Why Dave Ramsey Thinks We Should STOP Investing in a 401k
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- Опубліковано 1 чер 2024
- Dave Ramsey is recommending that his listeners no longer make contributions to their traditional 401k plan. I explain why. Dave explains that with your 401k you would have to pay taxes on all your draws and the tax rates could be significantly higher when you retire. He's basically saying to put money into tax-deferred accounts while tax rates are high, so that you can enjoy lower tax rates during your retirement years. What is Dave recommending instead of a 401k? The Roth 401(k). I might agree with him...watch to find out what I think is still missing from his claim.
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I think the retirement crisis will get even worse. A lot of people can’t save because of low paying jobs, inflation, and insane rental rates. And now that home ownership is out of reach for middle class Americans, they won’t have a house to retire with either.
Things are a bit strange right now. Inflation is making the dollar weaker for buying things like basic needs, but it's getting stronger against other stuff. So, stuff like stocks, houses and precious metals aren't doing so great because folks are putting their money into banks for safety but I'm worried about my retirement savings losing value fast.
Even if you’re not skilled, it is still possible to hire one. I was a project manager and my personal portfolio of approximately $400k of my retirement pension took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect my funds and make profit from my portfolio this red season. I’ve made over $250k since then.
Thanks for replying, You seem to know much, How did you go about it and can you recommend an advisor like yours?
Colleen Rose Mccaffery’’ is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
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The thought of retirement makes me cry. My apologies to everyone who have retired and filing social security during this time after putting in all those years of work just to lose everything to a problem you never imagined to happen. It’s so difficult for people who are retired and have no savings to fall back on.
True, It has never been easier to understand how to build your money after retirement than it is right now with the inflation, when you may study and experience a completely variegated market passively by employing a successful portfolio-advisor. The impacts of the U.S. dollar's gain or fall on investments, in my opinion, are complex.
It is the US government war on we the people.
Trust no banks.
*yep!*
*they want you to work, a 9 to 5 matrix job your whole life, then they want you to retire when you’re about to die…?*
*hell nawww, I’ll pass!*
@user-qm6mo9ct5g You probably have more options than you think. Did you ever find help with this?
Right big Gov cuz gambled it all away on stock market
I stopped 7 years ago. My fiance had $330,000 in her 401K she was dying of cancer terminal she had eight months left to live they still wouldn't let her take her money without a penalty. They said it's not a hardship She withdrew $85,000 of the 330000 paid 34000 in taxes penalties they stole from her
Are you contributing to a Roth or Roth 401(k) now?
@@davidmcknight8201 no nothing
Sorry for your loss! .If your wife was no longer working she could have done a rollover to an IRA, where you get to choose how much money is withheld for taxes and penalties only come into effect when you file taxes and it may have been possible to use an exception for the penalty for unpaid medical bills.
My god that’s awful. Makes your blood boil hearing stuff like this. fucking organized crime is all it is. The government always gets their cut. A
@@josephkingsley8708 she was a teacher in the IU Department she worked for the psers. 22 years in Pennsylvania
I dumped all my 401ks because all of them just kept losing money no matter what i invested in
We experienced the peak of our era, and now it is gone. Recession is tanking everything including 401K. My retirement equities portfolio of $750K is in the reds. I keep losing because of inflation. This world will fall to the corrupt rulers in the same way that Rome did. I'm sorry if you're thinking about retiring and you're worried that your pension won't be enough to meet the rising cost of living. Horrible foreign policies everywhere, bad regulatory policy, bad fiscal policy, and bad energy policy.
For retirees and those close to retirement, I believe it's particularly challenging. All those years of labor only to lose it all to a problem you weren't responsible for, my regrets to everyone retiring during this time.
I'm very worried about the future and where we're all heading, especially in terms of money and how to get by. I'm considering making my first investment in the stock market, but how can I do so given that the market has been in a mess for the majority of the year?
After the pandemic, things became extremely difficult, which is precisely when I sought a consultant's counsel. I've been investing on my own for nearly 3 years and have built up a stagnant reserve of $280K to $570K in just over 24 months.
I agree, that's the more reason I prefer my day to day invt decisions being guided by a init-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using a init-coach for over 2years+ and I've netted over 2.8million.
I’m in dire need of guidance so i can salvage my portfolio due to the massive dips and come up with better strategies. How can I reach this advisor?
Ok sir I have never heard of you or seen your videos, but I must say I am impressed. I am a Dave Ramsey guy I actually meet with one of his smart pro investers she suggested the Roth and a money market account ( I did both) my company is now offering a 401k starting in June, she suggested taking it only up to the match, but back to you sir , I'll start watching your channel maybe I can learn a little something. Good work on the content. I keep watching.
Thanks Joseph!
This guy is lying. Why doesn't he show the video of Dave saying these things? Because Dave didn't say them.
