roll over then. I use TD Ameritrade and they have some ridiculously inexpensive funds. You can even trade for free many of their index funds. Vanguard, etc. also have some low fee funds.
Bottomline...if your company offers match for 401k, then put in just enough to get the full company match, usually about 6%. It's a no brainer since you're automatically getting a 50% return. Beyond that amount, consider other investment vehicles, not 401k.
In the beginning you are talking about a defined benefits plan. They still do these in the military! Just like other financial vehicles you need to ensure the expense ratio is low and the equities you have chosen are actually increasing in value.
Daniel Iles the military pension is not being given to new members anymore. Legacy pension is still honored but the us military has moved to a 401k system.
There are plenty of good books out there to learn about investing and 401k's. You did cover some good points, some points were misleading. No such thing as "risk free" investing. There is risk in ALL investments including gold and real estate which you brought up. All investments have FEES, the fees the funds do charge and administrative fees as well. That's why people should try to invest in index funds, lower fees and usually perform better than managed funds. And there are fees if you withdraw your money before the age of 59 1/2, you mentioned the fee but not the age. Once you retire, one usually rolls their money into a IRA with a company ( I like Vanguard), have some of the lowest fees and great selection of funds. From there, one can put part of their money into a immediate annuity for steady income, as well as other options. I think a 401k is a good vehicle to invest in, been in mine for over 20 years and have a nice six figure nest egg. One needs to understand how the stock market works, and learn to manage your money over time, such as learn when to re-balance your portfolio and cut back on stocks as you near retirement. Has worked for me, and I'm considered lower middle class. If you want some titles of books to learn, let me know.
I contribute up to the point of maximum match. I get $1 for $1 on 6%. After that, my money goes to other investments/savings and/or expenses/debt reduction.
Thanks to CZcams, web blogs, and financial forums, everyone has the same financial knowledge as the rich. In the past, that information was mainly in books, magazines, and financial advisers. Now that knowledge is available to you, for free. Act upon it. Continue watching videos and learn. You can build financial wealth for you and your family. It takes a long time but the people who listen and act will have good results. Doing nothing but complaining results in nothing. Think about it - a new set of wealthy people will emerge in the future by focusing on saving and investing.
I do agree that 401 K is not the best investment out there but we know that the majority of people do not invest or don't know how to invest, this being said, instead of earning money and spend it, 401 K is a better option, but if you know have to invest your money, you do not need a 401 K, educate yourself and invest your money. I am a big believer that no one should know how to invest your money better than yourself
What most people here are not considering is that people (like me), don't have another 30 years of work life left. I plan on retiring in 6-8 years. 401k is the "safest" and easiest way for me to invest. C Hey Jaspret, can you talk about the Roth 401k and the Roth IRA? Thanks!🙏🏼
Yes, the money in the 401k is tax deferred but for most people, the 401k is the only avenue they will use to set aside any savings. The beauty of the 401k, is that it is automatically withdrawn from one's paycheck and most people never miss the money taken out. Assuming you are over 62 and want to take money out of your 401k, you normally wouldn't take all of it all at one time. Usually, the amount taken out in any given year would be a small percentage so the entire amount lasts through the rest of your life. So your tax on the amount you take out in that year is the tax rate you fall under. Most employers match your contributions to a certain percent of your annual income so you are saving more than just the money you personally contribute. Also over time, the stock market has historically risen. Yes, there have been times when we go through a recession and it will happen again so the older you get, the better to diversify into safer investments in your 401k (IE money market or bonds). Lastly, if an emergency ever arises, the money in the 401k is there in form of a loan. It can be a Godsend for any unexpected expense.
Fire investors really need to hear this. Side hustle is the key. You need steady income for when you can’t work no more. This is also why you check with HR to change the funds your invested in and use ladder conversions.
Excellent video Jaspreet but this would've been good time to talk about Roth contributions to 401K so you can pay the tax on the money up front and it grows tax free. 👌
Agree with all the comments that this is a good video, but a few counterpoints worth considering (tell me if I’m wrong): - Diversification into RE, while a great choice, perhaps isn’t as useful as J makes it out to be. RE will often go down if “paper assets” go down. And most young people are going to miss out on gains if they put meaningful money into gold over the long term. - The example about 10K is misleading because the 10K that you invested outside of a 401k already was taxed as regular income, then later you will ALSO have to pay cap gains tax. So the fact that 401K withdrawals are taxed as regular income is moot. Great video, love the channel.
If you diversify your income streams in retirement you can kind of shape how much taxes will get pulled out. For example: you can pull out traditional 401/ira funds until you hit the tax bracket that you want to pay from (hopefully you have other necessary expenses to lessen these). Then you can withdrawal from your roth to get to whatever income you need for the year. If you have real-estate that also opens up certain deductions that you can take from rentals etc. It may be worth your time to discuss different options with a lawyer/tax professional/cpa/cfa (although CFAs don't always give the best tax advice) instead of just blindly throwing your money into one type of investment. Also- social security is also taxed when you hit a certain (taxable) income level
Thank you for putting this out there. I got demonized for talking against 401(k)s. That I'm being reckless for picking and choosing my own stocks. My dividend stock portfolio paid out $300 year ending 2020.
I think you should sell your position if you have good capital gainings because with the FED going up in interests rate, it will crush down the stock market not at the current 30% , but maybe 55 to 70%. Cash out, earn small interest in the bank and then buying the dip. They are expecting worst than 1929 Depression.
@@carloschu7127 I'm holding. And I am buying stocks on the dip. I get dividends every month. I would lose now if I was to sell. Selling is not going to happen.
@@markmyjak7739 I understand. In theory, you should probably sell in 2021. Its already down 30% since January 2022. Nontheless , keep an eye on their 10Q and 10K if posible.
Most 401ks allow an in service withdrawal which means you at age 59.5 can perform a tax free rollover to a traditional IRA, which can give you more investment options/strategies
become your own administrator of your own individual 401k, hence no fees and I even got my company when I was working to put the money from work and the matching amount into my individual 401k. I also have physical assets and no debt on my home. all of us kids in our family learned this from mom who had been a trader in the past.
@@zacht9805 This is true, but if you prefer to pay taxes now versus later, is it better to have some of it (employer match) taxed later, or all of it (your contributions +employer match) taxed later? Keep in mind that generally speaking in this day and age, the employee's contribution is larger than the match. I am all for the second option, if there is no avoiding the match being pretax.
I work for a railroad and I have a 457k , 401k, 401k Roth and a defined pension plan. We also get railroad retirement which is better than Social Security. I also trade stocks with TD Ameritrade. My next step is to start buying and flipping houses.
@C B I started mine about 35 years ago with a meager $24 along with a $12 company match per week. If you had told me then that it would be worth well into seven figures today, I would have thought you were crazy....but here we are. See you on the course or at the lake house C B.
@C B You nailed it. They want the world and they want it now. That is why their debt is so incredible, and they can't dig out of it. It's amazing. I remember when you had to establish credit before you could get any real credit. I earned my credit by placing some items in lay away (remember that), and paying them off before I got to take them home. Then I was eligible for a Sears card. I then took a out a small ($200) personal loan from my bank and paid that off in 6 months. Then I got a Texaco gas card. All the while making payments on time and proving that I was employed. The whole process took about year and a half, and then I got an American Express and could get a car loan. Now, they issue cards to anybody and charge 20%+ interest, even if you don't have a job or income. These college kids, already saddled with debt, believe the admin and profs that six figure jobs are waiting for them and their liberal arts degree, dive deeper into debt. Then to top it off, when they get a job, they "don't believe in 401K plans" thinking they will beat the system and get wealthy through debt. Sorry for the mini rant. Peace Brother.
@C B - You're acting like millenials live in the same system that boomers got to thrive on. There's a way larger wealth disparity now than the one boomers grew up in. Boomers had access to free college before it was fazed out in the 70s. Also inflation wasn't as bad as it is now. Taxes were typically hit hardest on the wealthy, not on workers. Wages were reflective of the work put in, whereas workers today have had inflation increase the cost of living while our wages never adjusted for those very inflation increases. Also credit cards became far more accessible in the 80s, forcing many to flood the markets, thereby increasing inflation and causing market failures. Boomer & Gen X'ers SSI is still secure, while ours may be partially insolvent. Millenials are the most educated degree-holders of any generation, yet have the highest unemployment rates. No, we don't expect anything to be "handed" to us. We just want the same access to opportunities that led to the prosperity of previous generations. We know this history bc our parents set those expectations in us, since this is what they themselves got to experience. You could be a miner or mechanic in the 60s and make enough to own a home and 2 vehicles for a 2 parent, 2 child household. Today, even on 2 household incomes and no children, buying a home and car is not feasible. And this is a widespread issue, which indicates this is a problem within the current *system* not the generation. Please check your privilege. I am investing in 401K, Roth, HSA, REIT, treasury bonds, etc. And I plan to go expat during retirement to survive the rising inflation and take advantage of the FEIE on my passive income. Millenials are incredibly educated on money, but the system leeches us for all we've got. Please leave your judgments out of this.
You definitely need a 401k as well as other investments. What Jaspreet fails to mention that is that a 401k (as well as 403 & 457) is protected from lawsuits. Retirement plans are ERISSA protected. This means a creditor cannot take your money. Brokerage accounts on the other hand are NOT ERISSA protected. This means you cause a car accident or face any judgment, your brokerage account can be garnished. Diversification of your investments also includes diversifying your tax obligations & legal protection. A Roth IRA btw is generally protected more or less up to $1 million. This is important to factor in as you get older. So please, put money away in your 401k if you have a job that provides that option. Invest in other vehicles too, i.e. Roth IRA, brokerage accounts, etc.
