1 00:00:00,080 --> 00:00:00,800 Speaker 1: What's up, everybody. 2 00:00:00,880 --> 00:00:04,280 Speaker 2: Welcome to financial Heresy, where we talk about how money 3 00:00:04,320 --> 00:00:07,800 Speaker 2: works so that you can make more, keep more, and 4 00:00:07,880 --> 00:00:12,120 Speaker 2: give more. Today we are doing a basically an in 5 00:00:12,280 --> 00:00:17,319 Speaker 2: depth course on retirement accounts. This is a topic that 6 00:00:17,720 --> 00:00:23,400 Speaker 2: affects ninety nine percent of Americans. Number one, Number two, 7 00:00:23,960 --> 00:00:28,360 Speaker 2: it is slightly overwhelming because there are so many different details, 8 00:00:28,360 --> 00:00:32,360 Speaker 2: so many different types of retirement accounts out there. But 9 00:00:32,520 --> 00:00:37,400 Speaker 2: number three is very detrimental in the long term if 10 00:00:37,400 --> 00:00:40,479 Speaker 2: you get it wrong, and extremely beneficial in long term 11 00:00:40,479 --> 00:00:43,599 Speaker 2: if you get it right. And number four it's actually 12 00:00:43,600 --> 00:00:45,520 Speaker 2: when you when we break it down, and you'll see 13 00:00:45,520 --> 00:00:48,519 Speaker 2: by the end of this episode, it's actually not that 14 00:00:48,640 --> 00:00:52,960 Speaker 2: complicated once you understand the moving parts here. And so 15 00:00:53,120 --> 00:00:55,160 Speaker 2: we're going to take a look at the different types 16 00:00:55,200 --> 00:00:59,600 Speaker 2: of retirement accounts, how to use them, what they are, 17 00:00:59,720 --> 00:01:01,880 Speaker 2: what you can do with them, which you can't do 18 00:01:01,960 --> 00:01:05,800 Speaker 2: with them, and then once you understand these moving pieces, 19 00:01:06,080 --> 00:01:08,280 Speaker 2: you'll be able to put a plan in place that 20 00:01:08,440 --> 00:01:11,360 Speaker 2: is best for you, that will get you to your 21 00:01:11,400 --> 00:01:15,600 Speaker 2: goals much faster than just kind of hoping you're doing 22 00:01:15,600 --> 00:01:21,040 Speaker 2: the right thing. Basically, so essentially we've got we've got 23 00:01:21,080 --> 00:01:24,360 Speaker 2: two different well I'm gonna say three different types of 24 00:01:24,440 --> 00:01:28,320 Speaker 2: approaches that people take to their retirement accounts. Approach number 25 00:01:28,360 --> 00:01:34,920 Speaker 2: one is is avoidance. And in this avoidance it's, you know, 26 00:01:35,760 --> 00:01:40,000 Speaker 2: most of the time, it's younger people, younger professionals, people 27 00:01:40,040 --> 00:01:43,320 Speaker 2: who live in or work in jobs that maybe don't 28 00:01:43,400 --> 00:01:47,560 Speaker 2: provide for one k's, you know, whatever the situation is. 29 00:01:47,600 --> 00:01:50,240 Speaker 2: There's avoidance where people say, I'm not gonna worry or 30 00:01:50,320 --> 00:01:53,120 Speaker 2: think about a retirement account right now, a retirement plan 31 00:01:53,200 --> 00:01:57,919 Speaker 2: right now, I'm not gonna be contributing, contributing anything, and 32 00:01:57,920 --> 00:02:00,000 Speaker 2: and they're just thinking, you know, at some point later 33 00:02:00,120 --> 00:02:01,640 Speaker 2: in my life, I'll be making enough money where I 34 00:02:01,640 --> 00:02:03,080 Speaker 2: can start thinking about this, and then I'll do the 35 00:02:03,120 --> 00:02:04,720 Speaker 2: research and learn what I need to learn, and then 36 00:02:04,720 --> 00:02:06,400 Speaker 2: I'll be able to start making my way towards it. 37 00:02:06,600 --> 00:02:09,520 Speaker 2: So that's approach number one. The problem with that is 38 00:02:09,560 --> 00:02:12,079 Speaker 2: that most of the games you have in the end 39 00:02:12,160 --> 00:02:17,160 Speaker 2: of your life from your investments come from the early 40 00:02:17,200 --> 00:02:19,040 Speaker 2: seeds that are being planted. So when you think about 41 