I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement in 3 years.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert
How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
I’m 32 years old and I am just starting to invest for the first time in my life. I have started contributing to my 401K and opened a Roth IRA with automatic contributions. My question is, does asset allocation even matter early on, or am I just overthinking this?
There’s a lot to decide on… How much do you want to carry in international, small value, bonds, etc. Most times it is better to just delegate your day-to-day investing to someone of great expertise
good gains! who is this professional that guides you please? enthused about investing for my eventual retirement but dont know how to go about it, for now I only invest in my 401k through my employer and gains are quite slow
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. I retired with 5 million dollars
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.
Sonya Lee Mitchell 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..
Simple: 1- Max out your company match -if any- on 401k, or participate in pension plan -if offered-. 2- Max out your Roth IRA of $6,000 a year (as of 2019), unless you make more than 120,000 a year (as a single). 3- Max out 401K Roth if offered by employer. Notes: A: Open Roth IRA with TdAmeritrade, Etrade.. etc and put at least a dollar. you have a 5 years timer that starts when you 1st contribute. B: If employer offers borrowing from 401K and you cannot afford maxing out your $6,000 a year Roth IRA, you can borrow from your 401k if you can afford it. C: Other than wine and old collectibles, is the only thing you can do to make time work on your side.
@@Hotobu in 2020, making 139,000 a year and filling as single will limit your Roth IRA contributions. anything below that and you should maximize your ROTH IRA. ROTH IRA is how the government shot themselves in the foot by collecting less taxes than they would like
Although the explanation of a Roth vs. Traditional was spot on, at 60 you do NOT want to overload on growth stocks for a large return. You have to adjust your allocation so you can have funds on hand if you need it at 60, otherwise a bad market turn and you're going to be broke late in life.
Translation Growth: could be medium or large cap companies that are expected to grow Growth and Income: dividend and/or dividend appreciation funds (typically large cap) Aggressive growth: small cap stocks. International: self explanatory...even though most American large cap stocks have a lot of international exposure these days.
He needs to recalculate the return using the $60k that goes into the Roth. He's using the $200k he calculated based on having $90k invested. The conclusion is not necessarily wrong, but the reasoning is misleading.
In a 10 year period, remember there is always a potential for a recession or economic slowdown. So, don't count on your money to grow every year. There will be years that your money may go down 40% or more. That's the risk.
@@hurt1704 I think you mean only those who jump _off_ the roller coaster get hurt. As Dave says elsewhere, if you pull your money out of an account after suffering a loss, then all you're doing is locking in your loss.
And that is a great time to make your conversion. you will not be jumping off of the rollercoaster either. I.E. If you have a mutual fund in abcde fund and convert it to a roth you are not jumping off of the rollercoaster, Just paying tax on the amount you move.
I never really thought about the contributions to a traditional IRA as just deferring the tax, but that’s what it is. I realize the theory is you need less in retirement and therefore should be in a lower tax bracket when you withdraw it so overall you’re paying less tax. I think the Roth is a much better retirement vehicle not just because it grows tax free, but because you don’t have to take withdrawals at 70 and you can turn it over to your kids tax free when you die.
who wants to turn all of their wealth over to their kids? Mine got a Roth IRA in their name with $ 10000 in the S&P 500 index fund at birth which should easily grow to a few Million until they retire. Or they can take everything out to buy a car and waste it, then be broke. That's plenty nice on my part, I think.
@@ventilator2999 More people than you know. My step-mothers father invested year after year - never spending a penny. It was all transferred to his daughter in several financial advisor directed accounts. She's wealthy beyond my comprehension.
The Roth is not necessarily a better vehicle if one makes over 125k or so. By deferring my income and having such features as deductible mortgage interest and property taxes this brought my taxable income to below 100k for many tax years. The effective tax rate is lower. Even if I didn’t go below 100k in taxable income this year or future years when I retire…so long as I take out less than the next level effective tax rate then I’ll be ahead. The good news too is that in 10 years with the way inflation is going the new “100k” may be “120k”. The only way to play this game is having cash on hand and also having a Roth IRA. For anybody making less than 100k right now or even slightly over because the standard deduction is 12k or so for single then it seems best just to go with a Roth 401k. Not sure if I’m missing anything.
You do not have to pay them upfront. You can wait until you do your annual taxes. Doing this allows the entire amount to start growing tax free right away.
Is the time value of money a consideration when choose traditional vs Roth? The taxes later more money now seems like it would have more of a benefit as the size of the contribution increased.
After investing into my job's pre-tax 401k for the past 14 years, I regret not knowing about the benefits of a Roth 401k. I just recently switched all of my contributions over to the Roth, but I already have $225k in pre-tax investments that won't be sheltered from taxes once I withdraw. It's obviously not feasible to convert that much money over to the Roth, since my tax bill would be astronomical if I did. I'm just going to have to deal with the fact that that part of retirement won't be tax free.
You don't have to roll it over all at once. I'm going to roll mine over to Roth IRA 60k a year when I retire until I get it all in there. You can take it out anytime you want to and no Required Minimum Distribution when you reach 70.5. Regular IRA and traditional 401k have RMDs.
You shouldnt regret it. How he explained it is nor accurate. Tax brackets make or break the plan for Roth. If you are a higher wage earner while working, you have less investing power after taxes therefore a traditional is more beneficial. Roth is more helpful for those workers in lower tax brackets that have relatively more investing power after taxes.
Veerendra Jadhav They are both retired and making 200k? Wow. How does she not know how much they have in savings? Maybe I'm misunderstanding something....
200k sounds like alot if you live where cost of living is cheaper. There are places in the united states where making that much only qualifies you as middle class.
Dave cracks me up! He uses general basic advice and applies it to everyone regardless of their situation. Everyone’s situation is completely different and he gathers minimal information about the person/family to make a decision that is not specific to that individual/family. And people listen!
Nutshell: 401k takes your money out before it is taxed so when you go to pull it out you are going to be income taxed on it. ROTH 401k means the money that goes into your 401k has already been taxed therefore when you retire, you dont pay taxes again on what it has grown into.
@_ David _ When using a ROTH, in general means after tax dollars. IRA is a tax sheltered account that stands for Individual Retirement Account. If it is ROTH then it would mean putting money in that account is after tax, if it isn't then its before tax which means you pay taxes when pulling money out. It also means it lowers your potential tax bracket while putting money into it. There are advantages to both.
If you're talking about a broad international fund, you may be better off keeping that outside of your retirement account. If the fund is paying dividends that don't get treated as domestic via a tax treaty, then you're going to have dividend tax withheld inside a retirement fund, and you won't be able to get a credit for it on your US taxes. Your Nestle dividend will be taxed at over 30%-- by the Swiss-- and you will lose that advantage. Better to keep US stocks (no withholding, no tax due) inside the IRA (whether Roth or Traditional). Or select international stocks e.g. British ones that don't withhold for US citizens. (NB: I'm assuming that a person has investments both in AND outside of retirement accounts).
Above all else, this show is entertainment. The guy's been running a radio show for over 25 years. He knows when he wants to listen to people talk and when he wants to listen to himself talk.
The average annual return for the S&P 500 is 10%. This is reduced by mutual fund expenses and one should consider that this market is the longest in history to go without a 20% bear market which will likely dampen future results.
One concern with the Roth option is the amount of time you have to wait until any kind of tax break sets in. I’m 35 and contribute regular to 401k/ traditional IRAs and receive a tax break every year. With my Roth (which I also have) I have 30 + years until I will see a dime of tax breaks so one needs to think about that.
One thing to consider is are you going to be in a lower tax bracket when you retire? Unless you're in a high tax bracket you're not actually getting a break. On top of that, you don't know what tax bracket you'll actually be in when you retire since they change income tax brackets every decade. Its a "pay me now" vs "pay me an unknown amount later" game.
I'm 23 and the ROTH doubles as an emergency savings for me. I only have a few thousand in there and haven't had to dip in yet but I know that if some kind of emergency comes up I can pull my money out to cover it which is great for piece of mind.