The thing is...if you don't have an IRA/Roth IRA, if you don't have personal retirement savings or any other account you absolutely must take advantage of a 401k if your company offers one and has a good matching program. Diversification is absolutely key as you mentioned, but you MUST be saving in SOME way. Saying "well my 401k fees are terrible and the match isn't 100% so i'm not going to participate" is extremely irresponsible if you don't have other retirement savings plans. Plus, the top 1% of "income earners" in this country is full of retirement aged people, meaning if you're OK with an extremely high tax rate such as 60-70% on the top income tax bracket, be ready to pay that % when you want to pull your 2.5 million out of your 401k upon retirement because guess what...you're now in the top 1%. All that being said....get a freaking Roth IRA if you haven't already. Just type in "Roth IRA Calculator" into Google and have some fun :)
I was diagnosed with a mental illness at 16 and I am now 34 and have become unable to work full time within the past 2 years. I have applied for disability services. I have 250k in my 401k and 10k in my bank account. I have dipped into it early 4 times now with steep penalties that I was supposed to get waived because of my disability. It was not exempt but was supposed to be. They are refusing to do anything and a lawyer wants 2k to start trying to recover 14k in fees. On top of that they are denying my disability claim through SS over and over because I already have money and have worked within the last 10 years. What a mess. I am paying 600 a month out of pocket for insurance with a 10k dollar deductable until they accept my claim for SS disability and Medicaid which they probably wont even give me. This country is really good until it isnt. It is as easy to loose all your money as it is to make it.
This video is misleading. It assumes that the you can't avoid fees, it assumes that the stock market is separate from the 401K which it's not, it assumes that ppl retire in a crash when actually you're supposed to move your 401K bonds 5 years ahead of retirement into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. It also assumes that pensions don't have fees, when in fact they have up to 18 charges. It claims that market trends don't go up forever. Of course they don't, they fluctuate, but historically they give you a net return of 8% to 12%. Even with a crash, you still come out with gains. This video claims the tax-deferred option means taxes will go up when historically most people reduce their income during retirement and your taxes will be while you're in a lower-income bracket. And the biggest error about this video is the claim that your income increases bc you pulled out your entire 401K at retirement. Nobody would do that. Nobody *should* do that! Experts recommend you pull out 4% of your retirement fund for your annual income. I suggest keeping it in a savings account with at least a high interest return and pull out whatever you need for your monthly expenses. The remaining 96% of your retirement savings should sit in the market to continue growing. My biggest pet peeve about this video was that he says he put everything into the stock market, which is where your 401K grows! And if you try to go with a brokerage firm, they charge way higher fees and they always lose. Study after study has shown that 97% of the time, those who bet against the market do not succeed. Not even the best brokers or computer algorithms can predict the market. As soon as he started selling a book at the end, that was all I needed to know to understand why he was being so misleading. Listen, go into 401Ks but BE SMART about it. Use the cheap *blooom* robo-advisor or the free Personal Capital fee analyzer to find hidden fees and adjust the necessary allocations to find the cheapest options (like index funds). Make sure to read your company's fee disclosures and your funds prospectus. Then look for lower cost options that charge fees below 1%. These fees will be equal or lower than pensions or Roth. Do your research on Vanguard, Fidelity, S&P, etc. But whatever you do, DON'T cut out the 401K. It shouldn't be your sole retirement fund, but 1 of many plans in your retirement portfolio. Nobody is immune to a stock crash, not even this guy in the video. That's why your portfolio should be diversified, and have a variety of domestic stocks, international stocks, treasury bonds, interest savings, assets like real estate or even REIT funds, etc. And even if there IS a crash, relax. Do not panic, do not sell. Again, markets fluctuate and it will bounce back up with greater gains. Look at the past 100 years, and you'll see it raises back EVERY SINGLE TIME. Warren Buffet himself will tell you. Invest and HOLD. Remember: *it's not about timing the market, it's about time in the market* Loss of money in the short term doesn't mean you won't reap benefits in the long-term. The only thing you need to be concerned about is inflation. That's why another tip I have is to retire in a no-income tax state, or live as an expat abroad so that your retirement savings doesn't get eaten by taxes or inflation rates. Anyhow, please don't listen to this video, this guy is very irresponsible. Do your research. Watch LeanFIRE style channels like *Next Level Life* or *Graham Stephen*
@@YourMajesty143 well said and i appreciate you taking the time to explain this. Its horrifying to see people saying that they are going to withdraw their 401k funds after watching this video.
This was not a smart decision, because 401ks are invested in the stock market, too. You ceased taking advantage of pre-tax investing and pre-tax growth,which would make you richer quicker. Avoid paying tax as long as possible is the holy grail of many forms of investment.
The longer you put off paying taxes, the higher the tax rate you'll pay - not really too wise. That and both forms carry the risk of the stock market itself. At least he is able to freely shift his money into other assets as he so chooses without penalty. I would say overall his choice is wiser than a 401k. But I do feel on edge about his money not being more diversified.
@@scorpion8ragethere's nothing wise about abandoning a 401k investing vehicle that allowed Pre-tax dollars investing with an employer match in favor of post tax dollars investing. Doesn't matter what the future tax rate is, you can only contribute 19k without accounting for the employer percentage math.
This is off topic but could you make a video about how you make your videos? Like what type of background do you use, what kind of lighting and studio set-up, and also: How do you create your thumbnails? Where do you get your ideas on how to pose for those pictures? And how do you find ideas for videos in general? Also what are your tips on how to start a successful CZcams-Channel? I think you're one of the few who manages to keep a PERFECT balance between making your videos entertaining by letting your fun personality shine through but at the same time still keeping them professional enough so it becomes clear that you know your sh!t and people can take you seriously!
401k is still a great vehicle for retirement. This is what I do for retirement savings. 1).contribute to company match in traditional 401k 2). Max out hsa account 3). Max out roth
Just because you can’t save up money does not make the video wrong Point is, you can save the money yourself and not get taxed but your comment shows your mindset was not built that way You want someone else to do things for you You’ll get as far as the 80 percent you spoke about - relying on a 401k...lol
@@andrewlovelace5119 Lots of people spend every dime they get their hands on. Getting the money out of the paycheck before you see it makes it easier to invest and leave alone. Plus, the company match is free money. Dave Ramsey is a multi-millionaire because people aren't disciplined enough to spend less than they earn and invest a portion of their pay.
@@jarvisaddison8560 First find out if your 401k is actively managed; if so, ask for it be changed to self-directed where you pick your own investments (then talk to a financial adviser and/or look up videos on what investments are good for long term). If it's not actively managed then they probably just put the money into a target date fund. You can leave it in there if it's performing well enough, or see what other funds are available and re-allocate your money into whichever of those you want.
@@MayTheSchwartzBeWithYou Because Jaspreet has a gift for explaining in readily understandable terms. My crystal ball shows me Jaspreet becoming big on Fox Business soon.
Traditional IRAs invest pre-tax dollars, so you pay taxes when you take the money out. Roth IRAs invest post-tax dollars, so you don't pay any taxes when you take the money out.
ALWAYS utilize a 401k if there's a company match. Contribute up to the company percentage match. With my 401k, I have it looked at, and re-balanced, monthly. I will add that you can choose to put money in AFTER taxes if you chose to so it is taxed now and not later. I have never lost money in my 401k. I see no reason not to put in 5% because my employer also puts in 5%. That's free money. You can invest with the rest of your extra income.
@@MayTheSchwartzBeWithYou I mean no you shouldn't but one of the benefits to the Roth account is being able to pull contributions with no penalty. Also, what if you want to start a side hustle or self direct some of your funds?
@@MayTheSchwartzBeWithYou I get that. Just saying not all circumstances are the same. If the 401k my employer puts me in absolutely sucks balls I'd like to be able to transfer some of my 401k money to my IRA while still taking advantage of the company match and without switching employers.
@@MayTheSchwartzBeWithYou If I don't contribute to my 401k I don't get an extra essentially 2 percent of my salary from my employer. My wife gets an extra 6 percent. That's a lot of money to just leave on the table.
My man! You make Dave Ramsey look like a beginner investor. You should have a show and do Q & A. Thanks for all you hard work and wisdom. The are a blessing to the world. 😊
100% correct. Here's one strategy: 1.Contribute to 401(k) ONLY up to the match 2. Contribute every year to Roth IRA 3. Buy rental real estate 4. Start brokerage account yourself with extra money and invest 5. Buy and fund permanent life insurance to create tax-free pension at retirement 6. Start side business to create Roth 401(k) and make more tax-free accumulation All of this assumes you have no debt, are living below your means, and have good income.
The investment income is taxed. The fees can be offset by tax breaks, if you are not confident in managing your money you can make an argument for 401k , investing can have high risk you need to be well rounded to play the game.
Newbies think that the best way to play the stock market is to buy stocks then sell them a day or few months later, than repeat the process. This method of investing usually loses money. The people who buy and hold for long periods are the people who make the most money.
Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. If you are like most people you will invest part of your money aggressively in stocks, and part conservatively in money market funds and bond funds. However, some young people will go all stocks, and some very conservative people will go all money markets.
You want to buy a diversified portfolio of stocks as individual stocks are too risky. Highly knowledgeable people can buy a properly balanced portfolio, but most folks have a difficult time balancing things on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Back in 2000, Some people bought all Internet stocks; they got burnt when they all crashed together. You have to diversify across industries. Unless you know what you are doing, it is best to buy mutual funds that will diversify for you. Buy no-load, low cost funds. Mutual funds should have expense ratios of less than 0.5%. Always grateful to Jennifer Elizabeth Boland for leading me through the right path❤️
Many investors are too lazy to do any research, or read financial statements. But this is what the pros do. Investing in stocks does not have to be gambling if you put some work in, are patient, and have realistic expectations.
Why didn't you mention the Roth IRA?
No offense i think stocks are better.
Are stocks really that profitable? Heard so much about the volatile market. I might be wrong anyway.
Yes of course it is! But i will say don't do it yourself if you are inexperienced. Go get yourself someone good you can trust or better still check out *Sandra* *Yvonne* *Webster* she's good too.
I totally agree with you...being holding health for years.
Yea. I don’t like people holding info and create panic. Most invest in 401k bc employer contributions
Here are some go to’s to keep in mind:
1) Compare the MF’s of your 401 (k). There are some funds that overlap and thus as you grow your portfolio, make sure you know the MF options you are picking that are the best given your companies options.
2) If your company lets you go, now’s a perfect time to roll over that 401k in a tax free vehicle like a Roth
3) Invest up to the match. When you take money out and hit RMD (Require Minimum Dist.): age 70 1/2, the government dictates if the money you take out is sufficient (meaning if they are getting their tax money out). If not, then they force that money to come out and oh you have to pay taxes on each penny. If not then be happy with a 50% penalty. So invest in it, don’t overfund it like a cow.