00:02:19,080 --> 00:02:21,799 Speaker 2: like an orchard, you imagine like if you start off 42 00:02:21,800 --> 00:02:25,480 Speaker 2: with one apple seed, if you plant that later on, 43 00:02:25,720 --> 00:02:29,320 Speaker 2: you know, years later, that turns into one apple tree 44 00:02:29,440 --> 00:02:34,640 Speaker 2: that produces apples, and you could, you know, then start 45 00:02:34,680 --> 00:02:36,880 Speaker 2: eating some of those apples, but really that's not enough 46 00:02:36,880 --> 00:02:38,800 Speaker 2: to live off of, and so you want to take 47 00:02:38,960 --> 00:02:41,440 Speaker 2: every seed from every single one of those apples and 48 00:02:41,480 --> 00:02:43,280 Speaker 2: go out and plant all those and then you wait 49 00:02:43,320 --> 00:02:46,320 Speaker 2: another ten, ten years or however long. I don't know 50 00:02:46,320 --> 00:02:47,880 Speaker 2: how long it takes apple trees to grow, but you 51 00:02:47,880 --> 00:02:50,360 Speaker 2: get the point. You wait until those, you know, the 52 00:02:50,400 --> 00:02:53,959 Speaker 2: next one hundred trees grow and then you could start 53 00:02:53,960 --> 00:02:55,560 Speaker 2: eating apples from there. But if you could do it 54 00:02:55,600 --> 00:02:57,360 Speaker 2: a third time, then you know, that would be the 55 00:02:57,400 --> 00:03:04,880 Speaker 2: most beneficial. So basically the most important factor here is 56 00:03:05,000 --> 00:03:08,440 Speaker 2: the time, because if you only have three years, well 57 00:03:08,480 --> 00:03:10,200 Speaker 2: then you're only ever going to be able to get 58 00:03:10,240 --> 00:03:13,440 Speaker 2: the apples produced by one tree. But if you have 59 00:03:13,600 --> 00:03:19,040 Speaker 2: thirty years, you have the apples produced by hundreds of trees, 60 00:03:19,160 --> 00:03:22,200 Speaker 2: which is obviously much better for you. And so the 61 00:03:22,520 --> 00:03:25,440 Speaker 2: biggest contributing factor to success with investing long term is 62 00:03:25,480 --> 00:03:30,000 Speaker 2: going to be time. And so the avoidance approach is 63 00:03:30,040 --> 00:03:35,240 Speaker 2: an approach that forces people into you know, they realize 64 00:03:35,400 --> 00:03:38,600 Speaker 2: too late that they didn't get started early enough, and 65 00:03:38,640 --> 00:03:41,040 Speaker 2: so the earlier you can get started, the better. So 66 00:03:41,120 --> 00:03:46,480 Speaker 2: avoidance is a suboptimal strategy. The second strategy is ignorance. 67 00:03:46,880 --> 00:03:49,720 Speaker 2: The second approach is ignorance. Now, this is people that 68 00:03:49,840 --> 00:03:54,480 Speaker 2: actually do start contributing, start investing, start using their retirement 69 00:03:54,520 --> 00:03:59,680 Speaker 2: of plans, but they have no knowledge of what they're doing. 70 00:04:00,720 --> 00:04:02,880 Speaker 2: They don't know the types of plans that they have, 71 00:04:02,960 --> 00:04:05,520 Speaker 2: they don't know the capabilities of the plans that they have, 72 00:04:05,600 --> 00:04:07,960 Speaker 2: they don't know they know how much money they're putting 73 00:04:08,040 --> 00:04:10,360 Speaker 2: in they think. They don't know if their employer matches, 74 00:04:10,480 --> 00:04:12,880 Speaker 2: they don't know if they're investing it in the right way. 75 00:04:13,280 --> 00:04:16,800 Speaker 2: So obviously this approach is better than avoidance, but it's 76 00:04:16,920 --> 00:04:20,520 Speaker 2: barely better than avoidance for the average person. Because I've seen, 77 00:04:20,560 --> 00:04:22,159 Speaker 2: you know, I used to be a stockbroker. I've seen 78 00:04:22,520 --> 00:04:25,200 Speaker 2: time and time and time again where people have had 79 00:04:25,279 --> 00:04:29,560 Speaker 2: retirement accounts for years and all they were doing was 80 00:04:29,560 --> 00:04:33,240 Speaker 2: putting cash into an