Because pensions and companies that hold them can be bought and legacy costs (pensions) can be shed in the sale. Under a new name, pensions may not be required to be honored. Meaning, the new company may be profitable right away by telling older pension holders to scram. This is something you should have learned in 2008 by watching GM. This is why you always hold gold and other investments as a percentage of your portfolio. Trust no one leg of the stool.
don't you get taxed on what you earn, so if they are retired they are only earning their pension, that can't be any more than a 38% which is what most middle class people earn anyway.
He doesn't ask the important questions up front like what is the traditional IRA invested in, age and her tax bracket. She likely doesn't benefit from an traditional IRA to Roth IRA conversion. @ 1:30"... get...returns like what the stock market does..." - yet he doesn't bother to suggest she simply invest in an S&P 500 or Total US Stock Market mutual fund. That is better than his tired and obsolete offering 5 seconds earlier.
@@jaZzyjeff818 A part of his business model is charging his 'local providers' for the referrals (he's upfront about this, it's not a secret). You don't need a 'local provider' to go online and buy low-fee index funds.
Traditional IRAs may not be deductible. In that case, you''d pay taxes on the gain, but not on what you contributed. If your IRA is not deductible, you might as well go with a Roth right away. Lots of people who are retiring and who have 401(k)s that were tax-deferred are getting ready to pay BIG tax bills. If you are doing a Roth conversion, you can control when you do the conversion.
Bro. She makes 200k. She needs to put in traditional instead... She is basically at the top tax bracket. Once she retired at 65. Her income would be 0. So she can withdraw 401k as much as she wants in a lower tax bracket. The point is that she's makes 200k.
For my considerations on rolling into a Roth is that lump sum of cash from IRA to Roth is taxed as income. Meaning it likely will put you into a higher tax bracket and (she's retired) it will likely raise your cost of Medicare part-B. Both are based on income. She was clearly unaware but I try to roll each year up to the point of moving into a higher bracket. Especially since our election was compromised and the new buyers of the WH are promising higher taxes on all working taxpayers, to afford free stuff handouts. Sorry, but is very applicable to this topic.
why is it no one answers the question "how do I convert to a roth ira? do I take the cash out ?get a check ? report it on my taxes? special paperwork ? wire transfer ?
Definitely don’t take a check. Call the brokerage that has your trad IRA and they will facilitate the conversion, which can also be in-house, unless you wanted the Roth to be with a different brokerage. They will also explain the tax consequences but will probably advice you to seek further guidance from a tax pro (but tbh you can do the research yourself).
If you can open a Roth account where your assets are currently at, that is easiest. Tell them you want to open a Roth account and convert your assets over. You PROBABLY need to make an estimated tax payment via IRS Form ES1040. If you wait until tax time, if the payment is too large, you will pay a penalty on top of the taxes due. I don't know what the calculation or amount is. Schwab and ETrade and Fidelity and Vanguard (and others) all are eager to host your money, so you can open a Roth with any of them and they will be ready, willing and able to walk you through the process of converting an account over to your Roth. I will say that ETrade does not do a good job explaining their process. I had cash ready to pay the estimated tax as part of the conversion, but it wasn't in the right place (it needs to be in the Traditional IRA account), and after futzing around, I just converted the assets and dealt with the tax at tax time. One year that triggered a penalty and another year it didn't. If you take a check, that becomes a taxable event and gets added to your income for the year. Bad idea. When I rolled a 401k into an IRA, there was a check involved, but it was not written out to me, and I just forwarded it on to my account.
I much prefer the Roth, BUT if you are already in a traditional, let it sit. Then start a New Roth IRA and forget rolling the old one. It’s not MUCH better just slightly better to be in a Roth and better to not roll what you already did no matter which one it’s already in. I’ll explain why. Even though in a Roth the investment gains are tax free, the amount of starting principal upon which the investment is growing will be reduced by the non-tax-deductibility at the beginning and that washes out the benefit of saying the gain is tax free, the amount of all that investment gain all the way out till withdrawal is also reduced proportionally in a Roth by the fact that your starting principal will be less given the same money you contribute from gross income. All it comes down to instead is will your marginal tax bracket be higher or lower at withdrawal time. And both IRAs are usually better tax-wise than a non-IRA where the contributions are like a Roth but the withdrawals are taxed at 15% capital gain
More than double even with inflation. Inflation is typically around 2-3%. If we did receive 12% returns minus inflation take the higher to be conservative (12-3=9%)- using the rule of 72 we would expect money to double in about 8 years. But the bigger wrong assumption is continuously getting 12%.
@@JustinFromMD You are correct sir! Market average going back to 1929 is 8% but in his example you are easily beating the market every year and why wouldn't everyone put their money in these mutual funds?
He will tell you when you are at the baby step 4 (invest 15% of your income) to do it in Roth accounts. Lots of employers offer Roth 401ks, now. Their match has to go into a Traditional 401k, though.
As a percentage of the population, how many people in the US would not have the financial literacy to fully understand the different tax schemes? I'm guessing it would be at least 70%.
so to clarify ... if you use already taxed dollars to put in the roth, is it still taxed later (not the growth)? Or do you put into it tax free, and just take out the taxes later on the initial input?
I wonder if the same would apply by having a traditional TSP and wanting to move it into a Roth TSP ? I only have 13,000 in it so far but can't imagine coming up with money to pay taxes on it upfront.
You cannot currently convert your traditional Thrift Savings Plan to a Roth Thrift Savings Plan. You'd most likely be better off just contributing to your Roth TSP account.
I have two Grandchildren 26 yrs and 23 yrs. Which is best, IRA or Roth IRA? Also, arrange so that they can't touch it until they turn 50 yrs old. Do you have a video that covers this? Thank you.
I really want to help my mom as she's set to retire within 3 years. She's got a 457b, and I have no idea how much she has in it, so let's just use a nice even $300k. What are her options? Is there any reason why she would want to move it to either type of IRA? Should she just stay with the 457b? Would there be any difference in the amount taxes she'd have to pay at this point?
I just started my 401k with my company . they contribute the 6% a dollar for a dollar ....how do I make my money grow ? They take about $107 every check
I have Roth IRA account, traditional IRA account and 457 B account. I'm 61, retiring end of this year and moving overseas. What's the best way to close all these accounts, take my money and move?
Survivalist Nomad Not an expert, but as far as the Roth is concerned, I would transfer the sum to a Charles Schwab Investor Checking Account (whose debit card has no foreign transaction or ATM fees), and I’m honestly not informed enough to know why to do with the 457B. The idea would be that if you choose to bank with someone else in that foreign country, Schwab would make it easy since their customer support is top notch, or you could just leave it there since you won’t get dinged for foreign transactions or ATM withdrawals. Make sure to opt out of margin trading if you do decide to open the checking account or else it’ll ding your credit with a hard inquiry. Watch Ask Sebby or Credit Shifu’s video’s for more info on that specific account. Signed, Not an expert, but someone who cares.
Graduated college 2 years ago and 2 years into my career, trapped in a lease until next year, renting unfortunately. I'm saving to buy a car in cash and paying off my student loans(62k -> 54k). Started off small with a roth. $10 per paycheck. 2 years later it's ballooned up to about $500. Is this alot? No. Absolutely not. Is this alot for just a little? Yes. Goal for 2020? Get to under 40k in student loans , own a decent car and save my darned emergency fund. NO MORE LEASES! NO MORE PAYCHECK TO PAYCHECK! X^(
So if you roll from a IRA to a Roth there is no limit? I thought there was a limit. I don't the moving fund to the Roth vs getting the annual Roth. I thought the Limit in 2024 is $8,000.00 for someone over 51? Transferring money is different?