4) use excess money to diversify your portfolio in different tax treatment accounts like the Roth IRA, 7702 IUL/VUL or other investment vehicles like the HSA.
5) Remember, you don’t know the tax rate of the future so diversify your assets such that you can take out money that bests the tax environment at that time.
Utilize Rule of 72, 3.5-4% distribution to never let your nest egg go down, make sure you diversify, buy life insurance with LTC riders to cover medical bills outside of Medicare Part A,B, & D (combined LTC and medical expenses add up to 500k in total expenses in retirement), and buy annuities to provide Guaranteed lifetime income, diversify your portfolio with active and passive funds, and make sure you understand the tax treatments of your vehicles.
Sit down with a professional to make sense of it all (make sure they are a broker and licensed in both insurance and investment industries to best help your situation).
Hope this helps!
The creator of the 401k himself on NPR said that the 401k was never designed nor intended to be people's primary retirement vehicle. It was intended to be used along side other investments
@@johannussteinmarch6403 i imagine 401k plus SS or a pension and maybe real estate, other stocks, bonds, savings, IRA and annuities.
Consider what your return or monthly income will be from your 401k vs your pension and SS. My 401k income will be greater than the two combined. I don't think he foresaw the growth of 30-40 years in a 401k, or that employers would do away with pensions. The question of whether to join your plan is no longer a question.
True
The problem with 401k’s is that people are responsible for managing it and to many people don’t know how. They just dump their money in it and hope ir makes money.
During the recession I hardly lost any money because I moved my investments to bonds; everyone I work with lost nearly everything. I know people who lost $200k, a few lost 300k but they wouldn’t listen to me because I’m not a professional.
Another thing you can do is buy cheap while the market was down, eventually when the market recovers, you will own the bank when your cheap stock multiply 30x’s
THROUGH THE STORM you can do this through fidelity 401k? I have previously pulled money from my 401k to reinvest in other assets, and it felt great to have diversification. As my 401k continues to build and take up a larger percentage of my net, I am faced with a question. Pull the money or let it diminish in value if/when we have a downturn. This right here sounds like the solution I’ve been looking for.
that sentence. The government wall street and corporation Got together. ......... Now let that sink in for a few minutes.
Facism.
Capitalism baby, it’s the American dream 😉
Other than it's a complete lie, yeah, let bullshit sink in. But don't research any of this liar's "facts" for yourself though.
@@michaelrudolph7003 Isn't it funny that this guy is presenting bullshit packaged as insightful information.
Bob Saget what’s wrong with capitalism
I max out a IRA and also contribute to my 457 plan (like a 401k) in edition I’m also lucky enough to have a pension, but I use those retirement accounts only as a baseline, my number one investment is me and my ability to KEEP HUSTLING 💪🏿💪🏿💪🏿
Good for you man! That's how it's done 😎
Same here bro ✊🏾
Smart Man!
That will come to an end after age 60
The whole point of retirement is to plan for when you CAN'T keep hustling. Just saying. You do seem to have that covered though, just don't minimalize the importance of your planning, it's counter productive.
Many great points in this video, but one that is critical is understanding that 401k contributions are invested in Wall Street, but are taxed as ordinary income and not investment income.
Exactly!
Jaspreet says exactly that...
speak to a tax professional and a financial professional!
As a Certified Financial Planer, I appreciate the education but there are some things to clarify:
1. The reason advisors get charged a fee for managing the assets under the plan is because we are the people who are responsible for educating and guiding the investor in how much they should be savings and what investment option to pick based on risk tolerance - now disclaimer, not all advisors are the same (like saying all mechanics are shady), there are no hidden fees, they are all in the plan documents and it is also the advisors job to pick cost efficient funds.
2. The best thing about the 401(k) is the tax deduction and tax-deferred growth. Company matches are optionals, while free money is great (you get 50% or 100% return on your money instantly) the tax shelter is what makes it great as a retirement account.
3. Market Corrections (2008) are cyclical, they are bound to happen, Real Estate was the cause of 2008 crash and market based, while I do agree diversification is good, planning is better, having non-correlated assets. Having assets that are on and off the rollercoaster for these moments.
4.Taxes - we are in the lowest tax bracket we have ever been, so taxes may go up or they may go down in the future. You also want diversification on how your money is taxed. Investing in a non-qualified account is great, but your money gets taxed 3 times... it's post-tax money, taxed while it's growing (you will get a 1099 for income earned every year) and you pay taxes on the back end. Yes you pay at a lower tax bracket but your growth is significantly impacted by the taxes owed while the money is growing.
My take on this is your 401(k) is not good and it's not bad. There are NO GOOD OR BAD financial products, they each serve a PURPOSE and are tools, what ends up happening people don't know how to use them properly or what their purpose is. Every product has it's own pro/con - there is no magical unicorn (sorry!) that will do everything you want it to do but a combination of products will, that's why you want to diversify your accounts among risk, liquidity, and taxes and have accounts that complement with one another NOT compete. To be a good carpenter you need to have a hammer and screwdriver and a flathead because not every job calls for a hammer, it depends what you're trying to do ;)
Can you clarify how much fees are for all the companies? Average is 1 % management fees minimum mostly. The hidden fees are true, not BS. Some charges for buying the funds are unbelievable & ridiculous. You know why these charges exist! Ofcourse you do !
Why does everything make sense when Jaspreet says it? ( !?!??!!)
A Darice ikr I didn’t even understand 401k
🤔🤔🤔
@@MinorityMindset you a wiseman
Bc he makes it sound simple which it is!
I was about to say that !
401K is a modern day retirement plan where corporations are basically saying, "you are on your own, start saving up" since for the majority pensions are a thing of the past.
These days we HAVE to be more CREATIVE in our retirement plan to get ahead and save up. Consider looking for ways to build PASSIVE INCOME, that way when you sleep you are still making money. If you can build up enough passive income, you can even retire early =)
Best mix is having a 401 K, well paying job as well as in my case took a city job with pension plan along with a 457 ( b) plan.
House is already paid off
Screw the gold “ asset”
no credit card debts and all cars paid off.
Live like a king even as a middle class person with good health and great family
How long did it take to pay off your house?
Logan Jones 7 years
You forget to mention done get sick or many of the ills that visit people in their 60’s and beyond...
Spot on advice, I try to explain this to my clients everyday. Most of them are so myopic, following bad online advice that it just doesn’t sink in. Great video!
Love how enthusiastic you are! Great take home message - blindly investing in a 401k is not necessarily right for everyone and that people need to understand their money and do financial and tax planning!
Thank goodness we got people like Jaspreet. Really eye opening.
:)
This video is misleading. It assumes that the you can't avoid fees, it assumes that the stock market is separate from the 401K which it's not, it assumes that ppl retire in a crash when actually you're supposed to move your 401K bonds 5 years ahead of retirement into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. It also assumes that pensions don't have fees, when in fact they have up to 18 charges. It claims that market trends don't go up forever. Of course they don't, they fluctuate, but historically they give you a net return of 8% to 12%. Even with a crash, you still come out with gains. This video claims the tax-deferred option means taxes will go up when historically most people reduce their income during retirement and your taxes will be while you're in a lower-income bracket. And the biggest error about this video is the claim that your income increases bc you pulled out your entire 401K at retirement. Nobody would do that. Nobody *should* do that! Experts recommend you pull out 4% of your retirement fund for your annual income. I suggest keeping it in a savings account with at least a high interest return and pull out whatever you need for your monthly expenses.
The remaining 96% of your retirement savings should sit in the market to continue growing. My biggest pet peeve about this video was that he says he put everything into the stock market, which is where your 401K grows! And if you try to go with a brokerage firm, they charge way higher fees and they always lose. Study after study has shown that 97% of the time, those who bet against the market do not succeed. Not even the best brokers or computer algorithms can predict the market. As soon as he started selling a book at the end, that was all I needed to know to understand why he was being so misleading. Listen, go into 401Ks but BE SMART about it. Use the cheap *blooom* robo-advisor or the free Personal Capital fee analyzer to find hidden fees and adjust the necessary allocations to find the cheapest options (like index funds). Make sure to read your company's fee disclosures and your funds prospectus. Then look for lower cost options that charge fees below 1%. These fees will be equal or lower than pensions or Roth. Do your research on Vanguard, Fidelity, S&P, etc.
But whatever you do, DON'T cut out the 401K. It shouldn't be your sole retirement fund, but 1 of many plans in your retirement portfolio. Nobody is immune to a stock crash, not even this guy in the video. That's why your portfolio should be diversified, and have a variety of domestic stocks, international stocks, treasury bonds, interest savings, assets like real estate or even REIT funds, etc. And even if there IS a crash, relax. Do not panic, do not sell. Again, markets fluctuate and it will bounce back up with greater gains. Look at the past 100 years, and you'll see it raises back EVERY SINGLE TIME. Warren Buffet himself will tell you. Invest and HOLD. Remember: *it's not about timing the market, it's about time in the market* Loss of money in the short term doesn't mean you won't reap benefits in the long-term. The only thing you need to be concerned about is inflation. That's why another tip I have is to retire in a no-income tax state, or live as an expat abroad so that your retirement savings doesn't get eaten by taxes or inflation rates. Anyhow, please don't listen to this video, this guy is very irresponsible. Do your research. Watch LeanFIRE style channels like *Next Level Life* or *Graham Stephen*
Or you could have learned the same thing in high school
Mannnnn !!!! He is super helpful
Some advice is good. But some other advice is not. He recommends Webull but he never told us it’s a Chinese company. We have to share our personal info like birthday and ssn with a Chinese company. Big mistake. He probably got paid by them for promoting them.
Exactly why you should also have a Roth IRA. In my mind a 401K is only half the equasion.
Exactly. If you can afford it and have access to it, then I would contribute to a 401K pre tax, after tax and also a Roth.
GB and PG they have a Roth 401k
@@Peppermon22 A lot more ocmpanies are offereing Roth 401ks, now. The latest figure I saw was about 70% of companies that offer a 401k have a Roth component.
I invest in a Roth Brokerage account along with my 401k, buying stocks which will grow tax free at retirement time also, building a fix account just in case the market dips, be blessed yall.
