Roth IRA vs 401(K): The Best Investment For You | NerdWallet
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- Опубліковано 30 лип 2024
- Investing for retirement is an integral part of building your financial future. Whether that means saving up or investing through a 401(k) plan and/or Roth IRA account, investment strategies can change over our lifetime. You might find one is the best option to start your investing journey and the other more beneficial for your long-term plan.
NerdWallet investing writer Alana Benson breaks it all down in this video to help you make an informed decision and understand what comes next after deciding which plan best fits your needs.
Suggested Articles:
401(k) Calculator: www.nerdwallet.com/investing/...
IRA vs. 401(k): How to Choose:
www.nerdwallet.com/article/in...
Chapters:
0:00 - Intro
0:21 - 401(K) Explained
0:44 - 401(K) Contribution Limits
2:54 - Traditional 401(k) vs Roth 401(k)
3:29 - Roth IRA Explained
3:54 - Roth IRA Benefits
4:19 - Roth IRA Pros and Cons
#NerdWallet #401K #RothIRA
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Roth IRA vs 401(K): The Best Investment For You | NerdWallet
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It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.
For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement.
It's unfortunate most people don't have such information. I don't really blame people who panic. Lack of information can be a big hurdle. I've been making more than $875k by just investing through an advisor, and I don't have to do much work. Doesn't matter if the economy is misbehaving; great wealth managers will always make returns.
As a new investor it's always great to hear from a person who has gone through all the difficult times and come ahead of it. What are some strategies i can employ to be successful?
Sharon Marissa Wolfe is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
I recently sold a house in Portland, and I'm considering investing the proceeds in stocks. I know it's a wonderful time to buy, but is this the right moment? When will I fully recover? I'm honestly just perplexed at this point as to how other folks in the same market are making over $450,000 in gains in a matter of months.
For any investor, a strong plan is essential to their portfolio. The higher the risk, the bigger the possible return when it comes to making important decisions, thus it makes sense to consult with seasoned experts.
Many people minimize the advisor's job until they become emotionally burned out. After a protracted divorce, I needed a boost to keep my firm viable, so a few summers ago, I looked for licensed consultants and found someone with the highest qualifications. My reserve has increased from $275k to $850k thanks to her assistance, even with inflation.
That does make a lot of sense, unlike us, you seem to have the Market figured out. Who is this coach?
NYCOLE CHRISTINA VANNATA a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thanks for sharing, i did a quick search and found her web page, i hope she responds to my mail soon
It is advisable to save at least 15% of your income in a 401(k). Online calculators can help you estimate the appropriate savings amount based on your age and income. By saving at least 15% of your income in a 401(k), you can work towards a comfortable retirement. This strategy allows you to benefit from compound interest, potentially growing your retirement savings significantly over time.
People don't really know this, You need to create your own process, manage risk and stick to the plan, through thick or thin while also continuously learning from mistakes and improving.
I totally agree; I am 66 years old, recently retired, with approximately $1.2 million in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, I didn't do all this alone, but with the help of a financial advisor. Having one is currently the best way to trade in the stock market, especially for people nearing retirement.
My portfolio has been in the gutter for the entire year, so I started researching new ways to profit in the market, but everything I tried just seemed to miss the mark. Please let us know the name of your financial advisor.
Credits goes to "Sharon Lee Peoples" one of the finest portfolio managers in the field. She's widely recognized; you should take a look at her work.
She appears to be well-educated and well-read. I ran a Google search on her name and came across her website; thank you for sharing.
I have worked all my life without thinking about my retirement. Now my kids are growing fast, the way I am spending my savings, it has come to my attention that at my old age, I will have no jobs, no money left and no retirement funds to fall back to. So I am asking what do I need to do and how do I begin investing in my retirement. I just need professional advice. Thanks.
I am no professional, but I know and use one. You should do same to avoid unnecessary losses. It is never as easy as they make it look. Please be safe.
Could you please refer me to your expert, I will like to look him up.
It is a SHE, and her name is Deborah Lynn Dilling.