My mum lost almost everything during the 2008 Great Recession. She was two years from retirement. Ended up at Wal Mart. What I learned is when the company she worked for went bankrupt, the 401k was also tied up in the process and was inaccessible for almost 9 months. A fraction of the balance remaining which was taxed upon access. Robbed by the employer, market and IRS.
I as the eldest son support my mum. She lives with us. Just one example of how The 401k was a huge scam for us.
So no. Mr McKnight. The 401k is a load of Bollox.
Sorry about your mum. The 401k works for a lot of people, but not everyone, particularly when they hope to retire right around a market crash.a
within a year of the 2008 crash my 401k came screaming back, i never lost a dime .I don't understand is why the company going bankrupt would affect her 401k( outside of maybe not making a match anymore)..
She probably had 100% in company stock😢😢😅😅😅.
This was a Democrat in 2008 .. they will continue to this to make sure they do not pay million dollars payouts. Because the money you have given to 401k had already been spent. It's like given your money to a buddy to hold for a year, see what you have in a year from your buddy.. probably nothing.
@@Mrttansamman1000 Sorry, who was a Democrat in 2008? Dave Ramsey?
I lost close to a half million dollars in 08’. I hung in there and keep going with the 401k and actually got it all back and was getting anywhere from 10-25 thousand every few months until 2020 then Bidennomics happened and it has been a roller coaster since.
That’s pretty much the stock market for you. Glad you hung in there.
Please explain Bidennomics.
When you have a 6% match it's hard to give up free money.
You can still do a Roth 401k and get the match. This is something I totally recommend.
If you don't have a Roth 401(k), but want to invest 15% of your income (Baby Step 4), then what you could do is contribute just enough to get the employer match, then the remainder into a Roth IRA (without going over the limit of course).
So if you have to contribute 6% of your income to get the employer match, but have no Roth 401(k) available, you could consider contributing 6% into the traditional 401(k) and 9% into a Roth IRA.
@@np5246 it’s ok to have some money in the 401k. You can offset that income in retirement with your standard deduction.
If you feel this strong about Dave Ramsey's ways you should go on his show for a debate or have him on your show. I actually owe him alot as I owe no one and have a good grasp on my money situation.
@@miked8730 I’d love to.
Great advice about utilizing the standard deduction as opposed to not to
Yes, very important to include discussion about utilizing the standard deduction.
I watch several UA-cam videos on how to trade in the stock market but haven't made any head start because they are either talking some gibberish or sharing their story of how they made it and I do not want to make mistakes by taking risks in my own hands
@@Anikaparvati1 What is the name of your broker and how do i connect with him or her ?
@@Christina-Gisela Wow that was easy, i found her website and left a message for her . i hope she reply me. thanks.
More and more people might face a tough time in retirement. Low-paying jobs, inflation, and high rents make it hard to save. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire.
Rising prices have affected my intention of retiring at 62, working part-time, and building my savings. I'm worried about whether individuals who weathered the 2008 financial crisis found it less challenging than my current situation. The stock market's volatility, coupled with a reduced income, is making me anxious about having enough for retirement.
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.
Would you mind telling me how to contact this specific coach using their service? You seem to have the solution, as opposed to the rest of us.
Sharon Lee Peoples is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Yes sir I’d love to speak to you about a problem I’ve been having and work with my retirement accounts. I originally signed up for Roth IRA and did not receive a statement until a yr after the account was opened up. I noticed on my W-2 there hadn’t been taxes taken out on my Roth account. When I called to inquired why I learned that the hospitals investment company had accidentally set my accounts up in a Traditional IRA and was told there wasn’t anything I could do about it.
Just fill out the intake form at Davidmcknight.com and we’d be happy to chat with you.
This is my first time being introduced to your platform. I’m so confused on what to invest in, or how to invest, as I am a novice. However, I have put up a nest egg and have a bank account that yields 4.15% interest. Now, I just want to know what investment to take advantage of. I’ve watched several videos suggesting investing in ETF index funds, CD accounts, and money market accounts, and Roth IRA’s. Upon my past research, I realized that 401k is not the safest route to go. What do you suggest as a calculated strategy to build a strong diversified portfolio?
Any investment with Roth in the title would work great.
So I just stumbled onto your channel. Where do I start learning about best strategies for retirement, feel so overwhelmed with all the options.
Stay tuned right here!
So what do I do with my 401k while I’m still working? My company won’t let me take my money or move it unless I quit or get fired.
I split between Roth and regular 401k. I see a problem once RMDs start. Im doing Roth conversions each year to mitigate that future issue.
Good idea to have some in traditional because of the standard deduction in retirement.
It's hard not to contribute to the plan your employer is matching.
Indeed.
At time stamp 4:19 is were the real advice is.