Contirbuting to your employer retirement (if you have one available) and getting the match money (if your employer offers) is not bad. IRAs (Roth or traditional), taxable investments and even real estate, all can assist in providing for you in the future. Blanket generalization (if followed) harm a lot of people. I started my first employer retirement plan, ira, taxable investments and real estate investments when i was in my 20s working hourly jobs. Now in my 50s, glad i did. Dont take this guys, mine or anyones else "opinion" for what "you" should do, Take the time to learn enough to invest for yourself or seek assistance to invest. Concepts like spend less then you earn and invest the surplus (in something) goes a long way. Just my thoughts from decades of life experience.
You think so now. ? Wait until you have to get the money OUT. Your in for a big surprise. I’ll let you find out on your own. Lol. I’m 53, been investing since age 18. Good luck
That's terrible
The employer went to the government and Wall Street and out came the 401k. That can’t be good.🤮
🧐🧐
Exactly
Truth. It is a Ponzi scheme. If I had the chance to do it all over again, I would.
Sure but even two ugly people can have a beautiful baby once in a while. This is the case here.
Most people should use the Roth IRA instead of or in addition to any 401K. You can't count on Social (In)security to keep you from starving when you are elderly. Saving something is far better than most retirees that have less than 60 K in savings.
*401k < Roth-IRA < Bitconnect < become loan shark < become shark* 🐬
Scratch that🎭
401k< Roth Ira💪
Black Vito - Moneyology & Philosophy genius
@@LucianLacroix ☝🙏
Roth 401K in a low/no fee index fund. Lower/no fees, and 50% employer matching.
@@djangomarine6658 I like the sound of that👌💪
Wise man
401k is fine if you have match or allows you to put into low cost index funds. The tax savings of 10% basically means 10% + 7% annual return, which is amazing.
Wow, I don’t even know where to start. Tax deferred growth (meaning you don’t have to pay taxes if you decide to change investments (sell one fund/stock/bond and buy another)); compounding growth (meaning you constantly build on what you previously had), with money you technically owe to the IRS (the money you would’ve paid taxes on, had you not ‘invested’ it, growing in your account, where you get to make the decisions as to how it’s used). As for the fees, you as the employee, get no input as to where or who your 401k custodian is, or who the investment managers are, none of that. That’s up to the employer, because they’re bearing the burden/cost in setting all this up (it’s a lot of work and expenses). Then employees, most of the time, only get a tiny selection of investments to choose from (which they barely understand anyways, I blame public education, it’s hard to teach capitalism when you don’t believe in capitalism). Making the appropriate investment selections is key (diversification: small cap companies, large cap companies, international companies, well established companies and new ventures, commodities, bonds, etc... with proper percentages invested in all these different categories). Knowing which fund does what is important. Knowing that there’s an active manager overseeing and adjusting along the way isn’t, or at least shouldn’t be, a ‘free’ service. Granted, there are funds that are ‘all encompassing’ or funds that track an index extremely cheaply. But you shouldn’t label the 401k as some trick Wall Street pulled over on the public. It gave us all easier access to the world, lower overall costs, greater ability to save for retirement, whether in a retirement account or not, the ability to have an equity stake in something, the chance for a better rate of return (not sure if you heard but fixed rates are pretty low), and tons of other things. I get it, if I complain about I can create this victimization that sells so good right now.
It's great if you got a great match and you're with a company that you will stay will until you retire... but it still shouldn't be your ONLY long term investment tool.
Moses Emmet Your 401k belongs to you and you can take it with you whenever you move to a new employer, or roll it into an IRA if you start your own business.
Still agree that it shouldn’t be the only investment.
@@LTJGHoot You can also go to a self directed plan at 59.5. That basically opens up entire field to you.
jamie t Dotn have to be 59.5 to open a self directed plan, that’s when you can pull funds from it free of penalty like an IRA. Self directed can’t contain interests in anything you own basically.
The idea is that when you have a 401k or ira or hsa through a company, you’re not stuck with that company is all I’m saying. You can take your retirement funds with you from job to job and not feel stuck. Any money you put in is yours forever. Company matches may be subject to a companies vesting policy but usually those terms are 3-6 years before fully vested, not 20+
@@LTJGHoot I am referring to an employee account. If you work for an employer, the only way to switch to a self directed account is to leave. You can take a loan, or a hardship distribution, but you can't take funds out and go self directed until 59.5. You can roll it over when ever your employment cease prior to that. If you are self employed, that is a slightly different 401k, plan and subject to different laws.
I have built up several 401k's while having worked for just as many employers. No need to stay at one place. So I now have a current 401k and an IRA that contains previous 401k's rolled in.
Many 401K plans have an unmanaged option, and I have always taken that. It's still tax deferred and all that, but by investing in index funds it allows me to diversify internationally and in many cases (like Vanguard) the fees on those funds are below 1%.
Although, I also roll that money over to an IRA every few years whenever I switch jobs, and I maintain Roth and regular investment accounts as well. I have found that a 401K with employer match is much better use of my investment dollars than the Washington State Pension that I get through my current employer. For example, right now, I have a 457 Deferred Compensation account, a Roth 457 account, and a Pension through my employer (King County.) I make a 7% contribution to the 457 and Pension accounts, for a total of 14% retirement contributions. The County determines how much my pension contribution is, which means they could raise or lower it at any time (let's assume they don't change it); if I choose to stay at the county for at least 3 more years, then I will qualify for collecting the pension some time between 2043 and 2053. If I stay 5 years then leave, I would be able to collect $840 from the pension for the rest of my life, but when I die I won't have anything to pass to my wife and children; in contrast, with the 457 account, I will be able to safely withdraw (I.E. < 4% per year) about $830 per month, but then leave my family nearly $250,000 when I die. That inheritance for my children is the difference between a defined benefit like a pension and a private retirement account. I have obviously made several assumption including: I will retire in 2048; that I would contribute equally to both the personal retirement account and the pension for a period of 5 years; and the investments in the personal retirement account will grow at a rate of 5% each year - meaning the market will perform much worse in the future than the past 30 years.
I manage a multiple Employer plan (MEP) 401k. I see what people of average salaries can save over time. Here are the benefits of a 401K that are unmatched simply by investing in a personal brokerage account. 1) company match and 2) deferred taxation. The Roth IRA is truly a marvel and is by far the superior option - Here is why:
Do a mortgage calculation on a home worth 350K at 5% interest. What you will see is that the interest you pay over 30 years is almost equal to the actual cost of the home. Well, for long term investing this principal works for you, not against you. If you ultimately contribute 350K to your 401K over the years, the compounding interest (stock gains, or bond interest payments) means that your 350K has grown into 700K, 1 million or more (depending on the rates of return earned). In a Roth 401K you already paid taxes on the 350K you contributed, but you do NOT pay taxes on the growth of that 350K, 700K or 1 million that was earned (Company match portion is taxed upon withdrawal for both traditional and Roth IRA). Your personal brokerage account does not offer this.
If your company matches, has a low fee structure (ETF stock or bond funds have almost no fees) and solid investment choices, start contributing today. If your company does not offer a 401K plan. Go set up your own personal ROTH IRA and start today. Consistent contributions + time is the formula for almost 100% success.
If your employer has any kind of match, it is in your best interest to have a 401k to get that free money. Only contribute as much so you are not leaving any free money on the table, if you have excess money beyond that find a home such as regular stock market s&p500 fund, real state, gold, etc. Read about traditional vs roth 401k. When you leave a job, you can move the 401k into an IRA by Vanguard where fees are very less or move it into a self-directed IRA where you are in control. So, 401k is great to get your free money but don't put all your eggs in one basket.
Dude! You're a really good teacher man. You just articulated my current situation PERFECTLY!!! Keep spreading this knowledge Mr. Singh! 💪
Dude!
Jaspreet is Numero uno
I guess the beginning and what's relevant to most is the standard deduction and brackets for income tax depending on your filing status; Single, Married Filing Jointly, etc. Also learn the difference between, Federal, State and Local tax. There's so much more depending on whwther you have kids, the type of assets you have, whether you own a business, inherit money, etc.
It's not worth learning it all unless that's your business, and even then, there is so much (which keeps changing BTW), that you usually find people who specialize in specific areas.
I'd stick with practicing law. You obviously don't know that much about personal finance.
For one thing what you call paper assets isn't what financial analysts call an asset class. Sure, real estate and gold are asset classes. But you can hold title to those things as "paper certificates" as well. In fact as an example I hold a REIT index in my 401(k) plan. That index holds shares of companies that invest in and manage real estate. The term "asset class" is just referring to a type of asset that moves in a manner that is relatively uncorrelated with other asset classes. It usually does this because that asset performs differently depending on where we are in the business cycle...
Second, your assertion about tax rates illustrates a pernicious innumeracy problem prevalent in the US. In particular if you invest pre-tax dollars in a 401(k) plan and compare that with an investment with capital gains in an after-tax account, you have to start the after-tax account with less money. For instance if you are in the 24% tax bracket and invest $1,000 in a 401(k) plan pre-tax, only $760 would be available to you as an investor in a taxable account. You don't get to ignore that fact just because its inconvenient. And that fact tends to mean that about the best a taxable account can do is match the performance of a 401(k).
But in practice it rarely does. That's because most investments spin off some kind of income - that thing you said people like to have. And in a taxable account you have to pay taxes on that income each year, even if you just re-invest it. Suppose your $1,000 investment spins off 10%/year (to make the math simple) and the investment doesn't grow in value otherwise and let's assume it's a qualified dividend costing you 15% in taxes in the taxable account. In that scenario after 10 years in the 401(k) plan you would have $1,000 * (1.1 ^ 10) = $1,000 * 2.59374 = $2,593.74. In a taxable account you would have $760 * (1.085 ^ 10) = 2.26098 = $1,718.35. At the end of the 10 years your 401(k) is worth something more like $1,971.24. That's an improvement of 14.7% over 10 years.
Of course my example is neither the best case nor the worse case scenario. More often investment portfolios spin off a combination of interest, dividends and capital gains. Also some of the capital gains will remain deferred, so you wouldn't pay taxes on them in years that they are not realized. This makes the value of this part of the tax advantage less significant; but in general deferring the recognition of gains just makes the resulting tax efficiency of your investment approach that of a tax-advantaged account without ever actually exceeding it. (Unless you count the step-up of cost basis your heirs get when you die. But technically you didn't actually benefit from that - your kids did.)