*Deborah Lynn Dilling* is the licensed coach I use. Just search the name, you'd find necessary details to work with some correspondence to setting up an appointment with her.
I am kind of skeptical about all investments, but I have no other option than to begin my retirement plans. Please what more can you tell me about Deborah Lynn Dilling. I want to be in safe hands.
100% agreed, my so called target retirement fund in 401k had absolutely terrible return compared to sp500. I moved all to sp500 but biggest regret of my life I didn't do it sooner....What else is best way for me to invest 200k in a non-retirement account?
I would avoid index funds, mutual funds, and specific stocks for the time being. Right now, the best option is a fixed income of five percent.
True. I’ve been investing in the stock market for 11 years now, last 5 years with the help of a financial advisor. Through this period of advisory support alone, I've been fortunate enough to achieve a 10x return compared to my previous efforts as a DIY investor, summing up nearly 85% ROI as of today. My best so far...
@sommersalt88 I'm intrigued by this. I've searched for financial advisors online but it's kind of hard to get in touch with one. Okay if I ask you for a recommendation?
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Jennifer Leigh Hickman” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Thank you for sharing, I must say, Jennifer appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive. I reached out and scheduled
I have two pensions. I would much rather have had a Roth 401k throughout my working lifetime. $500/month invested from 25 - 65 at 9% is $2.3mil. I have $100k that i like to invest in a non-retirement account, Where would you invest this as of now?
I would avoid the index funds, mutual funds, or specific stocks for the time being. 5% fixed incomes are the safest bet for now. Save your cash for when the market actually shows signs of recovery.
Working with a financial advisor has been a game-changer for me. They provided invaluable insights and tailored strategies that aligned perfectly with my risk tolerance and financial objectives. With their support, I've seen significant growth in my investments and gained confidence in my financial future.
I've been looking to get one, but have been kind of relaxed about it. Could you recommend your advis0r? I'll be happy to use some help.
Angela Lynn Schilling has always been on the top of my list..She is regarded as a genius in her area and well knowledgeable about financial markets. I highly recommend her if you want excellent collaboration.
I've experimented with a few over the past years, but I've stuck with ‘’Angela Lynn Schilling” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.
@@JacquelineTheresa That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well
@@NancyBetty-x My advisor is VICTORIA CARMEN SANTAELLA
You can look her up online
Nah I Can't say I can relate, VICTORIA CARMEN SANTAELLA charge is one-off and pretty reasonable when compared to what I benefit in returns.
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 60 years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with Carol Vivian Constable for about five years now, and her performance has been consistently impressive.
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
I just retired, but I am uncertain that my 401k and IRA will ensure a stable future. I have $900k set aside, I am seeking an approach that matches my risk tolerance and financial objectives. Please I need advice, should I invest in stocks or real estate ?
You should explore rosters of dividend aristocrats and select six to ten from the compilation. These esteem companies boast a remarkable history of consistently paying dividends for over 25 years. Furthermore, it is discerning to engage a financial advisor to help in crafting a meticulously structured portfolio.
I am in terms with working with a financial advisor. It has really helped in shaping my retirement future. I am currently working with CFP, his expertise on wealth management and tax planing is unmatched. He has really helped in optimizing my financial growth and security. He works in accordance with my financial goals and my risk tolerance.
Yeah.. I think the first concern of any experienced financial advisor is to understand the financial objectives of his clients and the amount of market risk their clients can tolerate and working closely with them to produce a strong result.
I agree. My advisor took time to understand my entire financial landscape and this has earned me high net worth across all my holdings
Please who is the advisor guiding you. I have actually been looking into financial experts lately, but I have not seen to get a creditable one.
I might have missed this but another big advantage to Roth IRAs is they do not have Required Minimum Distributions (RMDs). This gives you better control over how much money you must withdraw (heavy liquid) and declare as taxable income, after age 72. For anyone with a large traditional IRA, they might end up in a higher tax bracket when RMDs kick in. I've heard it called a Tax Bomb.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000
Mind if I ask you to recommend this particular coach you using their service?