But if you retire early you want a little more in traditional and he suggests(before Social Security)
Until it’s time to take distributions you don’t know how much is in a 401 k at any time. All you have is a report with numbers that mean nothing if you can’t cash it out. It just makes you feel a way.
So don’t do a 401k and don’t take the company match?
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
@rachealhubert74 Quitting may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. Alice Marie Coraggio, a licensed fiduciary whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help.
@rachealhubert74 Alice Marie Coraggio
Lookup with her name on the webpage
@rachealhubert74 Alice Marie Coraggio her trading strategies is working for me for more than a year now and I’m making good profit from the stock market and she's 100% honest, reputable and trustworthy
Lol, Ramsey has always recommended ROTH over traditional. I don’t ever recall a time when it was any different.
Not true.
@@DavidMcKnight what’s not true about that?
@@chief5981 he has recently opened up an entire section on his website addressing tax-deferred vs tax-free. This is a recent development.
Dave has been around longer than the Roth, so that can't be true.
The only time I’ve heard him say to go tax deferred is when it’s time sensitive.. like for older people.. grow as much as you can now, pay taxes on the backside
Dave’s approach is more nuanced. Another thing to keep in mind is your age. At a certain point, Roth’s are silly because you are already hurting what are already stunted earnings. I would rather pay taxes on my winnings rather than the principal. I do have a small percentage going into a Roth 401, but only 5-10% of my 25% contribution.
This may make sense if you believe, contrary to expert opinion, that taxes won’t be rising dramatically in the future.
now im concern i was putting money in roth, but if dave r. say to put money in roth i suspect something will happen and its wrong to do... my policy is do the opposite of what dave r say to do..... 💯
Well take solace in knowing that it's also something I'm telling you to do. ;)
They took half of mine after retirement age.
How come?
my employer matches 4% of the traditional 401k not the ROTH. I'm all alone on the ROTH.
But they still pay your match into the deferred portion, right?
That's not true it comes out to about the same taxes paid in the end. First off on a roth ira you can only save 6k per year where as you can defer 20k in a 401k. Secondly the 401k allows you to earn compounded interest on the taxable income over the years you started saving a Roth Ira you can't.
You can put the same amount into a Roth 401k and if taxes are higher down the road you’ll take out more money.
Isnt the point of tax defered 401k so that you can put more money in (the money that would be taxed before hand) and get better compound interest on it? What would the difference be if we put $10 a week tax defered in a 401k or put $7 a week tax free because we paid the $3 tax already. Wouldnt the gross and net be more if the interest rate is the same since the invested money is more? We cant say what the tax rate will be 30 years from now, but we also cant say that we will even have a US dollar 30 years from now. So have you run the numbers? Not bases on the same dollar amount invested. But the same dollar amount out of my pocket.
Your math is correct. The question rides on what tax rates will be when you take the money out. Most gurus (including Ramsey, Orman, etc) believe taxes will be higher so recommend the Roth 401(k).
"What would the difference be if we put $10 a week tax defered in a 401k or put $7 a week tax free because we paid the $3 tax already." That's 30% tax at contribution. At retirement if the entire balance were taxed at 30% at withdrawal then traditional vs Roth would be a wash as you'd have identical spending income.
@@alrocky that is correct. So it all comes down to where you think taxes will be when you retire. If higher then Roth makes the most sense.
He didn’t say to stop using a 401k 🤣. This was a pretty wild stretch.
He sure did. He likes the Roth 401(k), but that's totally different than the traditional 401(k) that 95% of people contribute to.
@@davidmcknight8201 yeah but you never once showed where he suggested you stop contributing to a 401k or where he suggested you take your money out of your 401k.
He merely pointed out the tax burden of when you make withdrawals.
@@TheWealthyIdiots you’re really straining at gnats here. He explained the implications of the 401k and then recommended the Roth 401k and Roth IRA instead.
@@DavidMcKnight yeah I might say that a Roth IRA has more benefits than a taxable brokerage account but I’m not telling to stop investing after 6.5k a year.
Saying that there are vehicles that may be better than a 401k isn’t even close to saying you shouldn’t have one, or should pull your money out of one.
@@TheWealthyIdiots I’m happy you came away with that conclusion. Most didn’t. From his website: We’re big fans of the Roth 401(k). In fact, in a showdown between a Roth 401(k) versus a traditional 401(k), we’d go with Roth every single time!
Also IRMAA’s. The trick I am finding is avoiding the 32% tax bracket while reducing future RMD’s and IRMAAs. Also realize there will be a period of time between retirement and now age 75 before RMDs are required creating opportunities to perform roth conversions at lower tax rates. Yes it is a gamble either way, so is investing. I don’t think the lower tax brackets will change. Politically they can’t do that, but sliding the brackets to the left they will do. They already have it baked in with the sunset of the “Trump” tax cuts and phase out of SS tax limit (currently 160k of income).