account. It was not being invested 81 00:04:34,080 --> 00:04:37,240 Speaker 2: during you know, a great bull market as well, and 82 00:04:37,320 --> 00:04:40,240 Speaker 2: so this was you know, this is something that you know, 83 00:04:40,480 --> 00:04:44,960 Speaker 2: it basically turned into a tax deferred savings account. So 84 00:04:45,320 --> 00:04:48,080 Speaker 2: it wasn't growing, it wasn't compounding, it wasn't invested, it 85 00:04:48,080 --> 00:04:50,919 Speaker 2: wasn't earning dividends, wasn't earning interest, wasn't doing anything, but 86 00:04:51,000 --> 00:04:53,640 Speaker 2: at least they had something in there. They had, you know, 87 00:04:53,680 --> 00:04:56,400 Speaker 2: they have a little tiny bit just from the amount 88 00:04:56,440 --> 00:04:59,440 Speaker 2: they contributed that they once they became aware, they could 89 00:04:59,440 --> 00:05:01,680 Speaker 2: start doing the right thing with it. The other problem 90 00:05:01,720 --> 00:05:07,160 Speaker 2: with the ignorance strategy or approach is that you if 91 00:05:07,200 --> 00:05:10,000 Speaker 2: you invested in the wrong way, or you forget about 92 00:05:10,040 --> 00:05:12,560 Speaker 2: accounts or you're not sure how to use them, then 93 00:05:12,680 --> 00:05:14,840 Speaker 2: you're leaving a lot on the table. So even if 94 00:05:14,880 --> 00:05:17,560 Speaker 2: you know that it's being invested in something like the 95 00:05:17,640 --> 00:05:21,719 Speaker 2: standard Target Date Fund or something like that, you're not 96 00:05:21,920 --> 00:05:23,840 Speaker 2: using it maybe to the best of your ability. You 97 00:05:23,880 --> 00:05:26,279 Speaker 2: don't know that there's such a thing as a roth 98 00:05:26,400 --> 00:05:29,320 Speaker 2: versus a traditional and if you do know, you're not 99 00:05:29,360 --> 00:05:31,800 Speaker 2: sure which one is going to be best beneficial to you. 100 00:05:32,960 --> 00:05:35,640 Speaker 2: And when you leave your employers, it's still you know, 101 00:05:35,680 --> 00:05:37,800 Speaker 2: you've got a trail of old four to one K 102 00:05:37,880 --> 00:05:40,599 Speaker 2: corpses from every job that you've had that you left 103 00:05:40,640 --> 00:05:43,320 Speaker 2: behind wherever you worked, and it just seems like an 104 00:05:43,360 --> 00:05:45,360 Speaker 2: overwhelming mess. And so the only thing that you're doing 105 00:05:45,480 --> 00:05:46,880 Speaker 2: is kind of baring your head in the sand and 106 00:05:46,920 --> 00:05:49,680 Speaker 2: hoping that the new plan that you have is going 107 00:05:49,760 --> 00:05:54,760 Speaker 2: to work out for you. So ignorance is better than avoidance, 108 00:05:54,880 --> 00:06:00,919 Speaker 2: but just barely better. The optimal approach is the inform approach, 109 00:06:01,680 --> 00:06:04,880 Speaker 2: and this is where you understand what the different types 110 00:06:05,040 --> 00:06:10,359 Speaker 2: of retirement accounts there are out there. You understand what 111 00:06:10,440 --> 00:06:13,960 Speaker 2: is available to you specifically, you understand how they all work, 112 00:06:14,279 --> 00:06:17,160 Speaker 2: and therefore you're able to make an informed decision about 113 00:06:17,160 --> 00:06:20,119 Speaker 2: how to use them best for you. And then once 114 00:06:20,160 --> 00:06:22,480 Speaker 2: we go through the rest of this episode, that's the 115 00:06:22,480 --> 00:06:23,880 Speaker 2: camp that you're going to be and you're going to 116 00:06:23,920 --> 00:06:26,520 Speaker 2: be in the informed camp where you will be able 117 00:06:26,560 --> 00:06:29,600 Speaker 2: to you know, you'll know all about every single one 118 00:06:29,640 --> 00:06:32,640 Speaker 2: of these accounts and the best way to use them, 119 00:06:32,839 --> 00:06:35,360 Speaker 2: and you'll be able to make a lot more money 120 00:06:35,360 --> 00:06:40,760 Speaker 2: in the long run, mostly by intelligently navigating the differences 121 00:06:40,800 --> 00:06:43,520 Speaker 2: in how these accounts are treated from a tax perspective 122 00:06:45,360 --> 00:06:48,960 Speaker 2: and then also invest investing them the correct way the 123 00:06:49,040 --> 00:06:52,799 Speaker 2: investment perspective. All right, so that was a long intro. 