Yes. Transferring/converting is different. You're just moving money that's already in the IRA...it's not a contribution. Yearly contributions have limits
Assuming you make too much to just open a roth IRA - sounds like being a hot mess mom is working out well for you :P …yes having a backdoor ira is a great tax advantage regardless of whether you currently have a traditional or roth. Your current traditional/ roth status doesnt really change anything. Def worth backdooring
There is no "best" place. I personally would use a platform like ETrade or Vanguard or Fidelity or ScottTrade. I don't know of any benefit of one over the other. You can do it all online, so it is really accessible. I don't have any experience with an IRA through a bank, but it seems like it would be harder to acquire investments like stocks, and I assume a bank would politic you pretty hard to let them advise you and to have you buy their products. One platform I would recommend AGAINST is Robin Hood. I have an ETrade account. Inside of that I have a regular trading account, a rollover Traditional IRA and a Roth IRA. The rollover Traditional IRA was created when I rolled a 401k from an employer to my ETrade account. I have since moved some of the stock in my rollover Traditional IRA to my Roth IRA. I did it at the start of the COVID crisis, when the market tanked. The tax bill from the conversion was a lot smaller that way. My current employer offers a Roth 401k. Lots of companies now offer that. The company match portion has to go into a Traditional 401k, but my contributions go into a Roth. Fidelity does a lot of the administration for employer 401ks. If Fidelity manages your 401k program at work. I would go with them.
Opened a index fund for $3000 do I pay taxes on this and what about the growth? I’m 62 should I open up a Roth account and how much can I investing it every year?
Q1 If that $3,000 were invested in a traditional IRA you would owe zero taxes. Q2 If you or your spouse is working you can invest *$7,000* into a traditional or Roth IRA. *"Should"* cannot be properly answered without more information.
He finally "sorta" addresses her question at around 5:10. And he never does tell her HOW to convert a traditional IRA to a Roth. And that's what she asked. :(
Why does he recommend her to cash flow 15k this year and 15k next year? Isn’t it more comfortable to just to deduct it off your profits when you take it out?
Over lifetime it's definetly possible. She doesn't have that much time left in case we crash to recover. Now just this year she would have made 25% but that's not normal.
E Rodriguez ,,,, numbers don’t lie,,,,,invest on the history percentage of returns,for the last 10, years....a lot of people invest on the name of mutual fund...example.....a return on a mutual fund in 2000, was 10 %, in 2010 was 15%, now in 2018 is 17%,,,, where do you think is going to be in 2020.....???20%?,,,,,17%,,,,,or 15%,,,,,where ever it go it goes is better than 10 %.......go to vanguard..com...
@@patandbrandi Over the lifetime that is incredibly unlikely, unless of course you could predict the future and only buy on the low crashes and sell at peak.
Hey Dave! Just got off the phone with Fidelity Services. They told me that if i wanted to move my pre-taxed old 401(k) to roth IRA, i will be subjected to the tax % + the 10% penalty. I wasn't expecting the 10% penalty part. Thought it was only if i cashed out everything. Can you confirm if this is true?
If you do things right you can have the current holder of your 401k transfer and convert it directly, unless you've already cashed it out or asked them to send a check directly to you.
With a Traditional IRA, you get to deduct money that you put in at tax time, which lowers your adjusted gross income. You pay tax on the money as it comes out. With a Roth IRA, there is no deduction at tax time, but years later, when you take your money out, you don't pay any taxes on it, including all the growth that happened. With your savings account, any interest you earn has to be reported as income, and is taxed. So there is no tax benefit for putting money into savings and you get taxed on the interest you make. AND, over time, inflation makes that money less valuable. So, sitting on a bunch of cash is not a good idea. Five dollars when my dad was a kid bought a car-full of groceries. Now it buys a gallon of milk and a dozen eggs. You should have SOME money in savings. Dave recommends 3-6 months of expenses. You don't pay any taxes when you open a Roth account. Any money you put in it is after-tax dollars. So there is no benefit each year when you file your tax return. But, when you take money out of your Roth account, it is all tax-free. You can only put $6500 per year in an IRA ($7500 if you are 50 or older). You can put $22,500 in a 401k, so if you are working and your employer offers it, you would be smart to start putting your money there, first. If you still have money, then you can contribute to an IRA, as well. Lots of employers offer Roth 401ks, now.
It boils down to this. Converting from a traditional to a Roth IRA means you will pay taxes now rather than pay them later. Why would you want to do that? Because more than likely this is as low as taxes will ever be. Taxes are going to go up in the future. So now is a great time to look into making the switch. Talk to a financial advisor and a CPA to see if it's right for you.
A broker can actually lose his license if he or she lies or gives bad information to a customer. Insider trading is when a person a business owner and invests based off of information of how that business is performing. Meaning: you cannot invest in your own company.
The better question is what mutual funds did they have you buy from them? It looks like you might be getting raked over the coals from the LOAD mutual funds they offer and the high expense ratios of those mutual funds. Enter the 5 letter tickers of those mutual funds @ Morningstar.com and look under Purchase. If you see something like ~5% Front Load or any amounts under Load, you've been had. If the Expense Ratio is anything over 0.50% you paying way too much. A 5% Front LOAD means you lose 5% off the top and that goes into a salesman's pocket. A 5% Front LOAD means they take $50 from your $1,000 investment and you end up with only $950 of stocks / mutual fund shares.
Well I've done my research on Primerica and from what i see they are HIGHLY regulated by State & Federal government & FINRA - the biggest SRO in the country and they are publicly traded in the NY Stock Exchange so I they don't look like a Pyramid scheme to me....
Jestic They are a multilevel marketing (extra fancy pyramid scheme) they are focused on recruiting and while they don't make money by recruiting they will forever get an override on people they recruit. It's a close to a pyramid scheme without actually being one. Transamerica has a similar company called WFG or World Financial Group
most companies allow you to do both as long as the limit falls under the 401(k) total limit. Always contribute enough to get the employee match, and then put how much you can afford into the Roth 401(k). Then if you switch jobs you can move them over to IRAs and it doesn't count toward your IRA limits.
I had the same question. But even in the caller's situation I don see the benefit of converting. I decided it was better to reduce my 401k contribution and apply the difference to my Roth. I just can't reconcile saving taxes now only to pay taxes 20 years from now at triple the rate? I feel its a dirty shame you have gamble with your savings in order to "ensure" your future.
So is a 401k work the same way as a traditional IRA? You put money in pretax and pay taxes on entire amount at retirement ? Whereas the Roth you pay taxes only on what you put in while growth grows tax free?
---Ramsey's comparison of a Roth IRA with a traditional IRA that are both funded by $90K is an unfair comparison. In this comparison the Roth would always look better--it would be a no brainer. However, in reality, any person who has $90K of after tax money to put in a Roth should have more than $90K of pretax money to put in a traditional. The, thus comparison should be $90K funding for a Roth versus $90K plus the pre tax savings added back for a traditional. At a 25% marginal tax rate the tax savings would be $22.5K which when added back to the $90K would be $112.5K. Thus if $90K in a Roth grows to $290K, $112.5K in a traditional grows to $362.5K which would be $72.5K more. That is more fair comparison. ---If the retiree's tax bracket is also 25%, the retiree's taxes on $362.5K would be $90,625 which is $18,125 more than the $72,500 of additional investment growth in the traditional over the Roth. However this assumes that the retiree would draw down ALL of the traditional IRA savings and thus be taxed on ALL of it in their life time. However, it is more likely that the retiree would leave a considerable portion of the savings to their surviving spouse. If, on the other hand they had paid taxes up front in order to fund a Roth account they would deprive their surviving spouse the opportunity for further investment growth on pretax money as well as the benefits of a larger investment portfolio from pretax funding. Similarly, a surviving spouse might not draw down all retirement savings rolled over to them but would might leave some of it to their children... ---...and even if a surviving spouse and children must meet annual withdrawals that would be fully taxable in an inherited traditional IRA, the minimum withdrawals could stretch out full liquidation of the account, over many years, over which time some portion of the account would still contain pretax seed money that is invested and growing. Thus a child with a life expectancy 30 years after the last surviving parent could stretch out withdrawals and thus defer some amount of taxes in an inherited traditional IRA over an additional 30 years.
He explained it well but it’s incorrect. Roth is after tax meaning you inherently have less up front investing power than with traditional. The math is in tax brackets when investing compared to when retired.