Good comments. Thanks for chiming in.
Government could start taxing Roth by the time some people retire. Some sitting senators are proposing taxes on unrealized gains. I am using a mix of traditional, Roth and taxable, we will see what happens. The way things are going with non stop spending I am not sure the dollar will be worth anything by the time I retire
You may be right on the inflation but I still think it’s a long shot they’ll tax the Roth when 95% of all retirement accounts are pre-tax. They’ll just raise the taxes on those accounts instead of double taxing the Roth.
Shouldn’t we consider the limit up to -92000 401k withdrawal for married?
Less the 27700 standard deduction (and I realize all of this is subject to change) would keep your income at no higher than 12% tax… not certain of the ss effect here…
I am really having a hard time justifying the 22% tax I must pay now to potentially avoid 12% later…
We do fund Roth iras … it’s the Roth 401k that I haven’t been able to stomach when the taxes are due…
If you don’t think your effective tax rate down the road will be greater than your effective tax rate today than you should probably hold off. All my data shows that taxes will have to double by 2030 to avoid calamity.
Life Insurance proponents confused cash value with dividends. Mr. Ramsey is very clear about it.
It's not the death benefit or the use of it as long-term care that he questions. It is the premium payments versus cash value that he does not agree or endorses. He estimated one can do better by self insuring. I agree with him.
He doesn’t like it as a stock market alternative and neither do I. It is however a superior bond and LTC alternative and an excellent volatility buffer in retirement.
I actually followed these steps over the years to accumulate some money over the years, but my portfolio has really declined this year. I have lost over 30% of my $200K portfolio in the market, and now I'm desperately trying to improve my portfolio. How do I turn the tide around? 😞
The market hasn't been good this year, but it is important you find stocks with market-beating yields and shares that at least keep pace with the market long term. You don't have the luxury of long term advantage, so I suggest seek guidance from a broker or financial advisor.
I agree. I diversified my $400K portfolio across various market with the aid of an investment advisor, and I have been able to generate 113% of the gross capital in net profit across high dividend yield stocks, ETF and bonds, in a short time.
That's impressive! I could really use the expertise of your advisor. Could you recommend who you work with, please?
*Sharon Louise Count* serves as my advisor, bringing extensive qualifications and experience in the financial market. Her deep understanding of portfolio diversity positions her as an industry expert. You could look her up yourself.
Thank you for this. I'm gonna check her out and try to reach her. I hope she gets back to me soon.
Our income will decrease dramatically upon retirement, especially as we are waiting 2 years before drawing SS. Why would I want to pay 32% tax rate today instead of 12% in retirement?!!?
Dramatically is a strong word. Further most experts believe that tax rates are likely to rise, perhaps even double, in the next 10-15 years. Research David Walker.
@@DavidMcKnight Is a 75% decrease in year one and 90% in year 2 (while we live off of savings) dramatic enough for you? Even after social security kicks in, we’re talking 70% decrease from last few working years income. What say you now?
@@brianmccorry9186sorry, i misread your previous comment. Thought you said that spending would decrease dramatically for all retirees. I can see how that could be the case in your personal situation.
@@DavidMcKnight Okay, thanks. I just wanted to see if I was missing something. I do intend to convert $ to Roth IRAs &/or take distributions at 10-12% tax rates next few years as well as reduce RMDs.
In my case there is NO way round it. It is mandatory that I fund my traditional 401k with a minimum deduction of 8.5% by law while I continue to work for state government.
Not the end of the world. At retirement you can take distributions and have the income offset by your standard deduction.
Like Woody Allen said in his comedy when asked what he does for a living, "I'm an investment counselor I invest other people's money until there's little or nothing left"
LOL.
What??? I’d rather pay no taxes as I build the nest egg than pay as you go when you build. And, when you start withdrawing, you control when you take it out. Another example of Dave Ramsey steering his listeners down a path that ultimately hurts them.
This makes sense if your country isn’t marching into a future where experts generally agree that taxes have to rise dramatically to pay for $239 trillion of unfunded entitlement obligations.
I am normally not one to defend Dave Ramsey, however, there are two points you make that I disagree with. First, I am fairly certain Dave has encouraged the Roth 401(k) and IRA for years. His line of thought is to contribute to the match no matter what and choose Roth if offered. Second, you also have to consider Dave's primary audience when you mention PLI. They are mostly middle-class folk paying off debt, building an emergency fund, and starting to save for retirement. Should these people be putting a couple hundred $ per month into PLI? Probably not. Moreover, the majority of PLI policies sold today are not properly structured or funded, which could lead to a lot of heartaches later in life if you are relying on it as a retirement income stream.
I’m not sure when he started to exclusively recommend Roth, but the article I saw about it was recent. And you’re right, a lot of his listeners shouldn’t be doing PLI but his advice is rather categorical. Anyone who has a PLI should surrender it immediately. He puts no qualifiers on it.