There is one more tax advantage for 401(k) (or IRA) accounts that hold pre-tax money. The US income tax code is progressive. That is to say it's tiered. And for most retirees the bulk of their taxable income actually comes from their retirement accounts and perhaps some interest income. But for a retired couple 65 and older, it takes $27,000 in ordinary income just to fill the standard deduction! That money is tax-free. The next $19,400 pays only 10% and then from $46,400 to $105,950 you pay only 12%! Even the 12% rate is probably half your marginal rate when you were contributing! This is the most significant benefit of having some pre-tax savings! So you can easily keep an additional >12% by making pre-tax retirement contributions...
There is one exception that you mention earlier on: fees. The cost of 401(k) specific fees can eat away at any tax advantage. If your plan charges fees in excess of 1% of assets for all fees, you should probably just contribute to get the match if any. (Be sure to stick to simple, low-cost funds to keep the costs low.) Beyond that IRAs and taxable accounts are superior. But not all 401(k) plans are like that. My employer subsidizes our plan and my investment costs are as low or lower than what I could get outside of the plan in an IRA. In my case my 401(k) is a superior investment vehicle.
BTW, notice I say "investment vehicle", not investment. A 401(k) is not an investment. The investments are the things the 401(k) holds... People shouldn't confuse the two.
Joel Corley well said thank you
People don’t want to see the facts. They just want to be victims.
You know more than this clown selling hopes to CZcams.
I am curious why people who already know watch an educational video?
Grim Repair I’m amazed since he started a channel to share those who don’t salty and gotta comment with insults
Some companies (like the ones I've worked for) will cover the 401k fees and also offer Roth 401k's, which is post-taxed dollars. So, when you withdraw those funds, I believe only the company match portion will be taxed.
I pulled my money from my 401k and I paid no taxes on it. I was paying high fees in my old 401k I did a rollover and paid much much lower fees. It did cost me a $150 penalty but will save me thousands of dollars.
Rollovers are not taxable. Its taxable when you withdraw the $ out of your traditional 401k
Roth 401k is The Best.. 6% match dollar for dollar at my job. Plus, profit sharing dividends which total approx 3000. 00 additional money into the 401k yearly. It's the best.
I'm reading Robert Kiyosaki, J.L. Collins and the like. Saved money is *wasted* money - put it to work!
yes i read his book as well. i learn how to open his way of business where cash flow is king, i just disagree with him because he dislike stock market and he talk nonsense about stock market which he barely understand.i swing trade stock market and make quite well profit.
I love J.L. Collins, and I love how he narrates his own audiobook. His voice is soothing, lol.
@@saltyplayer7704looking for a swing stock guru/advisor, could you please recommend few?
I pay $8/year in 401k fees, in my 401k I can invest in everything I have access to in a brokerage account, my 401k is plenty diversified in mutual funds, my company matches over 100% in my 401k, I have a Roth option for my 401k. I see nothing wrong with my 401k
This is why is important to grow your financial intelligence, great video Jaspreet!!!
- Not all 401Ks are high cost. If your employer uses Vanguard or Fidelity, for example, they both have several very low cost index funds. This is where you should be investing. With that said, it is kind of misleading to point out the fees in 401K without mentioning that you will have also fees in most of any other kind of investments, from real estate to just investing in your personal brokerage account.
- If your company provides a good match (25%>), you should absolutely try to max at least to the amount that they match. This is an instantaneous and guaranteed return like no other. Free money.
- You don't pay the penalty for withdrawal after you reach a certain age or if you are under difficult circumstances (like disability). This is good. The purpose of the 401K is so that you have money for your retirement. The penalty prevents you from spending frivolously.
- Yes, having all your money in 401k is not diversified enough. You should probably have different kind of savings and investment accounts. With that said, when you retire you are not taking out all the money from your account at the same time. You have flexibility on how much you want to withdraw each year. That would allow you to withdraw more or less during periods of crisis or bonanza. Compared to real estate, your 401K is probably much more secure.
- The taxes part is pretty bad and misleading. Let's say that you have $1000 that you can chose between investing in 401K or invest in your brokerage account, you are at the 30% marginal tax rate (local + federal) and that by the time you retire you are still at the same rate (maybe more, maybe less). If you decide to use it for your 401K, you will pay right away 7.5% on FICA and the rest ($925) go into your account. After 30 years that money has increased 5 times to $4625. You decide to withdraw all that money so you pay income tax (30% * $4625 = 1387.5) which would leave you with $3237.5. If in the other hand you want to put that into your brokerage account you will pay right away 37.5% on taxes (federal + locale + FICA). The reminding $625 also increases 5 times in 30 years leaving you with $3125. On top of that you pay capital taxes on your profit which could be from 0 to 20%. Let's say 10% which would mean that you pay an additional $250 on taxes (10% * $(3125 - 625)) leaving you with $2875. That means that in this scenario your 401k has 12% more. Of course this can be more or less depending if your income taxes are lower or higher than the current or if capital taxes might increase also in the future. Additionally, people say that you will have lower income when you retire because normally you don't need as much money at that time. Presumably, you already have a bought house, no child care, no student loans and no need to save for retirement. Yes, you will probably have more health cost but still overall you should be needing less and as such you might be at a lower tax rate. As I said before also, the video tries to scare you that income taxes might rise in the future while not saying that capital taxes might do the same.
Overall, the video is pretty negative and in some ways misleading against 401k. If you are able to afford it, 401Ks can be one of the best ways to ensure for your retirement and it is better to start now than later.
If your 401k gives you the option of an S&P 500 index fund then the fees are usually a lot lower. Paying for managed funds usually isn't worth it.
My coworker retired and dead the same month he retired and he was in his sixties
Exactly how they planned it!
This guy is one Sikh dude. Dropping some serious minority knowledge on the masses.
First sentence 😂😂😂
Yep, he's doing a great job of keeping you down, Congrats!
His costume instills so much more confidence in his words.
False comparison about the 10k. The 10k in a regular brokerage is done with post-tax money and the 10k in the 401k is done with pre-tax money. That's a huge difference right there. Would love to see you properly analyze that in another video.
Nice content, Fortunately, you can take control of your investment process by directing all of your contributions into a conservative investment option that is offered in your retirement plan. Then, when the time is right, you can make a strategic investment allocation to one or more of the less conservative funds offered in your 401(k) plan.
I want to take my money in my 401k account and reinvest it on something profitable like Options, index funds and stocks. I need guidance on how to go about it as a beginner.
@@anthonyalphonsus9454 that's was exactly what I did I. Take your 401k from account, invest stock, index funds or options .
I use all my retirement accounts as a baseline, I Max out my 401k and I have my pension. The interest rate is quite not encouraging.
I don't know why I feel Biden is going kill us with tax!
This is why it's very important you acquire financial freedom and intelligence, so you don't have to work all your life. I want to retire by the time I'm 40. I would be very happy if any tips or recommendation here😊
I actually made huge amounts of money in my 401K. I paid the taxes and penalties to buy rental properties. My 401K is now back over 1 million, I will have lots of taxes to pay in retirement. You have to save somewhere if you ever expect to have real big amounts of money, the 401K is at least easy.
I feel like I’m so lucky. I have a 401k with a company match, and a pension. My wife and I plan on opening a small side hustle business in the next year or so. So between my 401k, my pension, her 403b, our money market savings account, both our social security checks, and our eventual small business, we should be good for retirement.
brandon longmire - Sounds like you’re in fine shape, but don’t count on that social security if you’re not a baby boomer, lol!
Good luck with that. Your 401k and 403b as well money market accounts on based on compounding interest formulas. Any interruption to the compounding interest formula results in loss. I.E if the market was to go down 2020 and not recover 2022 you will feel a significant loss. Not my opinion just math.
WOW ! Talk about prophecy.
Finally! Someone explained why 401K might not always be the best investment
Only use it to get the match put the minimum in. You can direct your 401k and pick the investments that have the highest dividend and lowest management cost.
Ok, for some people who work for non profits, there’s no matching (403B).
If you have the income, you should definitely maximize your deferred tax investment plan!!
And you should start this plan as early as possible!!!!
Maximum for 2019 is $19,000 ($25,000 for individuals over 50).
The benefit to just about any investment is time, your interest is compounding!
For those of you that can get a 401k Roth I would highly suggest it. Pay the taxes up front, let the interest grow over 20-30 years so when you pull it out its fully tax free!
Thats assuming the government and Wall Street won't change the rules and regulation on you. They got you by the balls, and there's nothing you can do about it.
I live on much less than I make and max out my 401k. I have a passionate dislike for loans, if I can 't afford to pay in full then I don't want it. Modest but paid for home. Getting ready to retire soon and this life style has paid off incredibly. My path is contrary to this video but it has lead to wealth. Slow and steady wins races, at least it did for me.
Fast and steady works even better... but good for you!
@@scorpion8rage lol, I swear I thought that way for a good part of my life. Used to day trade, thought I was the sht. Lost everything, twice, it was horrible. Spent like money was free. You do you and good luck, zero hate from me. I would not have listened to anyone in my youth, I was way too dumb. Had to learn the hard way. Cheers : )
I even went thru a short phase in life where I thought I could have made it as a professional gambler. My god I was so dumb, might still be dumb and not know it. Certainly is not only possible but likely.
@@coniccinoc
Ah no man, you misunderstood what I said. 🤣
I meant earn more and save more = faster.
I've always gone the fast route (again, read definition above), and it has paid off very well for me.
Always keep output far below input, and one will grow wealth very quickly.
@@scorpion8rage The key is to save what you can, when you can, while you can, and invest those savings. A little adds up to a lot over a lifetime, and a lot adds up a whole lot. The average working Joe/Jane can easily hit that million mark if they keep at it steady with even a modest amount of saving and investing, and still live a life that is fun and interesting. Oh yeah, don't forget to live a little, you only get once trip through. Watch you pennies for sure, but take a handful now and again to live life. Peace!
I just max out my 401k and borrow money against it to purchase rental properties without a loan hitting my credit report. I then get a home loan and purchase another house. I then use the rent from the rental properties to supplement my income from the 401k loan for the year... then i do the whole thing again.
You do know that you could have just rolled your 401k into real estate instead of borrowing against it? Avoiding the fees and penalties. Please look into this for future reference .