I want to make 12%/yr for the next 10 years. That is even better than Madoffs 10%/yr. As of today my accounts are up 2% for the year and I am glad they are in the black. I will see where they are at at years end. I have lived through 4 recession in my life and to count on a 12% return/yr for a 10 yea time frame is loony tunes. Over a 40 year time frame yes, but not over a 10 years, I think this very foolish. JMO but please let me know how you are doing it.
@@cullenmayes3370what’s your point? So if one invests $100,000 in an S&P 500 index fund on 1-1-2024, it will be worth $111,000 on 12-31-2024? Past performance is no guarantee of future results.
Im 17 and had a question im about to start working so i was wondering if a 401k is separate from a mutual fund or is it included in a 401k and if they are separate which should i invest more into. Thanks sorry haven't started working and want to know how this works as soon as possible
A 401k can include mutual funds it just depends on what you pick I suggest going with S&P 500 Index that'll give you a wide variety and will spread it out so on average you'll be getting around 7 to 9% interest... Save as much as u can I'm 30 and I wish I was your age again to start saving sooner ... save it automatically out of your check with a direct deposit.. you won't miss it and you'll thank yourself later good luck
A 401k is a financial vehicle for buying stocks/ bonds, you can't open one on your own, you have to have one through an employer. What types of funds are available depends on what your employer chooses to offer.
Like Scarlet night said think of Roth IRA, 401k, Traditional IRA as different vehicles... Van, pickup, car... Your investment is the people inside the vehicles. The investments inside the vehicles can be stocks, mutual funds, index funds... Etc. That said everyone has access to Roth or Traditional IRA. You only have access to 401k through an employer. The IRAs allow you to contribute a Max of $5,500 per year. Most 401ks allow you to contribute around $15k max. The company I work for is very small and we have a Simple IRA. It's like a 401k (employer sponsored) for a small company. It only has a Max contribution of $12k per year. For someone young like yourself look into opening up a Roth IRA through a company like Fidelity (what I use), T. Rowe Price, Vanguard... I chose Fidelity because they have a ton of mutual funds to pick from and also some decent index funds. The Roth IRA is best because you are investing pre-tax dollars which means that when you retire when you withdraw this money you won't have to pay income tax on this money. Tax shielding yourself in retirement is the key to successful retirement.
So if your young and are starting small, you should do a roth. because it will tax what is put in? so if its sitting there for 40years non of that will be taxed am I mistaken?
You want to contribute to a Roth IRA when in a relatively low tax bracket and in a traditional IRA when in a relatively high tax bracket. The money in the Roth sits and grows for 40 years and then when you withdraw from the Roth IRA and it will not be taxed.
What if 20 years from now they change the law and say sorry folks, you know that Roth IRA you already paid taxes on? Well, because of national austerity measures, we need to tax you on it again. A similar thing happened in Greece in 2008.
Once again, Ramsey talks about rolling into a Roth without raising the topic of tax brackets at all. All that seems to matter to his audience is that "less taxes" sounds good, but it's not always true. Depending on how their income changes, rolling over might not be enough of a gain to be worth the early tax payment, and could actually leave them with less money when it's all said and done.
Depending on how much money you have, I would suggest a independent financial advisor. If you don't have a lot those 3 are basically the same they are all very cheap and that's what matters if you don't have a lot. A lot meaning a minimum of $50,000
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement in 3 years.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert
How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
I’m 32 years old and I am just starting to invest for the first time in my life. I have started contributing to my 401K and opened a Roth IRA with automatic contributions. My question is, does asset allocation even matter early on, or am I just overthinking this?
There’s a lot to decide on… How much do you want to carry in international, small value, bonds, etc. Most times it is better to just delegate your day-to-day investing to someone of great expertise
good gains! who is this professional that guides you please? enthused about investing for my eventual retirement but dont know how to go about it, for now I only invest in my 401k through my employer and gains are quite slow
thanks for sharing! just did a web search on Katherine Nance Dietz and I find her valid
when moving from traditional to roth make sure the amount you make taxable doesnt take you over the amount that makes your medicare cost rise.
exactly. and give a cushion of about 5k just to make sure
Can you explain this a little more please?
Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. I retired with 5 million dollars
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.
Sonya Lee Mitchell 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..
Simple:
1- Max out your company match -if any- on 401k, or participate in pension plan -if offered-.
2- Max out your Roth IRA of $6,000 a year (as of 2019), unless you make more than 120,000 a year (as a single).
3- Max out 401K Roth if offered by employer.
Notes:
A: Open Roth IRA with TdAmeritrade, Etrade.. etc and put at least a dollar. you have a 5 years timer that starts when you 1st contribute.
B: If employer offers borrowing from 401K and you cannot afford maxing out your $6,000 a year Roth IRA, you can borrow from your 401k if you can afford it.
C: Other than wine and old collectibles, is the only thing you can do to make time work on your side.
How does making more than 120K per year factor into this?
@@Hotobu in 2020, making 139,000 a year and filling as single will limit your Roth IRA contributions. anything below that and you should maximize your ROTH IRA. ROTH IRA is how the government shot themselves in the foot by collecting less taxes than they would like
Although the explanation of a Roth vs. Traditional was spot on, at 60 you do NOT want to overload on growth stocks for a large return. You have to adjust your allocation so you can have funds on hand if you need it at 60, otherwise a bad market turn and you're going to be broke late in life.
You realize they’re also making 200k a year on pensions. That’s their cash on hand unless they blow it all
Translation
Growth: could be medium or large cap companies that are expected to grow
Growth and Income: dividend and/or dividend appreciation funds (typically large cap)
Aggressive growth: small cap stocks.
International: self explanatory...even though most American large cap stocks have a lot of international exposure these days.
You're the BEST!
yeye
This is some good information. I should have been listening to Dave 20 years ago.
Yes, agreed. But, middle class trying to get out of debts and making ends meat, I couldnt understand anything else, but to pay off debts.
He needs to recalculate the return using the $60k that goes into the Roth. He's using the $200k he calculated based on having $90k invested. The conclusion is not necessarily wrong, but the reasoning is misleading.
I didn’t have any friends until I met Roth.
Now I have 569,961 friends. Plus Roth; Roth and I are still friends too.
They're Not 'Friends'. They're 'Users'.
Wish I were you.
@@thisisshauna6986 Get to work💯
Movement Exotics exactly! Wish gets you -ish.
@@nobody_special012 Wish in one hand as my father used to say 😂
In a 10 year period, remember there is always a potential for a recession or economic slowdown. So, don't count on your money to grow every year. There will be years that your money may go down 40% or more. That's the risk.
@@hurt1704 I think you mean only those who jump _off_ the roller coaster get hurt. As Dave says elsewhere, if you pull your money out of an account after suffering a loss, then all you're doing is locking in your loss.
And that is a great time to make your conversion. you will not be jumping off of the rollercoaster either. I.E. If you have a mutual fund in abcde fund and convert it to a roth you are not jumping off of the rollercoaster, Just paying tax on the amount you move.
I never really thought about the contributions to a traditional IRA as just deferring the tax, but that’s what it is. I realize the theory is you need less in retirement and therefore should be in a lower tax bracket when you withdraw it so overall you’re paying less tax. I think the Roth is a much better retirement vehicle not just because it grows tax free, but because you don’t have to take withdrawals at 70 and you can turn it over to your kids tax free when you die.
who wants to turn all of their wealth over to their kids? Mine got a Roth IRA in their name with $ 10000 in the S&P 500 index fund at birth which should easily grow to a few Million until they retire. Or they can take everything out to buy a car and waste it, then be broke. That's plenty nice on my part, I think.
@@ventilator2999 More people than you know. My step-mothers father invested year after year - never spending a penny. It was all transferred to his daughter in several financial advisor directed accounts. She's wealthy beyond my comprehension.
The Roth is not necessarily a better vehicle if one makes over 125k or so. By deferring my income and having such features as deductible mortgage interest and property taxes this brought my taxable income to below 100k for many tax years. The effective tax rate is lower.