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
401K, Roth 401K, IRA, Roth IRA (Backdoor Roth IRA). So many options, which ones to choose. You can choose all of them depending on your situation, but what's the best setup?
The first thing to know is that the decision is much easier when you (1) have low income, (2) don't pay state taxes, and (3) are decades away from retirement age. In that case, contribute to your Roth 401K to get the company match, then max the Roth IRA, then max the Roth 401K. Simple! If you actually pull that off you'll be set for retirement unless your spending gets the best of you.
For everyone else, sadly, it gets more complicated. When comparing Roth vs trandition accounts, you always hear pay tax now vs pay tax later. However, it's more accurate to say total cost now vs total cost later. A lot of people don't factor in the impact when it comes to social security benefits, Medicare premiums, pensions, RMDs, relocating, the widows tax trap, inheritance for children, subsidies, side hustles, widthdrawal rate, big purchases, etc.
What's best for your situation will depend on your specific situation and how it evolves over the years. However, there are a few generalizations that tend to hold true for most people. Most people tend to make less money at the start of their career and that amount increases over the years (not a straight line). Knowing this, it's better to contribute as much as possible to Roth accounts early in your career and switch to traditional accounts the closer you get to retirement. The idea is that you contribute to Roth accounts when the cost is lower and there's more time for the money to grow. Hence most of the money in those accounts in retirement is due to the growth. You contribute to traditional accounts closer to retirement, which is when the cost is higher than if you did Roth contributions, and due to the limited time most of the money in those accounts are your contributions. When to make that switch will depend on all the factors used to determine your break even point.
My growth of 401k is 2.74% in the past year. In this environment does investing under a brokerage with a custodian outperform a 401k? should I seek a pro to grow my funds on brokerage acct or still hold? I have 5 years to retirement. Happy to discuss.
Mine was 8.16%, I used to dca into etfs but I reconsidered the strategy since I am still way behind after the massive downturn since Jan last year
the size of your retirement portfolio will overwhelmingly be a function of the performance of the stock and bond markets between now and when you start withdrawing from it.
Private investing is the best way to go about the market right now, especially for near retirees, I've been in touch with a wealth manager for awhile now netted 370thousand this downturn, made it clear there's more to the markets than we average ones know.
You can actually do both and max both out at the same time. As long as you make under $180k single, or $220k joint - you can max out both a 401K and IRA. You can mix and match ROTH and Standard in both 401Ks and IRAs as well. Nothing says you can't do $11,250 to a ROTH 401k, $11,250 to a Traditional 401K, $3000 to a ROTH IRA, and $3500 to a Traditional IRA - and $7750 to a HSA.
Why are IRA contribution limits kept so LOW ($6K/$7K)? They should be made the SAME as 401k limits so that folks without a 401K can be on equal footing! Somehow this video has helped shed light on some things but I'm aiming to create a portfolio worth not less than $1M before I turn 60.
A solid strategy can be a key component of an investor’s portfolio. Well, the bigger the risk, the bigger the reward and such impeccable decisions are better guided by professionals.
It's true; I discovered that in 2020 after nearly losing everything. However, I made the switch to using a financial advisor, and since I've been making at least $98k each month, I've stuck with using an advisor for investing.
I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?
"JILL MARIE CARROLL" is my advis0r. She has since provided entry and exit points on the securities I concentrate on. If you want to check her out, you may do so online. I usually trade in accordance with her strategy.
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
My company matches our 401k contributions up to 9.3% . We have Roth too. I wanted to know if I do 1/2 and 1/2 will it affect my 401?
Great video
3:20 Roth IRA benefits
How much can we consider high income, so I can decide to go for 401k or Roth 401k?
Federal Tax Brackets are: 10% 12% 22% 24% 32% 35% 37% Favor contributing to Roth 401(k) when in relatively low FTB and favor contributing to traditional 401(k) when in relatively high FTB. Favor Roth 401(k) if in 12% FTB. Which tax bracket do you expect your career path to take you?