@@DavidMcKnight He has encouraged Roth for the 5+ years I have been exposed to his content. Do you listen to him, or just read the website?
I don't like Dave's categorical responses on anything, especially with totally cashing out a policy with few details. That said, we also see the majority of IUL agents categorically slamming traditional retirement accounts, as well. I am against those statements in all cases.
Of course we can't hardly Blame Dave Ramsey since he doesn't make up the amount of taxes we will be Forced to pay down the road. I bought a couple of fixed index annuities and also a 4-CD ladder that I renew when they mature. The Ideal best strategy to start with is Get out of debt so a big chunk of your Social Security isn't going to monthly payments.. There is a Huge difference in what I was making per hour when I started my job compared to the day I retired from it.
It’s a relatively recent phenomenon that financial gurus have started endorsing tax-free accounts over tax-deferred accounts.
And with inflation there needed to be more making. Comes out even if your/ people, are lucky
The danger of a Roth 401k is it increases your AGI. Your AGI can limit how much you can contribute to your Roth IRA, so keeping your AGI under $153,000 will allow you to put the full amount into your Roth IRA.
Yeah but the Roth 401jk allows you to contribute so much more. And if you’re over MAGI limits then just do a back door Roth.
If you are making 153k from your job do you really think you will be in a higher tax bracket when retired?. I think not.
Our 401 k because our companies oversea. And that reason it is existing. You have choice for corporate bond or government bond or lending the monies to the mutual fund. Most of these contract more thAn 1 year
Thanks for your comment.
I disagree with both. Start income imvesting on your while you are young, DCA the income back into the account every month, and you will have a personal, self directed pension at age 50. Why pay into a 401k that loaded with fees while you hope that market goes up through the years you pay into it?
Because it’s a pretty fool-proof formula to turn yourself into a multi-millionaire. And if you do it in the Roth 401(k), you shield yourself from the impact of higher taxes down the road.
Ok, and what is the average 401k balance in the US upon retirement? A million dollars? I don't think so. My scenario would only require a third of that.
@@creeper2054 people don’t follow the formula so they don’t get the result. If your formula works well for you, good on you!
Is it a 401k formula or fantasy? I welcome others to chime in if what I stated is way off.
@@creeper2054 the formula is not the Roth 401k. The formula is save 20-30% of your income into tax-free accounts over a long period of time and let the market do the rest.
401 k charges 20 different fees! Congress tried to change it! But of course it got stop!
Twenty?!
The use of only Roth IRAs is based on the assumption that all investors make so much money in the current times time that the investment money is just free money to spend on anything.
But the reality is that most people need that money to spend on current living expenses.
The pre retirement 401K has the advantage of not paying current taxes on so that more money is available to currently live on.
It seems like you guys, including Dave Ramsey, make so much money that you have forgotten what is like to need your paychecks for current food and shelter.
It really shouldn’t be based on this premise because in either scenario you’re losing the same amount of money from your lifestyle. If you go pre-tax you’d lose $10,000 from your lifestyle, if you did after-tax, you’d lose say $2,500 to tax and put the remaining $7,500 into your Roth 401(k). Either way you’re out $10k.
@DavidMcKnight I disagree. You are only looking at the total over a life time. But when you need the money now to feed your family, the money is more valuable to satisfy a basic need.
@@TheHavocdogSorry I guess I’m not quite following. In either scenario you’re out the $10k today. If you need that $10k to pay for food instead, I get it.
Yes- but we do we really want to take a chance of being taxed for unrealized capital gains? Or even capital gains every time we withdraw something from our Roth IRA? I say no.
Roth IRAs aren’t going anywhere because the government loves them. Gives them more revenue today.
@@DavidMcKnight The government is corrupt.
And people think America is the best country? I’m happy to be an American, but our government is beyond disgusting!
Thanks for your comment.
1st world problems when theirs literally people dying of starvation.
In my opinion if you don’t think they will get around to taxing Roth accounts at some point I think you are probably mistaken.
Roths only represent 5% of all accounts. Why not just raise taxes on the accounts that haven’t been taxed yet like 401k’s and IRAs? That’s where the real money is.
Because they won’t like the fact you are making money without paying taxes. They’ll raise taxes on everything else as well.
I'm in the process of rolling over my 401k to IRA ROTH. I rather bite the bullet NOW. Taking three years to get this done.
Could be a smart move.
I rolled my company 401k into a self-directed Shwaub IRA and am enjoying buying CD'S (no fees) at a high rate of 5% or more. Havent been able to keep above water on my stocks. An inestment manager lost us a lot of money and will never go that route again. He was the one who made fee money off failed investments, not us!!!
You don’t think stocks can do better than 5% over time?