Even if I didn’t go below 100k in taxable income this year or future years when I retire…so long as I take out less than the next level effective tax rate then I’ll be ahead.
The good news too is that in 10 years with the way inflation is going the new “100k” may be “120k”.
The only way to play this game is having cash on hand and also having a Roth IRA.
For anybody making less than 100k right now or even slightly over because the standard deduction is 12k or so for single then it seems best just to go with a Roth 401k.
Not sure if I’m missing anything.
@@ventilator2999 how did you open a Roth for 10000, limit is 6000?
And since a new born has no earned income?
How did you do this?
@@ventilator2999 I do
I’m in the process of doing the same thing and the taxes you have to pay upfront is also my dilemma.
They’ll be a lot higher when you go to take it out later on...
You do not have to pay them upfront. You can wait until you do your annual taxes. Doing this allows the entire amount to start growing tax free right away.
I have to replay this two times to absorb the information.
Is the time value of money a consideration when choose traditional vs Roth? The taxes later more money now seems like it would have more of a benefit as the size of the contribution increased.
If your tax rate remains equal, there is no difference in end value between roth and traditional (you must factor in opportunity cost)
After investing into my job's pre-tax 401k for the past 14 years, I regret not knowing about the benefits of a Roth 401k. I just recently switched all of my contributions over to the Roth, but I already have $225k in pre-tax investments that won't be sheltered from taxes once I withdraw. It's obviously not feasible to convert that much money over to the Roth, since my tax bill would be astronomical if I did. I'm just going to have to deal with the fact that that part of retirement won't be tax free.
You will only be taxed from your income bracket!!
@@greatriffishere if he transfers it all at once though he'll be taxed as if he was in the same bracket as someone making $200k+ per year.
You don't have to roll it over all at once. I'm going to roll mine over to Roth IRA 60k a year when I retire until I get it all in there. You can take it out anytime you want to and no Required Minimum Distribution when you reach 70.5. Regular IRA and traditional 401k have RMDs.
You shouldnt regret it. How he explained it is nor accurate. Tax brackets make or break the plan for Roth. If you are a higher wage earner while working, you have less investing power after taxes therefore a traditional is more beneficial. Roth is more helpful for those workers in lower tax brackets that have relatively more investing power after taxes.
Nice video, but the question posed in the title is not addressed.
ajtheown
He did address it. You need to cash it out, pay 33% tax then you can move it into the Roth.
Those two make 200k in a year but can't cash flow 30k at any one time??? where do you find these people?
Veerendra Jadhav They are both retired and making 200k? Wow. How does she not know how much they have in savings? Maybe I'm misunderstanding something....
Veerendra Jadhav & how does she not have more saved if they make that much?
Veerendra Jadhav some rich people are horrible with finances.
That's 200k in pension income for the couple. What pensions pay that? Illinois school administrators probably.
200k sounds like alot if you live where cost of living is cheaper. There are places in the united states where making that much only qualifies you as middle class.
Dave cracks me up! He uses general basic advice and applies it to everyone regardless of their situation. Everyone’s situation is completely different and he gathers minimal information about the person/family to make a decision that is not specific to that individual/family. And people listen!
Yet, here you are listening lol
I was about to comment the same thing haha@@simplyme3684
Great Information!! Have done this a couple times over the years.
She still had no clue what was being talked about... LOL
Nutshell: 401k takes your money out before it is taxed so when you go to pull it out you are going to be income taxed on it. ROTH 401k means the money that goes into your 401k has already been taxed therefore when you retire, you dont pay taxes again on what it has grown into.
@_ David _ When using a ROTH, in general means after tax dollars. IRA is a tax sheltered account that stands for Individual Retirement Account. If it is ROTH then it would mean putting money in that account is after tax, if it isn't then its before tax which means you pay taxes when pulling money out. It also means it lowers your potential tax bracket while putting money into it. There are advantages to both.
If you're talking about a broad international fund, you may be better off keeping that outside of your retirement account. If the fund is paying dividends that don't get treated as domestic via a tax treaty, then you're going to have dividend tax withheld inside a retirement fund, and you won't be able to get a credit for it on your US taxes. Your Nestle dividend will be taxed at over 30%-- by the Swiss-- and you will lose that advantage. Better to keep US stocks (no withholding, no tax due) inside the IRA (whether Roth or Traditional). Or select international stocks e.g. British ones that don't withhold for US citizens. (NB: I'm assuming that a person has investments both in AND outside of retirement accounts).
The way he cuts people off on that console is funny asf.
Yeah, he does it so effortless! LoL 🤣
Above all else, this show is entertainment. The guy's been running a radio show for over 25 years. He knows when he wants to listen to people talk and when he wants to listen to himself talk.
that's the funniest one I've seen thus far.
Oscar: I have the flu and need help with my IRA.
Dave: Have a great long weekend.
Oscar: I'll probably just be sleep... (Dave hits button)
You just need to say ‘AF’
The average annual return for the S&P 500 is 10%. This is reduced by mutual fund expenses and one should consider that this market is the longest in history to go without a 20% bear market which will likely dampen future results.
One concern with the Roth option is the amount of time you have to wait until any kind of tax break sets in. I’m 35 and contribute regular to 401k/ traditional IRAs and receive a tax break every year. With my Roth (which I also have) I have 30 + years until I will see a dime of tax breaks so one needs to think about that.
Your tax break is not having to pay taxes on your income when you retire. That outweighs the annual tax breaks you're thinking of.
One thing to consider is are you going to be in a lower tax bracket when you retire? Unless you're in a high tax bracket you're not actually getting a break. On top of that, you don't know what tax bracket you'll actually be in when you retire since they change income tax brackets every decade. Its a "pay me now" vs "pay me an unknown amount later" game.
I'm 23 and the ROTH doubles as an emergency savings for me. I only have a few thousand in there and haven't had to dip in yet but I know that if some kind of emergency comes up I can pull my money out to cover it which is great for piece of mind.
@@jordanneedscoffee with a penalty right?
@@transistor281 No so long as you don't take more out than you have put in.
If you are retired making 200k a year through pension why do you even need to worry about how you invest?
Because pensions and companies that hold them can be bought and legacy costs (pensions) can be shed in the sale. Under a new name, pensions may not be required to be honored. Meaning, the new company may be profitable right away by telling older pension holders to scram. This is something you should have learned in 2008 by watching GM. This is why you always hold gold and other investments as a percentage of your portfolio. Trust no one leg of the stool.
What silly statement ! Thats like saying that I have a Physical ever year so I’m not worried about my health
don't you get taxed on what you earn, so if they are retired they are only earning their pension, that can't be any more than a 38% which is what most middle class people earn anyway.
They could be looking at it as a legacy plan i.e. what's the most tax efficient way to leave money behind to children, churches, and charities.
If you are working overseas, do be aware that foreign exemption precludes you from contributing to a Roth. That’s a caveat many may not know.
He doesn't ask the important questions up front like what is the traditional IRA invested in, age and her tax bracket. She likely doesn't benefit from an traditional IRA to Roth IRA conversion.
@ 1:30"... get...returns like what the stock market does..." - yet he doesn't bother to suggest she simply invest in an S&P 500 or Total US Stock Market mutual fund. That is better than his tired and obsolete offering 5 seconds earlier.
Al Rocky I’ve always wondered this myself. Maybe he has to be more vague for legal reasons?
@@jaZzyjeff818 A part of his business model is charging his 'local providers' for the referrals (he's upfront about this, it's not a secret). You don't need a 'local provider' to go online and buy low-fee index funds.
I really like have gentle and informative he was!!! Excellent approach!
Traditional IRAs may not be deductible. In that case, you''d pay taxes on the gain, but not on what you contributed. If your IRA is not deductible, you might as well go with a Roth right away.
Lots of people who are retiring and who have 401(k)s that were tax-deferred are getting ready to pay BIG tax bills. If you are doing a Roth conversion, you can control when you do the conversion.