@@alrocky I’m currently on 22%
@@abdl-nk6in As default consider contributing $7,000 to Roth IRA and as much as you income and budget allows up to $23,000 to traditional TSP. If you expect your career path to reach 32/35/37% contribute to Roth 401(k) now and t-401(k) once you reach 32/35/37% FTB. It's far more important to contribute as much as you can rather than wringing hands deciding if Roth or traditional better.
Most people don’t realise it, but the secret to retiring comfortably is finding a way to make returns while your money works for you. My dad, as I remember, started saving for retirement quite late, but I know he was making more than 10k returns from his investment monthly and it was completely passive.
This is really amazing though. I'm curious as to how he did it. Was it real estate? Or he was a market enthusiast?
Haha. Investing enthusiast? Not really. Our family got introduced to a financial advisor about four years before my dad retired. That was what changed things. I've been using the same now and I think my retirement income would be on the right track.
This is great. Is there a chance you could recommend who you work with? I could really use that at the moment.
I'm hesitant to make recommendations like this online so I can't drop her contact here, but you could look her up yourself and contact her if you wish. Her name is Sharon Louise Count.
How come you don't mention the ability to have more money invested in a 401k to grow and compound? E.g. a 10% return on pre tax $1,000 for someone in a 20% tax bracket is $100 for a total $1,100 while the after tax Roth is only $80 for a total of $880. That compounds over the years and is an advantage for the 401k.
Uncle Sam will be all smiles when you take your distributions. You'll be paying taxes on both your pre-tax principle and interest earned, whereas anyone with a Roth has no further tax liability on either the after-tax contributions or on interest earned. Also, a Roth can be Self-directed, meaning contributions can be invested in privately owned real estate or your own business... tax free.
@@howiescott5865 Smile now or smile later. You are giving up a lot of interest on money taxed early, that is my point. You might also be forgoing an employer match. Roth's are great on the back end but unless you think your taxes will be greater in retirement than when working I would start with a tax-deferred account, unless you make so much money you are able to max out your contribution after taxes, have other retirement income like a pension, or need the flexibility that comes with a Roth. I don't know which is better as it depends on the individual earner, but not talking about the benefits of investing more money earlier is a big hole in this video.
@@ckaarchitect Generally you want to contribute enough to your 401(k) to receive the company match and then $6,500 to Roth IRA. If in relatively low tax bracket [
In todays living conditions who even has money to invest in both
I'm barely able to pay my bills.
Can you believe I worked for a company for 12 years and only managed to save 19K USD. I realized how much time I was wasting working for others when I had a $ 1.2 million return on a stock I bought 4 years ago. Amazing right?
I am currently living an independent life thanks to my decision to have a passive income stream and invest
You are really lucky, I lost over 70 percent of my portfolio to this recent dip. I don't know why everything is so difficult for me, I make money off the market though but most times I end up losing. it hurts so bad.
I don't know if it's because I don't have a wealth advisor IA. Please, what do you suggest? You might have more experience than me.
My employer matches both
IRS is bad umkay!
1:12 1:14
Ugh you can tell she’s reading a script and doesn’t understand what she’s talking about
Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.
Prioritizing effective personal finance management holds greater significance than the sheer amount saved, irrespective of income source. Consulting a certified financial advisor can offer tailored strategies to optimize financial results by reducing expenses and enhancing income, regardless of whether it's earned through employment or investments.
I wholeheartedly concur. At 55 years old and newly retired, my external retirement funds total around One million two hundred fifty thousand dollars.. With no debt and minimal retirement fund allocation relative to my portfolio's value over the last three years, I recognize the importance of a financial advisor. Neglecting them isn't an option; however, thorough research is vital to find a trustworthy fiduciary advisor.
This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
The decision on when to pick an Adviser is a very personal one. I take guidance from ‘Carol Vivian Constable‘ to meet my growth goals and avoid mistakes, she's well-qualified and her page can be easily found on the net.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.