Also, I hope that you set up an entity to hold your rental properties. Good luck!
@@domesticviolencemastery3609 thats the beauty of it! Because its only a 401k loan, there are minimal fees. 75 dollars total. I get the money pretax... then i repay it pretax. Best of all, i make repairs to the house with that money, and claim them as a tax deduction... so now, my income taxes are minimized as well. :-)
My 401K is doing fantastic. It is not the only thing I have going, but it was my first thing 35 years ago. If you would have told me then that my meager weekly contribution of $24 plus a $12, would now be worth well into seven figures, I would not have believed you...but here we are.
But hey, just because you don't understand your plan, doesn't mean it is a bad investment, and there is simple way to correct that...learn about it.
@Thot Slayer I started at a major oil company on a packaging line for $6hr back in the mid 80's. I switched jobs a couple of times within the industry, rolling my 401K into my new job's plan, and have been operating chemical reactors with a petrochemical company for the last 20. Good old blue collar union worker.
@will edwards Sure, things happen. That is why I have moved the bulk of my plan to safe and secure, though lower returns, in my self directed account. So yes, I'm very well protected and I am licking my chops. At some point it becomes about protecting your assets versus growing them. What I have and the returns I get, will be more than enough to see me through. Thanks for worrying, but like I said, my 401K is not the only thing I have going.
But do your thing. Don't join one, do join one. Spend it all as you earn it, or save every penny if that is your desire. I've had much success doing what I did. You may not. We both could get hit by a bus tomorrow, but if you want to cross the street, that is a risk you must take. Good luck with whatever you do. Peace!
@will edwards - This video is misleading. It assumes that the you can't avoid fees, it assumes that the stock market is separate from the 401K which it's not, it assumes that ppl retire in a crash when actually you're supposed to move your 401K bonds 5 years ahead of retirement into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. It also assumes that pensions don't have fees, when in fact they have up to 18 charges. It claims that market trends don't go up forever. Of course they don't, they fluctuate, but historically they give you a net return of 8% to 12%. Even with a crash, you still come out with gains. And the market HAS moved up *overall* if we look at charts from a century ago to today. This video claims the tax-deferred option means taxes will go up when historically most people reduce their income during retirement and your taxes will be while you're in a lower-income bracket. And the biggest error about this video is the claim that your income increases bc you pulled out your entire 401K at retirement. Nobody would do that. Nobody *should* do that! Experts recommend you pull out 4% of your retirement fund for your annual income. I suggest keeping it in a savings account with at least a high interest return and pull out whatever you need for your monthly expenses.
The remaining 96% of your retirement savings should sit in the market to continue growing. My biggest pet peeve about this video was that he says he put everything into the stock market, which is where your 401K grows! And if you try to go with a brokerage firm, they charge way higher fees and they always lose. Study after study has shown that 97% of the time, those who bet against the market do not succeed. Not even the best brokers or computer algorithms can predict the market. As soon as he started selling a book at the end, that was all I needed to know to understand why he was being so misleading. Listen, go into 401Ks but BE SMART about it. Use the cheap *blooom* robo-advisor or the free Personal Capital fee analyzer to find hidden fees and adjust the necessary allocations to find the cheapest options (like index funds). Make sure to read your company's fee disclosures and your funds prospectus. Then look for lower cost options that charge fees below 1%. These fees will be equal or lower than pensions or Roth. Do your research on Vanguard, Fidelity, S&P, etc.
But whatever you do, DON'T cut out the 401K. It shouldn't be your sole retirement fund, but 1 of many plans in your retirement portfolio. Nobody is immune to a stock crash, not even this guy in the video. That's why your portfolio should be diversified, and have a variety of domestic stocks, international stocks, treasury bonds, interest savings, assets like real estate or even REIT funds, etc. And even if there IS a crash, relax. Do not panic, do not sell. Again, markets fluctuate and it will bounce back up with greater gains. Look at the past 100 years, and you'll see it raises back EVERY SINGLE TIME. Warren Buffet himself will tell you. Invest and HOLD. Remember: *it's not about timing the market, it's about time in the market* Loss of money in the short term doesn't mean you won't reap benefits in the long-term. The only thing you need to be concerned about is inflation. That's why another tip I have is to retire in a no-income tax state, or live as an expat abroad so that your retirement savings doesn't get eaten by taxes or inflation rates. Anyhow, please don't listen to this video, this guy is very irresponsible. Do your research. Watch LeanFIRE style channels like *Next Level Life* or *Graham Stephen*
Good job jamie t. What was your 401k asset allocation during its growth stage?
@@chuckwalla2967 I started at 5%, and that was a struggle for a young family. I bumped it up every time I got a raise, to hit 10% in order to get the max company match. I have kept it there ever since. My asset allocation was all equity funds and aggressive growth.
crash 08 poeple who lost money was mostly in 401k . Remember your 401k traded in the stock market. Anyone who have job should be invested in the stock market .
But those people recovered their losses overtime. The ones who panicked and sold were the ones who hurt the most. Always invest and HOLD. That's the Warren Buffet way to invest. It's not about timing the market, it's about time in the market. Short-term pitfalls don't mean you can't have overall net gains overtime of 8% to 12% ROI.
YourMajesty143 I that's a fantastic photo . I agree
Now you’re going to see more people contributing less to their 401k, and blowing it on tvs and smartphones. 😒
Eric John 😂😂
Those people need to watch more financial videos so their "assets" can buy their tvs and smartphones. ;)
Good video. But there are a lot of things you can do as an informed consumer. If you think you will be making more money during retirement time, invest in a ROTH 401k (post tax money). If your ROTH 401K grows from $1000 to $5000, you do NOT pay tax on the $4000 you earned from interest (whereas in a traditional 401k you have to pay tax on the entire $5000 when you withdraw).
Also, login to your 401k manager website and look at the statement to figure out your fees. If you move to a different employer, shop around for money managers with the lowest fees. You can always do a free 401k rollover to a company that has lower fees. My company uses fidelity, and when I look at my yearly statement, I can see I was charged about $5 in fees.
nothing wrong with a 401k...
but you should have your own separate brokerage account that you put money into....
This is the same advice I received
Remind people lost most of they 401k in 2008. The next crash can be worst. You better off investing in physical metals like gold and silver
@@kadive25nyc metals is not an investment its a hedge. this is a very different concept with its own purpose.
@@kadive25nyc Those that sold in a panic, yes they lost. Those of us who held and invested more, mad out fantastically.
Gold on 10/08 $857 (the low point of the year) Gold on 5/18 $1270
Dow on 3/09 7600 (low point of the crash 10/08 10,500) Dow on 5/18 26,500
You tell me who was better off? A clue - it is those that held and didn't panic and buy gold.
@@kadive25nyc - The common length of recovery for most market crashes is 1 to 2 years, there have been 2 market crashes where it took 7 years and 1 crash that took 5 years. And usually the loss is balanced out and then exceeded by the market highs, so that you still end up with an overall net gain of 8% to 12% ROI. That's bc markets are always going up over time. Even if you retire with a loss during a market crash, you had past gains prior to that (which help to counteract or protect against unexpected future losses). But let's say all your gains were meant to balance out previous losses, not future losses. That would only be true if you came into the market by getting hit with a big loss from the start, which is unlikely for most investors.
And if for whatever reason this is true for you, you can still have your investment recover, and that's bc you don't withdraw from your savings in one lump sum. In fact, regardless of market activity, most advisors suggest being very frugal your 1st year of retirement. You can pull out 2% to 4% of your savings for the year, and deposit it into another growth account as you withdraw monthly. If you want to play it safe, then 5 years before you retire, transfer 5 years worth of savings into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. The rest of your retirement funds, that you hadn't yet withdrawn, will sit there to recover and continue to grow.
Stop being afraid of short-term losses. They're expected. Focus on long-term NET gains. If you retire during a crash, and you still have an income to live off of from another savings account, then you can also ask your employer if you can hold off on withdrawal, or see if you can rollover into an IRA or ROTH. This is why it's important to diversify your portfolio, and not depend on 1 retirement plan to withdraw from.
All you need to do is do the math for someone that starts at a company @age 22 and retires @63 to quickly see the troubling numbers. All this when you account for inflation that is.
All 401K, 403b, etc. are not created the same. Even within the funds being offered by a company the fees can vary big time in the fees they charge. Years ago, companies got paid for offering certain funds. They were basically making money off their employees' money.
If your company's 401k plan offers index funds, these tend to be the least expensive. It will probably be less than 20-40 basis points. The fees in a 403b plan tend to be the worst.
At the end of the day, the 401k is probably the best investment option for most people. It is convenient and you could get rich. Later in life, you will have to explore tax planning strategies.
For those who want to put in the effort, the stock market with IRAs, Roths, and a brokerage ac are options. For the more involved investor, s/he could buy properties and rent them out. This is a ton of work.
Raj Beekie can you explain to me what I just got into? I was a Walmart employee for 8 years and was terminated in 2009 the company put in but I didn’t. Never thought anything about it. Fast forward to now i am a school bus driver and was able to roll over the $18000 dollars that was sitting in the 401k to a 403 b plan and was told that they were a non profit agency because I am an employee of the public school system. Did I mess up or was this a good thing to do going forward?
@@davemontano3790 Hi Dave, first off, I am not a licensed financial advisor. However, before rolling the 401k into a 403b I would have had you compare fees in a brokerage IRA account.
Now, that you are rolled into the 403k I don't think you can reverse that decision. Talk to the advisors at your brokerage company. If and when you change jobs, I know you can roll over then.
I use TD Ameritrade and they have some ridiculously inexpensive funds. You can even trade for free many of their index funds. Vanguard, etc. also have some low fee funds.
Bottomline...if your company offers match for 401k, then put in just enough to get the full company match, usually about 6%. It's a no brainer since you're automatically getting a 50% return. Beyond that amount, consider other investment vehicles, not 401k.
Company 401(k) match often represents a *_100%_* return.
Invest in different options besides a 401k.
In the beginning you are talking about a defined benefits plan. They still do these in the military! Just like other financial vehicles you need to ensure the expense ratio is low and the equities you have chosen are actually increasing in value.
Daniel Iles the military pension is not being given to new members anymore. Legacy pension is still honored but the us military has moved to a 401k system.