124 00:06:53,720 --> 00:06:55,960 Speaker 2: Let's take a look at the two buckets. There's two 125 00:06:56,000 --> 00:06:59,320 Speaker 2: buckets that retirement accounts fall into. Actually, you know what, 126 00:06:59,360 --> 00:07:01,560 Speaker 2: Before we start off with those two buckets, we need 127 00:07:01,600 --> 00:07:05,280 Speaker 2: to explain just accounts in general. So everybody, everybody's familiar. 128 00:07:04,960 --> 00:07:05,760 Speaker 1: With a bank account. 129 00:07:05,920 --> 00:07:08,279 Speaker 2: Right, You've got your bank account, Money goes in, money 130 00:07:08,279 --> 00:07:10,240 Speaker 2: comes out. The only thing that happens to the money 131 00:07:10,280 --> 00:07:12,200 Speaker 2: in there is that it stays in cash until you 132 00:07:12,240 --> 00:07:15,160 Speaker 2: want to use it. So everybody's familiar with bank accounts. 133 00:07:15,440 --> 00:07:19,480 Speaker 2: The IRS does not watch or track bank accounts because 134 00:07:19,480 --> 00:07:23,440 Speaker 2: there's no taxable activity that happens inside of a bank account. 135 00:07:23,680 --> 00:07:25,600 Speaker 2: So the money that goes in there you get from 136 00:07:25,640 --> 00:07:29,320 Speaker 2: your wages, but that's you know, taxed at the paycheck level, 137 00:07:30,800 --> 00:07:33,280 Speaker 2: and then if you under withhold, then you you know, 138 00:07:33,320 --> 00:07:36,400 Speaker 2: you pay your taxes in April, and so the money 139 00:07:36,400 --> 00:07:38,720 Speaker 2: that you get that goes into your bank account, that 140 00:07:38,880 --> 00:07:41,480 Speaker 2: transfer into the bank account itself is not a taxable 141 00:07:41,480 --> 00:07:44,720 Speaker 2: event because those dollars are already taxed. And then anything 142 00:07:44,720 --> 00:07:47,080 Speaker 2: that happens inside the account is not a taxable event 143 00:07:47,120 --> 00:07:49,640 Speaker 2: because if you use the money to buy you know, uh, 144 00:07:49,840 --> 00:07:52,720 Speaker 2: you know, an apple at the grocery store, you know, 145 00:07:52,760 --> 00:07:55,560 Speaker 2: there's sales tax R. I guess probably most places don't 146 00:07:55,560 --> 00:07:57,720 Speaker 2: have sales tax on produce. But you get the point. 147 00:07:58,040 --> 00:08:01,080 Speaker 2: Nothing in the account is a tax event. No, those 148 00:08:01,080 --> 00:08:04,560 Speaker 2: transactions are taxable events, and then the money coming in 149 00:08:04,600 --> 00:08:07,000 Speaker 2: and out is not a taxable event either, So the 150 00:08:07,000 --> 00:08:10,360 Speaker 2: IRIS doesn't watch those accounts. There's a second type of 151 00:08:10,400 --> 00:08:13,400 Speaker 2: account that's just in general. It's a category called an 152 00:08:13,400 --> 00:08:16,560 Speaker 2: investment account. There are many different types of investment accounts, 153 00:08:16,880 --> 00:08:18,240 Speaker 2: but the most common is going to be like a 154 00:08:18,240 --> 00:08:22,520 Speaker 2: brokerage account. Now, in a brokerage account, you're probably very 155 00:08:22,560 --> 00:08:25,480 Speaker 2: familiar with a brokerage account, which is, you know something 156 00:08:25,520 --> 00:08:28,800 Speaker 2: you probably have. You put the cash in the account, 157 00:08:28,840 --> 00:08:31,800 Speaker 2: which is not a taxable event, and you can take 158 00:08:31,840 --> 00:08:34,240 Speaker 2: cash out of the account, and that's not a taxable event, 159 00:08:34,440 --> 00:08:36,160 Speaker 2: just like a bank account. You put money in, take 160 00:08:36,160 --> 00:08:40,640 Speaker 2: money out. None of neither of those things are taxable. 