Bro. She makes 200k. She needs to put in traditional instead... She is basically at the top tax bracket. Once she retired at 65. Her income would be 0. So she can withdraw 401k as much as she wants in a lower tax bracket. The point is that she's makes 200k.
Do you know what a pension is? She is retired
For my considerations on rolling into a Roth is that lump sum of cash from IRA to Roth is taxed as income. Meaning it likely will put you into a higher tax bracket and (she's retired) it will likely raise your cost of Medicare part-B. Both are based on income. She was clearly unaware but I try to roll each year up to the point of moving into a higher bracket.
Especially since our election was compromised and the new buyers of the WH are promising higher taxes on all working taxpayers, to afford free stuff handouts. Sorry, but is very applicable to this topic.
You're wise.
Depends what tax bracket you’re in now versus when you retire
That's is the key. If you make more now than you will later, traditional is king
why is it no one answers the question "how do I convert to a roth ira? do I take the cash out ?get a check ? report it on my taxes? special paperwork ? wire transfer ?
Definitely don’t take a check. Call the brokerage that has your trad IRA and they will facilitate the conversion, which can also be in-house, unless you wanted the Roth to be with a different brokerage. They will also explain the tax consequences but will probably advice you to seek further guidance from a tax pro (but tbh you can do the research yourself).
If you can open a Roth account where your assets are currently at, that is easiest. Tell them you want to open a Roth account and convert your assets over. You PROBABLY need to make an estimated tax payment via IRS Form ES1040. If you wait until tax time, if the payment is too large, you will pay a penalty on top of the taxes due. I don't know what the calculation or amount is.
Schwab and ETrade and Fidelity and Vanguard (and others) all are eager to host your money, so you can open a Roth with any of them and they will be ready, willing and able to walk you through the process of converting an account over to your Roth. I will say that ETrade does not do a good job explaining their process. I had cash ready to pay the estimated tax as part of the conversion, but it wasn't in the right place (it needs to be in the Traditional IRA account), and after futzing around, I just converted the assets and dealt with the tax at tax time. One year that triggered a penalty and another year it didn't.
If you take a check, that becomes a taxable event and gets added to your income for the year. Bad idea. When I rolled a 401k into an IRA, there was a check involved, but it was not written out to me, and I just forwarded it on to my account.
12% where please?
Any additional resources you all would recommend to understand these things more
I much prefer the Roth, BUT if you are already in a traditional, let it sit. Then start a New Roth IRA and forget rolling the old one. It’s not MUCH better just slightly better to be in a Roth and better to not roll what you already did no matter which one it’s already in. I’ll explain why. Even though in a Roth the investment gains are tax free, the amount of starting principal upon which the investment is growing will be reduced by the non-tax-deductibility at the beginning and that washes out the benefit of saying the gain is tax free, the amount of all that investment gain all the way out till withdrawal is also reduced proportionally in a Roth by the fact that your starting principal will be less given the same money you contribute from gross income. All it comes down to instead is will your marginal tax bracket be higher or lower at withdrawal time. And both IRAs are usually better tax-wise than a non-IRA where the contributions are like a Roth but the withdrawals are taxed at 15% capital gain
Great information. Big help👍
I dont think she got it, just sayingggg....
What was the real benefit of moving to a roth? Instead of paying 30K to roll it, how about just invest the 30k separately?
And then pay taxes on all the growth of that 30k too...
@@davidhochstetler4068 Heh, yeah, Nicholas needs to listen to the segment again!
They've got to be federal government employees, with those pensions. No one else can be that stupid and make that much money.
😂😂😂😂😂😂😂😂😂😂😂😂
WHERE'S HUNTER?
@@HighCountryRambler he’s getting that %10 from Burisma
.....and exactly how stupid do you have to be, to attain that level of rudeness?
After adjusting for inflation expect the $ to double over ten years, not triple.
More than double even with inflation.
Inflation is typically around 2-3%. If we did receive 12% returns minus inflation take the higher to be conservative (12-3=9%)- using the rule of 72 we would expect money to double in about 8 years.
But the bigger wrong assumption is continuously getting 12%.
@@JustinFromMD You are correct sir! Market average going back to 1929 is 8% but in his example you are easily beating the market every year and why wouldn't everyone put their money in these mutual funds?
Does anyone know if Ramsey has provided his thoughts on a Roth Conversion after baby steps are completed?
He will tell you when you are at the baby step 4 (invest 15% of your income) to do it in Roth accounts. Lots of employers offer Roth 401ks, now. Their match has to go into a Traditional 401k, though.
Question... If you move it to an IRA and it's taxed, is it going to be counted as income on your next year's tax return
Well it will be counted as income for the year you move it.
As a percentage of the population, how many people in the US would not have the financial literacy to fully understand the different tax schemes? I'm guessing it would be at least 70%.
so to clarify ... if you use already taxed dollars to put in the roth, is it still taxed later (not the growth)? Or do you put into it tax free, and just take out the taxes later on the initial input?
Roth IRAs are not taxed at retirement.
You will not be taxed on it at retirement. Your contribution has already been taxed with your earned income from your paycheck.
With a traditional IRA are dividends and interest taxed at a capital gain tax rate versus what you put in being taxed at a income tax rate?
ZzHasbrozZ withdrawals are taxed as ordinary income
I wonder if the same would apply by having a traditional TSP and wanting to move it into a Roth TSP ? I only have 13,000 in it so far but can't imagine coming up with money to pay taxes on it upfront.
You cannot currently convert your traditional Thrift Savings Plan to a Roth Thrift Savings Plan. You'd most likely be better off just contributing to your Roth TSP account.
Keepit where it is and look for a better fund
I have two Grandchildren 26 yrs and 23 yrs. Which is best, IRA or Roth IRA? Also, arrange so that they can't touch it until they turn 50 yrs old. Do you have a video that covers this? Thank you.
I really want to help my mom as she's set to retire within 3 years. She's got a 457b, and I have no idea how much she has in it, so let's just use a nice even $300k. What are her options? Is there any reason why she would want to move it to either type of IRA? Should she just stay with the 457b? Would there be any difference in the amount taxes she'd have to pay at this point?
I just started my 401k with my company . they contribute the 6% a dollar for a dollar ....how do I make my money grow ? They take about $107 every check
I have Roth IRA account, traditional IRA account and 457 B account. I'm 61, retiring end of this year and moving overseas. What's the best way to close all these accounts, take my money and move?
Survivalist Nomad Not an expert, but as far as the Roth is concerned, I would transfer the sum to a Charles Schwab Investor Checking Account (whose debit card has no foreign transaction or ATM fees), and I’m honestly not informed enough to know why to do with the 457B.
The idea would be that if you choose to bank with someone else in that foreign country, Schwab would make it easy since their customer support is top notch, or you could just leave it there since you won’t get dinged for foreign transactions or ATM withdrawals.
Make sure to opt out of margin trading if you do decide to open the checking account or else it’ll ding your credit with a hard inquiry.
Watch Ask Sebby or Credit Shifu’s video’s for more info on that specific account.
Signed,
Not an expert, but someone who cares.
Graduated college 2 years ago and 2 years into my career, trapped in a lease until next year, renting unfortunately. I'm saving to buy a car in cash and paying off my student loans(62k -> 54k). Started off small with a roth. $10 per paycheck. 2 years later it's ballooned up to about $500. Is this alot? No. Absolutely not. Is this alot for just a little? Yes. Goal for 2020? Get to under 40k in student loans , own a decent car and save my darned emergency fund. NO MORE LEASES! NO MORE PAYCHECK TO PAYCHECK! X^(
So if you roll from a IRA to a Roth there is no limit? I thought there was a limit. I don't the moving fund to the Roth vs getting the annual Roth. I thought the Limit in 2024 is $8,000.00 for someone over 51? Transferring money is different?
Yes. Transferring/converting is different. You're just moving money that's already in the IRA...it's not a contribution. Yearly contributions have limits
Do you recommend the backdoor Roth strategy if you currently don't have a traditional or a Roth?