There are plenty of good books out there to learn about investing and 401k's. You did cover some good points, some points were misleading. No such thing as "risk free" investing. There is risk in ALL investments including gold and real estate which you brought up. All investments have FEES, the fees the funds do charge and administrative fees as well. That's why people should try to invest in index funds, lower fees and usually perform better than managed funds. And there are fees if you withdraw your money before the age of 59 1/2, you mentioned the fee but not the age. Once you retire, one usually rolls their money into a IRA with a company ( I like Vanguard), have some of the lowest fees and great selection of funds. From there, one can put part of their money into a immediate annuity for steady income, as well as other options. I think a 401k is a good vehicle to invest in, been in mine for over 20 years and have a nice six figure nest egg. One needs to understand how the stock market works, and learn to manage your money over time, such as learn when to re-balance your portfolio and cut back on stocks as you near retirement. Has worked for me, and I'm considered lower middle class. If you want some titles of books to learn, let me know.
If you got one on Roth 401ks, I'd like to know. Good advice mate.
I am collecting a pension,also began collecting Social Security benefits 4 months ago . I am fortunate.
A lot of companies don't match anymore.
Get a better job.
True. Matches are disappearing.
I contribute up to the point of maximum match. I get $1 for $1 on 6%. After that, my money goes to other investments/savings and/or expenses/debt reduction.
Thanks to CZcams, web blogs, and financial forums, everyone has the same financial knowledge as the rich. In the past, that information was mainly in books, magazines, and financial advisers. Now that knowledge is available to you, for free. Act upon it. Continue watching videos and learn. You can build financial wealth for you and your family. It takes a long time but the people who listen and act will have good results. Doing nothing but complaining results in nothing. Think about it - a new set of wealthy people will emerge in the future by focusing on saving and investing.
I do agree that 401 K is not the best investment out there but we know that the majority of people do not invest or don't know how to invest, this being said, instead of earning money and spend it, 401 K is a better option, but if you know have to invest your money, you do not need a 401 K, educate yourself and invest your money. I am a big believer that no one should know how to invest your money better than yourself
What most people here are not considering is that people (like me), don't have another 30 years of work life left. I plan on retiring in 6-8 years. 401k is the "safest" and easiest way for me to invest.
C
Hey Jaspret, can you talk about the Roth 401k and the Roth IRA? Thanks!🙏🏼
Good video idea, will do!
How old are you?
Kolten Jones That’s a personal question
@@YPeezy It matters for IRA and investing in general. Kolten wasn't being rude.
I wouldn't say a 401k is the safest. It really depends on what you're investing in within that 401k.
Yes, the money in the 401k is tax deferred but for most people, the 401k is the only avenue they will use to set aside any savings. The beauty of the 401k, is that it is automatically withdrawn from one's paycheck and most people never miss the money taken out.
Assuming you are over 62 and want to take money out of your 401k, you normally wouldn't take all of it all at one time. Usually, the amount taken out in any given year would be a small percentage so the entire amount lasts through the rest of your life. So your tax on the amount you take out in that year is the tax rate you fall under.
Most employers match your contributions to a certain percent of your annual income so you are saving more than just the money you personally contribute. Also over time, the stock market has historically risen. Yes, there have been times when we go through a recession and it will happen again so the older you get, the better to diversify into safer investments in your 401k (IE money market or bonds).
Lastly, if an emergency ever arises, the money in the 401k is there in form of a loan. It can be a Godsend for any unexpected expense.
Its a gamble, some win and some loose. You won't know until your ready to retire.
Straight and to the point!
I've asked my 401k adviser how many people he know who successfully retired on just 401K, his answer was ZERO
Can you do a video for beginners on understanding tax codes?
Fire investors really need to hear this. Side hustle is the key. You need steady income for when you can’t work no more. This is also why you check with HR to change the funds your invested in and use ladder conversions.
Excellent video Jaspreet but this would've been good time to talk about Roth contributions to 401K so you can pay the tax on the money up front and it grows tax free. 👌
Agree with all the comments that this is a good video, but a few counterpoints worth considering (tell me if I’m wrong):
- Diversification into RE, while a great choice, perhaps isn’t as useful as J makes it out to be. RE will often go down if “paper assets” go down. And most young people are going to miss out on gains if they put meaningful money into gold over the long term.
- The example about 10K is misleading because the 10K that you invested outside of a 401k already was taxed as regular income, then later you will ALSO have to pay cap gains tax. So the fact that 401K withdrawals are taxed as regular income is moot.
Great video, love the channel.
I turned my 401k into a self direct individual retirement account. Then you can take control of your own investments if you do this.
Exactly, We need teach this to Jaspreet... otherwise he continue to ramble the nonsense. Also there this thing called Roth 401k.
If you diversify your income streams in retirement you can kind of shape how much taxes will get pulled out. For example: you can pull out traditional 401/ira funds until you hit the tax bracket that you want to pay from (hopefully you have other necessary expenses to lessen these). Then you can withdrawal from your roth to get to whatever income you need for the year. If you have real-estate that also opens up certain deductions that you can take from rentals etc. It may be worth your time to discuss different options with a lawyer/tax professional/cpa/cfa (although CFAs don't always give the best tax advice) instead of just blindly throwing your money into one type of investment. Also- social security is also taxed when you hit a certain (taxable) income level
Thank you for putting this out there. I got demonized for talking against 401(k)s. That I'm being reckless for picking and choosing my own stocks. My dividend stock portfolio paid out $300 year ending 2020.
I think you should sell your position if you have good capital gainings because with the FED going up in interests rate, it will crush down the stock market not at the current 30% , but maybe 55 to 70%. Cash out, earn small interest in the bank and then buying the dip. They are expecting worst than 1929 Depression.
@@carloschu7127 I'm holding. And I am buying stocks on the dip. I get dividends every month. I would lose now if I was to sell. Selling is not going to happen.
@@markmyjak7739 I understand. In theory, you should probably sell in 2021. Its already down 30% since January 2022. Nontheless , keep an eye on their 10Q and 10K if posible.
Most 401ks allow an in service withdrawal which means you at age 59.5 can perform a tax free rollover to a traditional IRA, which can give you more investment options/strategies
ROTH IRA and real estate are the way to go
Roth is garbage is too.. real estate, CV life insurance, commodities
Matthew Long explain
become your own administrator of your own individual 401k, hence no fees and I even got my company when I was working to put the money from work and the matching amount into my individual 401k. I also have physical assets and no debt on my home. all of us kids in our family learned this from mom who had been a trader in the past.
I had the option to set up a Roth 401k instead. I took it!
The only problem with that is your employer puts in your match as pre tax anyway.
@@zacht9805 This is true, but if you prefer to pay taxes now versus later, is it better to have some of it (employer match) taxed later, or all of it (your contributions +employer match) taxed later? Keep in mind that generally speaking in this day and age, the employee's contribution is larger than the match. I am all for the second option, if there is no avoiding the match being pretax.
I work for a railroad and I have a 457k , 401k, 401k Roth and a defined pension plan. We also get railroad retirement which is better than Social Security. I also trade stocks with TD Ameritrade. My next step is to start buying and flipping houses.
I've never liked 401K's. Too many rules and fees and limitations.
I'm with you on that one!
If your employer offers a match, it is worth doing for most people. Self-directed IRA might work for you.
@C B I started mine about 35 years ago with a meager $24 along with a $12 company match per week. If you had told me then that it would be worth well into seven figures today, I would have thought you were crazy....but here we are. See you on the course or at the lake house C B.
@C B You nailed it. They want the world and they want it now. That is why their debt is so incredible, and they can't dig out of it. It's amazing. I remember when you had to establish credit before you could get any real credit.
I earned my credit by placing some items in lay away (remember that), and paying them off before I got to take them home. Then I was eligible for a Sears card. I then took a out a small ($200) personal loan from my bank and paid that off in 6 months. Then I got a Texaco gas card. All the while making payments on time and proving that I was employed. The whole process took about year and a half, and then I got an American Express and could get a car loan.
Now, they issue cards to anybody and charge 20%+ interest, even if you don't have a job or income. These college kids, already saddled with debt, believe the admin and profs that six figure jobs are waiting for them and their liberal arts degree, dive deeper into debt. Then to top it off, when they get a job, they "don't believe in 401K plans" thinking they will beat the system and get wealthy through debt.
Sorry for the mini rant. Peace Brother.
@C B - You're acting like millenials live in the same system that boomers got to thrive on. There's a way larger wealth disparity now than the one boomers grew up in. Boomers had access to free college before it was fazed out in the 70s. Also inflation wasn't as bad as it is now. Taxes were typically hit hardest on the wealthy, not on workers. Wages were reflective of the work put in, whereas workers today have had inflation increase the cost of living while our wages never adjusted for those very inflation increases. Also credit cards became far more accessible in the 80s, forcing many to flood the markets, thereby increasing inflation and causing market failures. Boomer & Gen X'ers SSI is still secure, while ours may be partially insolvent. Millenials are the most educated degree-holders of any generation, yet have the highest unemployment rates. No, we don't expect anything to be "handed" to us. We just want the same access to opportunities that led to the prosperity of previous generations. We know this history bc our parents set those expectations in us, since this is what they themselves got to experience. You could be a miner or mechanic in the 60s and make enough to own a home and 2 vehicles for a 2 parent, 2 child household. Today, even on 2 household incomes and no children, buying a home and car is not feasible. And this is a widespread issue, which indicates this is a problem within the current *system* not the generation. Please check your privilege. I am investing in 401K, Roth, HSA, REIT, treasury bonds, etc. And I plan to go expat during retirement to survive the rising inflation and take advantage of the FEIE on my passive income. Millenials are incredibly educated on money, but the system leeches us for all we've got. Please leave your judgments out of this.
You definitely need a 401k as well as other investments. What Jaspreet fails to mention that is that a 401k (as well as 403 & 457) is protected from lawsuits. Retirement plans are ERISSA protected. This means a creditor cannot take your money. Brokerage accounts on the other hand are NOT ERISSA protected. This means you cause a car accident or face any judgment, your brokerage account can be garnished.
Diversification of your investments also includes diversifying your tax obligations & legal protection. A Roth IRA btw is generally protected more or less up to $1 million. This is important to factor in as you get older. So please, put money away in your 401k if you have a job that provides that option. Invest in other vehicles too, i.e. Roth IRA, brokerage accounts, etc.