161 00:08:41,040 --> 00:08:43,040 Speaker 2: But inside the account you have the ability to do 162 00:08:43,120 --> 00:08:47,040 Speaker 2: something other than keeping it in cash. And so if 163 00:08:47,080 --> 00:08:50,480 Speaker 2: you purchase an investment in this account, that means you're 164 00:08:50,480 --> 00:08:52,400 Speaker 2: no longer keeping it in cash. So you can buy stocks, 165 00:08:52,440 --> 00:08:54,040 Speaker 2: you can buy bonds, you can buy ETFs, you can 166 00:08:54,080 --> 00:08:57,320 Speaker 2: buy mutual funds, so you can purchase all sorts of 167 00:08:57,360 --> 00:09:01,320 Speaker 2: different types of investments inside of a brokerage account. Now 168 00:09:01,400 --> 00:09:04,840 Speaker 2: that purchase itself is not a taxable event, but when 169 00:09:04,880 --> 00:09:08,320 Speaker 2: you sell it it is. If you buy something and 170 00:09:08,360 --> 00:09:10,160 Speaker 2: you spend one hundred dollars on it and then you 171 00:09:10,280 --> 00:09:12,520 Speaker 2: sell it for one hundred and ten dollars, you now 172 00:09:12,559 --> 00:09:14,680 Speaker 2: have a ten dollars gain. You turn your hundred bucks 173 00:09:14,679 --> 00:09:17,040 Speaker 2: into a hundred and ten bucks, So that ten dollars profit, 174 00:09:17,240 --> 00:09:20,880 Speaker 2: that's your gain. You're going to owe taxes on that 175 00:09:20,880 --> 00:09:23,880 Speaker 2: that gain portion just the ten just the ten bucks. 176 00:09:24,480 --> 00:09:28,280 Speaker 2: And so an investment account of brokerage account, these are 177 00:09:28,840 --> 00:09:32,680 Speaker 2: typically they're called taxable accounts, like if you go to 178 00:09:32,720 --> 00:09:35,679 Speaker 2: Fidelity or you know e Trade or something, you open 179 00:09:35,760 --> 00:09:39,880 Speaker 2: up an account and that'll be the two categories taxable 180 00:09:39,960 --> 00:09:40,760 Speaker 2: or non taxable. 181 00:09:41,400 --> 00:09:42,520 Speaker 1: And so a taxb. 182 00:09:42,280 --> 00:09:44,400 Speaker 2: Account would be just like a regular brokerage account because 183 00:09:44,480 --> 00:09:47,280 Speaker 2: anytime you have gains in that account, they just tally 184 00:09:47,320 --> 00:09:49,440 Speaker 2: that up. Throughout the year, they tell you and the 185 00:09:49,480 --> 00:09:52,719 Speaker 2: irs how much you had in total gains, and then 186 00:09:52,800 --> 00:09:55,240 Speaker 2: you have to pay the irs the amount based on 187 00:09:56,360 --> 00:09:59,200 Speaker 2: what your total gains were. And throughout the year the 188 00:09:59,200 --> 00:10:00,960 Speaker 2: gains and the losses are going to offset each other. 189 00:10:01,040 --> 00:10:03,880 Speaker 2: So if you make two investments, you turn one hundred 190 00:10:03,880 --> 00:10:05,360 Speaker 2: dollars into one hundred ten dollars, you had a ten 191 00:10:05,400 --> 00:10:07,160 Speaker 2: dollar gain and then you buy something else for one 192 00:10:07,200 --> 00:10:09,000 Speaker 2: hundred and ten dollars, but it goes down, so you 193 00:10:09,000 --> 00:10:10,520 Speaker 2: sell it for one hundred dollars. You have a ten 194 00:10:10,520 --> 00:10:12,440 Speaker 2: dollars gain and a ten dollars loss. Those are going 195 00:10:12,440 --> 00:10:14,880 Speaker 2: to cancel each other out, so on net you didn't 196 00:10:14,880 --> 00:10:17,760 Speaker 2: have any gains or losses, and so you wouldn't know 197 00:10:17,760 --> 00:10:18,400 Speaker 2: any taxes. 198 00:10:20,200 --> 00:10:21,520 Speaker 1: But you get the picture. 