Assuming you make too much to just open a roth IRA - sounds like being a hot mess mom is working out well for you :P …yes having a backdoor ira is a great tax advantage regardless of whether you currently have a traditional or roth. Your current traditional/ roth status doesnt really change anything. Def worth backdooring
I have so many questions about this Ira I am not hearing the answer on any of the videos
With a Roth IRA accounts, there it is a 10 percent tax penalty if withdrawn before the age of 60 years old
Man I still don’t get it.
Don’t roll it. Move how it is invested. Just start up a Roth with new money and keep the traditional but invest it different.
The Lead Quote just out of curiosity, why would you prefer not rolling it to an Roth and starting adding new money?
The Lead Quote if they are making $200k, they are nor eligible to open a Roth with new money. They can convert a traditional 401k though
Where is the best place to open up a Roth IRA account? Through the personal bank or should one go through a separate entity like Fidelity Investment?
There is no "best" place. I personally would use a platform like ETrade or Vanguard or Fidelity or ScottTrade. I don't know of any benefit of one over the other. You can do it all online, so it is really accessible. I don't have any experience with an IRA through a bank, but it seems like it would be harder to acquire investments like stocks, and I assume a bank would politic you pretty hard to let them advise you and to have you buy their products.
One platform I would recommend AGAINST is Robin Hood.
I have an ETrade account. Inside of that I have a regular trading account, a rollover Traditional IRA and a Roth IRA. The rollover Traditional IRA was created when I rolled a 401k from an employer to my ETrade account. I have since moved some of the stock in my rollover Traditional IRA to my Roth IRA. I did it at the start of the COVID crisis, when the market tanked. The tax bill from the conversion was a lot smaller that way.
My current employer offers a Roth 401k. Lots of companies now offer that. The company match portion has to go into a Traditional 401k, but my contributions go into a Roth.
Fidelity does a lot of the administration for employer 401ks. If Fidelity manages your 401k program at work. I would go with them.
Easy numbers, in ten years at 10% increase (average) figure you will increase from 2.5-3 times the original amount ie 125k -> 324k = increase of 259%
Yes. The biggest mistake is to wait and do nothing.
If you rollover from a traditional to a roth do you only pay the taxes or do you also pay a penalty as well?
Tax no penalty.
200K on pensions? Why do you need an IRA? If I have 200K coming in on pensions, I'd be retired and living the good life!
inflation, better rebalance retirement accounts.
I was utterly shocked when she said 200k given her lack of financial understanding. I highly suspect that figure is inaccurate!
Opened a index fund for $3000 do I pay taxes on this and what about the growth? I’m 62 should I open up a Roth account and how much can I investing it every year?
Q1 If that $3,000 were invested in a traditional IRA you would owe zero taxes.
Q2 If you or your spouse is working you can invest *$7,000* into a traditional or Roth IRA. *"Should"* cannot be properly answered without more information.
Not sure I can handle this myself, are there brokers who do this for others professionally ?
He finally "sorta" addresses her question at around 5:10. And he never does tell her HOW to convert a traditional IRA to a Roth. And that's what she asked. :(
You pick up the phone and call your company.
She really needed advice and understanding, that's what he gave her.
Why does he recommend her to cash flow 15k this year and 15k next year? Isn’t it more comfortable to just to deduct it off your profits when you take it out?
12%!!!!!!
yeah right.
well he did say it was an example not guranteed
Over lifetime it's definetly possible. She doesn't have that much time left in case we crash to recover. Now just this year she would have made 25% but that's not normal.
E Rodriguez ,,,, numbers don’t lie,,,,,invest on the history percentage of returns,for the last 10, years....a lot of people invest on the name of mutual fund...example.....a return on a mutual fund in 2000, was 10 %, in 2010 was 15%, now in 2018 is 17%,,,, where do you think is going to be in 2020.....???20%?,,,,,17%,,,,,or 15%,,,,,where ever it go it goes is better than 10 %.......go to vanguard..com...
@@patandbrandi Over the lifetime that is incredibly unlikely, unless of course you could predict the future and only buy on the low crashes and sell at peak.
For the age 50 and up especially at 60 it grows way faster , check out the Roth IRA calculator and you will notice ..
Hey Dave! Just got off the phone with Fidelity Services. They told me that if i wanted to move my pre-taxed old 401(k) to roth IRA, i will be subjected to the tax % + the 10% penalty. I wasn't expecting the 10% penalty part. Thought it was only if i cashed out everything. Can you confirm if this is true?
Conversions aren’t subject to the 10% early distribution penalty.
If you do things right you can have the current holder of your 401k transfer and convert it directly, unless you've already cashed it out or asked them to send a check directly to you.
Gyve P. That is incorrect info.. call again and ask to speak to a representative that can tell you the truth
you need to have it rolled over to a traditional IRA correctly and there aren't any penalties or taxes
key word "transfer" you want to do a transfer from one 401k to a roth (no 10% penalty) and not a cash-out and than move it to roth ira (10% penalty).
I don't understand when you say have to pay taxes on the money put in after they taxed the income made to put in to the roth
If you earn a percentage under inflation-you’re technically earning less than nothing
but, you're also losing less than you would holding cash
Is taking money from my regular savings account considered post tax money or do they take additional taxes out when I open a Roth IRA?
With a Traditional IRA, you get to deduct money that you put in at tax time, which lowers your adjusted gross income. You pay tax on the money as it comes out.
With a Roth IRA, there is no deduction at tax time, but years later, when you take your money out, you don't pay any taxes on it, including all the growth that happened.
With your savings account, any interest you earn has to be reported as income, and is taxed. So there is no tax benefit for putting money into savings and you get taxed on the interest you make. AND, over time, inflation makes that money less valuable. So, sitting on a bunch of cash is not a good idea. Five dollars when my dad was a kid bought a car-full of groceries. Now it buys a gallon of milk and a dozen eggs. You should have SOME money in savings. Dave recommends 3-6 months of expenses.
You don't pay any taxes when you open a Roth account. Any money you put in it is after-tax dollars. So there is no benefit each year when you file your tax return. But, when you take money out of your Roth account, it is all tax-free. You can only put $6500 per year in an IRA ($7500 if you are 50 or older). You can put $22,500 in a 401k, so if you are working and your employer offers it, you would be smart to start putting your money there, first. If you still have money, then you can contribute to an IRA, as well. Lots of employers offer Roth 401ks, now.
@@damondiehl5637 Thanks for the information!
I have so much to learn. I would have understood more of that if it were in Polish and I don't speak Polish.
I speak Polish and it didnt help :')
It boils down to this. Converting from a traditional to a Roth IRA means you will pay taxes now rather than pay them later. Why would you want to do that? Because more than likely this is as low as taxes will ever be. Taxes are going to go up in the future. So now is a great time to look into making the switch. Talk to a financial advisor and a CPA to see if it's right for you.
A broker can actually lose his license if he or she lies or gives bad information to a customer. Insider trading is when a person a business owner and invests based off of information of how that business is performing. Meaning: you cannot invest in your own company.
The bank gives you a list of companies to invest in and cannot give advice on it
Insider trading??? Just ask pelosi
I have a Roth IRA account with primerica, do you think they're trusted company?
The better question is what mutual funds did they have you buy from them? It looks like you might be getting raked over the coals from the LOAD mutual funds they offer and the high expense ratios of those mutual funds. Enter the 5 letter tickers of those mutual funds @ Morningstar.com and look under Purchase. If you see something like ~5% Front Load or any amounts under Load, you've been had. If the Expense Ratio is anything over 0.50% you paying way too much. A 5% Front LOAD means you lose 5% off the top and that goes into a salesman's pocket. A 5% Front LOAD means they take $50 from your $1,000 investment and you end up with only $950 of stocks / mutual fund shares.
Al Rocky
mrhozer : Is there a web site or a UA-cam video or an article to validate your statement? I’d like more info.
Well I've done my research on Primerica and from what i see they are HIGHLY regulated by State & Federal government & FINRA - the biggest SRO in the country and they are publicly traded in the NY Stock Exchange so I they don't look like a Pyramid scheme to me....