@@DavidMcKnight once upon a time I was able to double my stock holdings. The last few years have proven a loss in some "good" stocks. I am stuck holding a lot for years now in hopes of a good return. But the opposite has happened. Makes me sad. Once upon a time I preached 401k to my 3 grown kids and they look so dejected to see their balances shrink consistently.
This is all premised upon the government honoring its bargain with respect to o Roth investments. What evidence do we have of that?
Well, they’ve honored it over the last 25 years but there are no guarantees for the future.
What would make more sense. . . investing in an unconstitutional "retirement" program like a 401k where your money is tied up for 40 years or to save and pay-off your mortgage, car loans, student debt (if you even think college teaches you anything), purchase land, invest on your own?
Lmfao. How is unconstitutional? You guys are hilarious.
@@randallmadison9910 . . . the US Income tax code is unconstitutional. It's legalized theft. There is no constitutional right to confiscate peoples income. There are no government services used for income. And if there are any they are funded by local, state, or other means. And NO I'm not making the argument that no taxes should be paid. But there is no reasoning behind our income tax code. It's plain manipulation and theft.
Some people save big in their 401ks during their working and midlife years when expenses are high, then they gradually do Roth conversions to reduce the amount of their taxes in old age. They end up with multiple nest eggs they can use depending on their situation and the tax laws at that time.
Good strategy so long as you get all the conversions done before tte predicted increase in taxes takes effect.
Get your company Max match and max out your Roth IRA.
Why not fully fund your Roth 401(k) if you’re able?
Right now if you had 90,000 $ in 401k you will be taxed 30,000$ = 60,000 I would rather pay taxes from my pay check than a lump sum of what you thought you had in savings.
I’m inclined to agree.
Here is the way I was taught concerning making a determination between a traditional and a Roth Ira or a traditional or Roth 401K: If you expect your income in retirement to be MORE than you are now receiving while working invest in a ROTH IRA or ROTH 401k. If you expect your income in retirement to be LESS than you are now receiving while working invest in a TRADIONAL IRA or TRADITIONAL 401k.
I would say it’s your tax bracket not your income.
Workers at home 10% tax. The rest print the monies to regulate laws and orders Commonweath at home and oversea
Thanks for your comment.
Ramsey says to always contribute what the company matches on your 401K. So this video is not exactly true. So if they do 5% then you do the same. Your first investment should be the match then after that is whatever.
Your match can now go into the Roth portion of your 401(k).
your effective tax rate will never be less than when you are young, married and raising children.
Yes. Lower income, lots of deductions, etc. Great time to pay tax on retirement contributions.
But how many people save more latter in life
When I started at 27, my first year was just $500 in contributions. Last year at 52, invested $30,000
Don't forget that the $ you pay now in taxes vs 401k can't earn compound returns on pretax reinvested dividends, bond interest, etc.
But it was never going to compound to your benefit anyway. You were only ever going to grow the IRS’s portion of your account.
What about of the health insurance in retirement? Its price is based on ur income . According to Goldman Sachs there rich clients use the Obama care. That's why roth is better.
You’re exactly right. Roth is better for a multitude of reasons.
Obama Care (ACA) is not available after the age of 65,... that is when medicare takes over.
I am in a Roth 401K. I am good.
Perfect.
It sounds like you would be better off stuffing your money in the mattress.
Sorry not following you. This feels like a non sequitur.
I can see maybe doing this if you’re not getting a matching percentage from your employer which is basically free money and covers the tax penalty you would pay on a withdrawal on that contribution amount.
Dave’s larger point is to do the Roth 401(k) instead of the traditional 401(k). In either scenario you have the potential of receiving a match.
don,t withdraw all of them is that what dave was saying?
Sorry I’m not sure I understand your comment.
@@DavidMcKnight if u have like 400k if it's time to withdraw your 401 k , should you withdraw the whole amont? or spread it like in 4-5 years.
@@tadrod2323 you should only withdraw it as needed. Unless you’re doing a Roth conversion in which case you should probably stretch it over a 5-8 year period depending on your situation.
@@DavidMcKnight thanks David i thought of that as well
On the money dave… but actually the number i have seen is that NINETY ONE percent of 65 yo couples will have at least one spouse need LTC before death. 64% for men and 76% for women.
Would love a source!
ok I've been at my job going on 30 years now and my company matches up to 12% am I not supposed to take advantage of that match? that is an awful lot of money to walk away from.
As I say in the video, Dave Ramsey recommends the Roth 401k so feel free to keep getting the free money but consider allocating your savings to the Roth side instead.
Got us again with a tricky click bait title as suspected … I mean who wouldn’t have watched had you included “traditional” in title?
Do you ever use the word traditional when describing your 401(k)?
1.) A DOLLAR is a Monetary Unit. [Gold / Silver Coin] according to the Constitution Article 1 section 10.