When talking about tax you forget to discuss Roth 401k!
The thing is...if you don't have an IRA/Roth IRA, if you don't have personal retirement savings or any other account you absolutely must take advantage of a 401k if your company offers one and has a good matching program. Diversification is absolutely key as you mentioned, but you MUST be saving in SOME way. Saying "well my 401k fees are terrible and the match isn't 100% so i'm not going to participate" is extremely irresponsible if you don't have other retirement savings plans. Plus, the top 1% of "income earners" in this country is full of retirement aged people, meaning if you're OK with an extremely high tax rate such as 60-70% on the top income tax bracket, be ready to pay that % when you want to pull your 2.5 million out of your 401k upon retirement because guess what...you're now in the top 1%. All that being said....get a freaking Roth IRA if you haven't already. Just type in "Roth IRA Calculator" into Google and have some fun :)
Money is a control system
Nothing bad about real money, but that is banned. Government forces the use of fiat currency, which is super evil
I was diagnosed with a mental illness at 16 and I am now 34 and have become unable to work full time within the past 2 years. I have applied for disability services. I have 250k in my 401k and 10k in my bank account. I have dipped into it early 4 times now with steep penalties that I was supposed to get waived because of my disability. It was not exempt but was supposed to be. They are refusing to do anything and a lawyer wants 2k to start trying to recover 14k in fees. On top of that they are denying my disability claim through SS over and over because I already have money and have worked within the last 10 years.
What a mess. I am paying 600 a month out of pocket for insurance with a 10k dollar deductable until they accept my claim for SS disability and Medicaid which they probably wont even give me. This country is really good until it isnt. It is as easy to loose all your money as it is to make it.
Finally, a good video. I am pulling out of my 401k
This video is misleading. It assumes that the you can't avoid fees, it assumes that the stock market is separate from the 401K which it's not, it assumes that ppl retire in a crash when actually you're supposed to move your 401K bonds 5 years ahead of retirement into a safe option inside your plan like a stable-value bond fund or guaranteed fund investment options. It also assumes that pensions don't have fees, when in fact they have up to 18 charges. It claims that market trends don't go up forever. Of course they don't, they fluctuate, but historically they give you a net return of 8% to 12%. Even with a crash, you still come out with gains. This video claims the tax-deferred option means taxes will go up when historically most people reduce their income during retirement and your taxes will be while you're in a lower-income bracket. And the biggest error about this video is the claim that your income increases bc you pulled out your entire 401K at retirement. Nobody would do that. Nobody *should* do that! Experts recommend you pull out 4% of your retirement fund for your annual income. I suggest keeping it in a savings account with at least a high interest return and pull out whatever you need for your monthly expenses.
The remaining 96% of your retirement savings should sit in the market to continue growing. My biggest pet peeve about this video was that he says he put everything into the stock market, which is where your 401K grows! And if you try to go with a brokerage firm, they charge way higher fees and they always lose. Study after study has shown that 97% of the time, those who bet against the market do not succeed. Not even the best brokers or computer algorithms can predict the market. As soon as he started selling a book at the end, that was all I needed to know to understand why he was being so misleading. Listen, go into 401Ks but BE SMART about it. Use the cheap *blooom* robo-advisor or the free Personal Capital fee analyzer to find hidden fees and adjust the necessary allocations to find the cheapest options (like index funds). Make sure to read your company's fee disclosures and your funds prospectus. Then look for lower cost options that charge fees below 1%. These fees will be equal or lower than pensions or Roth. Do your research on Vanguard, Fidelity, S&P, etc.
But whatever you do, DON'T cut out the 401K. It shouldn't be your sole retirement fund, but 1 of many plans in your retirement portfolio. Nobody is immune to a stock crash, not even this guy in the video. That's why your portfolio should be diversified, and have a variety of domestic stocks, international stocks, treasury bonds, interest savings, assets like real estate or even REIT funds, etc. And even if there IS a crash, relax. Do not panic, do not sell. Again, markets fluctuate and it will bounce back up with greater gains. Look at the past 100 years, and you'll see it raises back EVERY SINGLE TIME. Warren Buffet himself will tell you. Invest and HOLD. Remember: *it's not about timing the market, it's about time in the market* Loss of money in the short term doesn't mean you won't reap benefits in the long-term. The only thing you need to be concerned about is inflation. That's why another tip I have is to retire in a no-income tax state, or live as an expat abroad so that your retirement savings doesn't get eaten by taxes or inflation rates. Anyhow, please don't listen to this video, this guy is very irresponsible. Do your research. Watch LeanFIRE style channels like *Next Level Life* or *Graham Stephen*
@@YourMajesty143 well said and i appreciate you taking the time to explain this. Its horrifying to see people saying that they are going to withdraw their 401k funds after watching this video.
@@YourMajesty143 very well said.
With my 401k in place and my portfolio steadily growing, I’m not good doing it alone but getting into the market turned out lucrative for me.
Big misinformation- he says your 401K can't hold real estate or real gold. You can, I know people that hold both in their 401K accounts.
Got out of my 401k last year and learned to invest in the stock market. Best decision I’ve made :)
This was not a smart decision, because 401ks are invested in the stock market, too. You ceased taking advantage of pre-tax investing and pre-tax growth,which would make you richer quicker. Avoid paying tax as long as possible is the holy grail of many forms of investment.
The longer you put off paying taxes, the higher the tax rate you'll pay - not really too wise.
That and both forms carry the risk of the stock market itself.
At least he is able to freely shift his money into other assets as he so chooses without penalty.
I would say overall his choice is wiser than a 401k.
But I do feel on edge about his money not being more diversified.
@@scorpion8ragethere's nothing wise about abandoning a 401k investing vehicle that allowed Pre-tax dollars investing with an employer match in favor of post tax dollars investing. Doesn't matter what the future tax rate is, you can only contribute 19k without accounting for the employer percentage math.
@@PORTDEPAIX
Anddddd everything you just said confirmed my stance. 🤣
Not much else left for me to say, so thanks.
This is off topic but could you make a video about how you make your videos? Like what type of background do you use, what kind of lighting and studio set-up, and also: How do you create your thumbnails? Where do you get your ideas on how to pose for those pictures? And how do you find ideas for videos in general? Also what are your tips on how to start a successful CZcams-Channel? I think you're one of the few who manages to keep a PERFECT balance between making your videos entertaining by letting your fun personality shine through but at the same time still keeping them professional enough so it becomes clear that you know your sh!t and people can take you seriously!
401k is still a great vehicle for retirement. This is what I do for retirement savings.
1).contribute to company match in traditional 401k
2). Max out hsa account
3). Max out roth
Over simplifying the issue. Without 401k, 80% people would have zero savings. And do you expect money managers to work for free?
Just because you can’t save up money does not make the video wrong
Point is, you can save the money yourself and not get taxed but your comment shows your mindset was not built that way
You want someone else to do things for you
You’ll get as far as the 80 percent you spoke about - relying on a 401k...lol
@@andrewlovelace5119 Lots of people spend every dime they get their hands on. Getting the money out of the paycheck before you see it makes it easier to invest and leave alone. Plus, the company match is free money.
Dave Ramsey is a multi-millionaire because people aren't disciplined enough to spend less than they earn and invest a portion of their pay.
You can avoid management fees in the 401k if you manage your own money instead of having a manager do it for you.
If you can explain how?
@@jarvisaddison8560 First find out if your 401k is actively managed; if so, ask for it be changed to self-directed where you pick your own investments (then talk to a financial adviser and/or look up videos on what investments are good for long term).
If it's not actively managed then they probably just put the money into a target date fund. You can leave it in there if it's performing well enough, or see what other funds are available and re-allocate your money into whichever of those you want.
@@Mazlem thank u
Can you make a video about traditional IRA's and Roth IRA's ?
@@MayTheSchwartzBeWithYou Because Jaspreet has a gift for explaining in readily understandable terms. My crystal ball shows me Jaspreet becoming big on Fox Business soon.
Traditional IRAs invest pre-tax dollars, so you pay taxes when you take the money out. Roth IRAs invest post-tax dollars, so you don't pay any taxes when you take the money out.
@@damondiehl5637 tax bro
ALWAYS utilize a 401k if there's a company match. Contribute up to the company percentage match. With my 401k, I have it looked at, and re-balanced, monthly. I will add that you can choose to put money in AFTER taxes if you chose to so it is taxed now and not later. I have never lost money in my 401k. I see no reason not to put in 5% because my employer also puts in 5%. That's free money. You can invest with the rest of your extra income.
Not to mention you are totally locked out of your 401k money while still employeed with same company.
Even with a Roth 😑
@@MayTheSchwartzBeWithYou
I mean no you shouldn't but one of the benefits to the Roth account is being able to pull contributions with no penalty. Also, what if you want to start a side hustle or self direct some of your funds?
@@MayTheSchwartzBeWithYou
I get that. Just saying not all circumstances are the same. If the 401k my employer puts me in absolutely sucks balls I'd like to be able to transfer some of my 401k money to my IRA while still taking advantage of the company match and without switching employers.
@@zacht9805
If you have fidelity,just open up a brokerage link where you have access to all the funds and transfer money that's in your 401k.
@@MayTheSchwartzBeWithYou
If I don't contribute to my 401k I don't get an extra essentially 2 percent of my salary from my employer. My wife gets an extra 6 percent. That's a lot of money to just leave on the table.
My man! You make Dave Ramsey look like a beginner investor. You should have a show and do Q & A. Thanks for all you hard work and wisdom. The are a blessing to the world. 😊
Are you investing for the future in A I, Virtual Reality, And The TechnologicalAdvances In The Future
This video should have way more views than it currently does.
100% correct. Here's one strategy:
1.Contribute to 401(k) ONLY up to the match
2. Contribute every year to Roth IRA
3. Buy rental real estate
4. Start brokerage account yourself with extra money and invest
5. Buy and fund permanent life insurance to create tax-free pension at retirement
6. Start side business to create Roth 401(k) and make more tax-free accumulation
All of this assumes you have no debt, are living below your means, and have good income.
The investment income is taxed. The fees can be offset by tax breaks, if you are not confident in managing your money you can make an argument for 401k , investing can have high risk you need to be well rounded to play the game.