Jestic They are a multilevel marketing (extra fancy pyramid scheme) they are focused on recruiting and while they don't make money by recruiting they will forever get an override on people they recruit. It's a close to a pyramid scheme without actually being one. Transamerica has a similar company called WFG or World Financial Group
If I had her money I'd retire now! I'm sure these people are Dr and lawyers ! I'll never do anything but hope and pray now! Thanks for the update!
He's defining the difference between a traditional IRA and a Roth, not explaining how to move from one to the other.
moving it is easy, just tell the holder of your TIRA to move how much to a RIRA. Not hard at all, just have to pay the taxes, and he did explain that.
And what about traditional 401k vs Roth 401k, considering that the employer provides matching. Is roth 401k better?
Paolo Lenzi yes. As long as your income is under $193,000
most companies allow you to do both as long as the limit falls under the 401(k) total limit. Always contribute enough to get the employee match, and then put how much you can afford into the Roth 401(k). Then if you switch jobs you can move them over to IRAs and it doesn't count toward your IRA limits.
I had the same question. But even in the caller's situation I don see the benefit of converting. I decided it was better to reduce my 401k contribution and apply the difference to my Roth. I just can't reconcile saving taxes now only to pay taxes 20 years from now at triple the rate? I feel its a dirty shame you have gamble with your savings in order to "ensure" your future.
The part he forgot to ask was how much of it was employer contributed, because that part is not taxable.
So is a 401k work the same way as a traditional IRA?
You put money in pretax and pay taxes on entire amount at retirement ?
Whereas the Roth you pay taxes only on what you put in while growth grows tax free?
Yes
Great segment. All ELPs don't necessarily teach. Some of them invest for you but don't really have time to teach.
---Ramsey's comparison of a Roth IRA with a traditional IRA that are both funded by $90K is an unfair comparison. In this comparison the Roth would always look better--it would be a no brainer. However, in reality, any person who has $90K of after tax money to put in a Roth should have more than $90K of pretax money to put in a traditional. The, thus comparison should be $90K funding for a Roth versus $90K plus the pre tax savings added back for a traditional. At a 25% marginal tax rate the tax savings would be $22.5K which when added back to the $90K would be $112.5K. Thus if $90K in a Roth grows to $290K, $112.5K in a traditional grows to $362.5K which would be $72.5K more. That is more fair comparison.
---If the retiree's tax bracket is also 25%, the retiree's taxes on $362.5K would be $90,625 which is $18,125 more than the $72,500 of additional investment growth in the traditional over the Roth. However this assumes that the retiree would draw down ALL of the traditional IRA savings and thus be taxed on ALL of it in their life time. However, it is more likely that the retiree would leave a considerable portion of the savings to their surviving spouse. If, on the other hand they had paid taxes up front in order to fund a Roth account they would deprive their surviving spouse the opportunity for further investment growth on pretax money as well as the benefits of a larger investment portfolio from pretax funding. Similarly, a surviving spouse might not draw down all retirement savings rolled over to them but would might leave some of it to their children...
---...and even if a surviving spouse and children must meet annual withdrawals that would be fully taxable in an inherited traditional IRA, the minimum withdrawals could stretch out full liquidation of the account, over many years, over which time some portion of the account would still contain pretax seed money that is invested and growing. Thus a child with a life expectancy 30 years after the last surviving parent could stretch out withdrawals and thus defer some amount of taxes in an inherited traditional IRA over an additional 30 years.
So which do you recommend?
Well explained Dave! Thanks for sharing, Sir!
He explained it well but it’s incorrect. Roth is after tax meaning you inherently have less up front investing power than with traditional. The math is in tax brackets when investing compared to when retired.
Idk how much I have if it comes out be a dollar or seven I'm go crazy bkus I don't understand this at all
Can you move a certain amount at a time into a roth. In order to pay lower taxes. Example: 10k move 2k per year and pay that tax?
Yes. You can.
I want to make 12%/yr for the next 10 years. That is even better than Madoffs 10%/yr. As of today my accounts are up 2% for the year and I am glad they are in the black. I will see where they are at at years end. I have lived through 4 recession in my life and to count on a 12% return/yr for a 10 yea time frame is loony tunes. Over a 40 year time frame yes, but not over a 10 years, I think this very foolish. JMO but please let me know how you are doing it.
Love how he flippantly throws around double digit returns like it’s common 🤣
The S&P does about 11% on average
@@cullenmayes3370what’s your point? So if one invests $100,000 in an S&P 500 index fund on 1-1-2024, it will be worth $111,000 on 12-31-2024? Past performance is no guarantee of future results.
What if you move from say NY to NC when you retire, wouldn't traditional work better though?
What investment pays 12%?
I am shocked at how much bad advice is on here in the comments. Lol. People that dont grasp the concepts, talking like they do. . .
Im 17 and had a question im about to start working so i was wondering if a 401k is separate from a mutual fund or is it included in a 401k and if they are separate which should i invest more into. Thanks sorry haven't started working and want to know how this works as soon as possible
A 401k can include mutual funds it just depends on what you pick I suggest going with S&P 500 Index that'll give you a wide variety and will spread it out so on average you'll be getting around 7 to 9% interest... Save as much as u can I'm 30 and I wish I was your age again to start saving sooner ... save it automatically out of your check with a direct deposit.. you won't miss it and you'll thank yourself later good luck
A 401k will have mutual funds for you to choose from!! Vanguard is a excellent place to open a 401 k!!
@@greatriffishere that's where I've got mine
A 401k is a financial vehicle for buying stocks/ bonds, you can't open one on your own, you have to have one through an employer. What types of funds are available depends on what your employer chooses to offer.
Like Scarlet night said think of Roth IRA, 401k, Traditional IRA as different vehicles... Van, pickup, car...
Your investment is the people inside the vehicles. The investments inside the vehicles can be stocks, mutual funds, index funds... Etc.
That said everyone has access to Roth or Traditional IRA. You only have access to 401k through an employer.
The IRAs allow you to contribute a Max of $5,500 per year. Most 401ks allow you to contribute around $15k max. The company I work for is very small and we have a Simple IRA. It's like a 401k (employer sponsored) for a small company. It only has a Max contribution of $12k per year.
For someone young like yourself look into opening up a Roth IRA through a company like Fidelity (what I use), T. Rowe Price, Vanguard... I chose Fidelity because they have a ton of mutual funds to pick from and also some decent index funds.
The Roth IRA is best because you are investing pre-tax dollars which means that when you retire when you withdraw this money you won't have to pay income tax on this money.
Tax shielding yourself in retirement is the key to successful retirement.
So if your young and are starting small, you should do a roth. because it will tax what is put in? so if its sitting there for 40years non of that will be taxed am I mistaken?
You want to contribute to a Roth IRA when in a relatively low tax bracket and in a traditional IRA when in a relatively high tax bracket. The money in the Roth sits and grows for 40 years and then when you withdraw from the Roth IRA and it will not be taxed.
What if 20 years from now they change the law and say sorry folks, you know that Roth IRA you already paid taxes on? Well, because of national austerity measures, we need to tax you on it again. A similar thing happened in Greece in 2008.
The Dems will find a way
Can’t live life based on “what-ifs.”
Only difference Is you pay taxes now or later and I didn’t need a 10 minute video to explain. It.
Once again, Ramsey talks about rolling into a Roth without raising the topic of tax brackets at all. All that seems to matter to his audience is that "less taxes" sounds good, but it's not always true. Depending on how their income changes, rolling over might not be enough of a gain to be worth the early tax payment, and could actually leave them with less money when it's all said and done.
I wish Ramsey would ask what ppl do for a living. $200k a year in pensions?! What do they do?!
Should I open a Roth IRA with Fidelity/Schwab/TD Ameritrade?
Depending on how much money you have, I would suggest a independent financial advisor. If you don't have a lot those 3 are basically the same they are all very cheap and that's what matters if you don't have a lot. A lot meaning a minimum of $50,000
$60k at 12% for 10 years is more around $180k tax free.