2.) only Congress can collect taxes; IRS is not a governmental agency.
3.) THE UNITED STATES INC. has been bankrupt several times. So that FRN is worthless paper!
4.) Study Noble Drew Ali!
Thanks for your comment.
Anyone that really knows Ramsey’s teachings knows he is very much in favor of 401k. He does state that it is better to do Roth 401k over traditional if AVAILABLE.
That’s the point of my video. 👍
Lol I’ll take my chances and pay later, I’m thinking 10 percent less
Hope for your sake you’re right!
Can Dave give us the name of his bankrupts lawyer
$150 M may just do him in...
Million dollars😂😂😂😂 As an RN for over ten years, employers don’t contribute a penny and after losing it all twice, FU#k the stock market !!!!
Ouch!
I much rather pay upfront
Agreed.
I'd much rather end up with the most after taxes. That is the goal you are supposed to be looking at
Company matches .75 for each 1.00 up to 8% of contributions to non-Roth . I can’t see giving that up, however I do see only investing what is matched and put the rest in Roth
You don’t have a Roth 401(k) available to you?
This past year I’ve been splitting my 401k contributions between traditional and Roth, but it’s still heavily split towards traditional. The tax savings I use for a variety of spending - including investments in my brokerage account.
Roth is not a magic salvation, if you have a high tax rate now you might as well reduce your taxable income by going traditional. Yes tax rates tend to go up but you have some control on how much you tax out in retirement. Not everyone has the same requirements and one strategy doesn’t fit all.
How can we "switch over" from a traditional IRA and 401k?
Talk to your HR contact.
Everybody has a better idea. Be careful and soft through the bs. They're are some fast talking good salesmen out there.
I’m not selling anything in this video other than the reality that Dave Ramsey, for very good reasons, is pushing the Roth 401(k) over traditional accounts.
Do you know what an updated paradigm is worth? Twenty cents! #DadJoke
Hah!!
Unless an employer does matching contributions, the 401k doesn't make sense. I think if you spread your money out over the largest stocks in the market, you'll do much better than a 401k. Someone else recommended to put the minimum amount into a 401k to get a match, which makes sense.
Yes I like contributing up to the match unless it’s a Roth 401k in which case fully fund if possible.
Even with no match you are still getting tax deferred or tax free compounding so the 401k may be worth doing.
You're not cashing out the entire 401k at once when you retire. You should be debt free at that time. So you'll likely need 50% - 70% of what you were making when you were working. Also, there are some employers that still do a % match. I'm currently contributing 12% and my employer is contributing 5%. That's a pretty hefty return from the start. There's NO WAY I'm giving that up. Now I agree that we can and should have our own post tax investment portfolio.
You wouldn’t have to give up the match if you did a Roth 401(k).
@@DavidMcKnight how does that work?
@@michaelott310 you can direct your match to either traditional or Roth and same with your contribution. Check with your HR.
@@DavidMcKnight ok. Thanx
@@michaelott310 you’re welcome.
He’s afraid of unknown future tax rates but is confident Roth will never be taxed LOL. So it’s better to pay let’s say 22 percent today betting that tax rates will over double in the future….crazy
Are you saying you'd never invest in a Roth account because you think they'll become taxable down the road? You do realize that Roths represent only 5% of all retirement accounts, right? In fact, the federal government loves Roth IRAs. The real target is on tax-deferred vehicles where they can change the tax rate at any point.
@@davidmcknight8201 Read my comment, I did not say never Roth, I said never to not 401k;) I do not see a win in not using 401K! IRS does not target tax-deferred accounts, they tax income where it comes from. I can delay Social Security and Pension to take $100K from 401k at a tax burden of $8,500 (8.5%), why would I pay 24% to 32% today? Don't follow your comment, 5% Roth - why do I care what others do? I have not seen a model that shows crazy Dave R's works.
@@davidmcknight8201 I now know where you are coming from, you think that taxes need to double or the US will go broke! Saying we need to raise taxes or we will go broke highlights a fundamental misunderstanding of our money system. Taxes do not pay for spending, taxes basically control the money supply. Spending is just a bill by Congress that allows the treasury to type credits into designated accounts, the spending is never constrained by tax receipts - we never borrow to spend. Treasures are just savings account that pays interest, it's to drive demand for currency but primarily a psychological operation put into law to discipline government spending. When the wheels come of the system it won't matter whether your money is pre or post-tax.
Is anyone noticing that the comment section on financial videos always turns-out to be a pitch for some financial advisor?
How so? And which advisor?
Investing in yourself is the best investment.. make your own choices where you have control..
Can you do both?
Yes, you have to pay income tax on 401k withdrawals in retirement. However, consider that you will automatically be in a lower income tax bracket in retirement than when you were working That is still a benefit, even if tax rates change over time. And yes, ROTH is better still, as no tax is due upon withdrawal. However, there are limits to how much you can stuff into a ROTH each year, thus you should max that out and put the excess into 401k and other taxable investments too.
Yes, fully fund the Roth and the Roth 401(k) to the extent you can.
I just cashed mine last week , gonna invest elsewhere
Hopefully you didn’t needlessly incur a big surrender charge.
@@DavidMcKnight I did unfortunately, but like you said, better now than in retirement.
If you cash all in is no need, just roll it over to another retirement account
That the money that you already paid taxes on... The government is greedy but doesn't want the wealthy to pay taxes....
The government wants their. Penh now so they prefer Roth.
Why aren't you opening a ROTH IRA??
I am personally over the income limits. And, I live in Puerto Rico where I pay no capital gains taxes.
I wonder how the extra 33% contribution from an employer plays into this plan?
What do you mean?
I got duped into that 401k thing and it’s done horribly
How long have you been doing it?
@@DavidMcKnight a long time ago I had one with a company and it sure hasn’t done well
@@mem1701movies sorry to hear that.
Yes, you are going to pay taxes on it. Remember, you deferred those taxes all those years.
What is the median retirement savings in the US? Most people pay very little tax in retirement. Don't think general statements and actually do the math to what combination is best for you.
@johngill2853 I don't know. I'm building my own investment portfolio. I'm building it, so taking SS is an option, not a necessity. And I won't do a 401(k).
It's true, I pay small amount of taxes in retirement and have more money in high end stocks because of the differ taxes plus I get money back from paying health insurance, real estate taxes, and everything else that is taxable plus I can sell and buy stocks all on my own and do not paid no one to watch my portfolio, so I 'm in control of my money
@@markmyjak7739 I love the 401k, it gets me out of the 22% tax bracket. I can't stand to give the government anything more than I have to
Roth
Yes
It's still a 401k.
I just lost 12% of my 401k because it was in four different bond funds. If I do nothing else in this life I want to warn people to never be in bond funds they have absolutely nothing to do with the characteristics of bonds. They are tied to Hocus pocus where they just give you 10 of thousands less than what you put in. I certainly think bond funds should be illegal because the everyday people investing in them are certainly going to be under the impression that they will get their principal back unless there's some kind of once-in-a-blue-moon default. But no they are tied to Hocus pocus and you will lose your money. I want to warn people. Individual bonds 👍👍 , bond FUNDS 👎👎
Yes, rising interest rates Can decimate a bond portfolio. This is why I make the case for annuities and cash value life insurance as a bond replacement.
While he'll never give you any credit Dave, at least the other Dave is swerving into the truth a little bit. Keep up the good work, you're helping a lot of people.
Thanks Robert!
I max out my 401k and it’s now going 100% to Roth. I make too much to do a Roth IRA. So I use the Roth 401k to build my tax free bucket for retirement. My company matches and of course that money goes into the tax deferred bucket. So I am building both. Yes, I pay more taxes now by contributing to the Roth 401k instead of pre-tax. It’s about $8-9k in extra taxes per year that I’m paying now. But, I’m just choosing to get the taxes paid now out of my income….while I am working and making an income that covers all my expenses. Those taxes are just another current expense. I look at it like this….if the government would let me put more than $30k into the 401k, would I do it? Yes. Well paying the taxes now by doing Roth 401k is me basically doing that. The extra $8-9k now is like me putting more money away towards my retirement. But…it is painful on April 15th every year when I see how much higher my current taxes were….but retirement is always about long term planning. Not short term.
I love it. That’s a great perspective.
When you make Ramseys income, you will have the credibility to criticize.
You think people should be immune from criticism just because they make a lot of money? Ever heard of John D. Rockefeller?
I max out both 401k and roth 401k in my job, this is 100% why I am currently a millionaire. My highest take home pay to date is $36,500.
That’s awesome. Nice work!
@ *BS* you cannot max out both [$22,500] to traditional 401(k) and [$22,500] to Roth 401(k).
@@alrocky Right, maybe he’s splitting the contribution between the two.
@@alrocky The maximum contribution to a roth 401k with catchup is $7000 and in 2022 it was $20500 total
@@bradstock2313 I think you meant to say 401k and Roth IRA, which will each have different limits (the 20,500 and the 7,000 including catchup respectively for 2022). Roth 401k will be different and has a combined yearly limit with a traditional 401k.
i liked and subscribed hopefully i can talk to you
WE are heading down the tracks with a runaway locomotive towards a digital currency,the dollar is due to collapse ,China and the other countries are ditching are treasury bonds like a hot potato,welcome to the Great quantum financial system,throwing my life savings into a 401k which invest in stocks and bonds seems risky,BUT this is an EXPERT ,so is the GOVT that's why we are 32 trillion in debt.
So how are you going to save for retirement?