199 00:10:21,640 --> 00:10:24,280 Speaker 2: This is a regular brokerage account, and the IRS watches 200 00:10:24,320 --> 00:10:26,560 Speaker 2: what happens in the account because if there are gains, 201 00:10:26,559 --> 00:10:28,920 Speaker 2: they want to tax you on it. Well, over the 202 00:10:29,040 --> 00:10:34,679 Speaker 2: last couple of decades, the Congress has wanted to give 203 00:10:35,360 --> 00:10:42,200 Speaker 2: people individuals ways to save for retirement for themselves so 204 00:10:42,240 --> 00:10:45,320 Speaker 2: that they wouldn't have to be reliant on pensions from 205 00:10:45,360 --> 00:10:49,840 Speaker 2: their companies or pensions from the government or social security 206 00:10:49,880 --> 00:10:52,440 Speaker 2: things like that, because slowly people have started to become 207 00:10:52,480 --> 00:10:56,920 Speaker 2: more and more aware that those are insufficient due to 208 00:10:57,840 --> 00:11:03,439 Speaker 2: inflation basically, and so uh and so when we have 209 00:11:03,920 --> 00:11:05,520 Speaker 2: when we have, we have a bunch of laws that 210 00:11:05,559 --> 00:11:09,440 Speaker 2: have been passed that have created uh specific types of 211 00:11:09,480 --> 00:11:12,720 Speaker 2: accounts that are available to us as individuals that gives 212 00:11:12,800 --> 00:11:17,680 Speaker 2: us certain tax benefits if for using them. And these 213 00:11:17,720 --> 00:11:23,160 Speaker 2: are all designed to incentivize investing for retirement and so, 214 00:11:24,320 --> 00:11:30,560 Speaker 2: you know, instead of investing for now. So underneath this category, 215 00:11:30,880 --> 00:11:34,680 Speaker 2: this is the category called retirement accounts. Many places we'll 216 00:11:34,679 --> 00:11:39,320 Speaker 2: call these non taxable account accounts, but we're just going 217 00:11:39,400 --> 00:11:41,880 Speaker 2: to talk about these, uh, we're going to call them 218 00:11:41,920 --> 00:11:45,720 Speaker 2: retirement accounts because that's what they are, and that's what 219 00:11:45,880 --> 00:11:48,520 Speaker 2: the you know, there's there's all sorts of retirement accounts. 220 00:11:48,520 --> 00:11:50,480 Speaker 2: There's four one k's, there's row four one k's, there's 221 00:11:50,480 --> 00:11:51,920 Speaker 2: four O one a's, there's four three b's, there's four 222 00:11:51,920 --> 00:11:54,240 Speaker 2: to fifty seven b's. There's TSPs, there's roth iraries, there's 223 00:11:54,240 --> 00:11:56,640 Speaker 2: traditional iries, there's set iaries, there's simple iris, there's I 224 00:11:56,800 --> 00:11:59,880 Speaker 2: four one k's, there's self directed iras. They're all so 225 00:12:00,120 --> 00:12:04,680 Speaker 2: arts of different retirement accounts out there that may or 226 00:12:04,679 --> 00:12:08,560 Speaker 2: may not be available to you. And each one of 227 00:12:08,600 --> 00:12:11,120 Speaker 2: these basically that name, like you hear the word four 228 00:12:11,160 --> 00:12:14,160 Speaker 2: oh one K, like what does that letter and or 229 00:12:14,320 --> 00:12:16,840 Speaker 2: that letter and number combination come from? Comes from the 230 00:12:16,880 --> 00:12:19,640 Speaker 2: section of the tax code that details what the rules 231 00:12:19,640 --> 00:12:22,760 Speaker 2: are for that account. So in the Internal Revenue Code, 232 00:12:22,760 --> 00:12:27,800 Speaker 2: the IRC section four oh one, sub section K, that's 233 00:12:27,840 --> 00:12:31,240 Speaker 2: where it talks about the four oh one K and 234 00:12:31,400 --> 00:12:33,320 Speaker 2: the four oh one A, four oh three B, four 235 00:12:33,440 --> 00:12:37,199 Speaker 2: fifty seven B, all all the same. You know what 236 00:12:37,280 --> 00:12:38,760 Speaker 2: type of thing, you're just going to the section that 237 00:12:38,800 --> 00:12:41,800 Speaker 2: details it. And so these are there's all sorts of 238 00:12:41,840 --> 00:12:44,360 Speaker 2: different retirement accounts out there that give different types of 239 00:12:44,400 --> 00:12:47,240 Speaker 2: incentives that may be better for some people or better 240 00:12:47,280 --> 00:12:49,480 Speaker 2: for other people, but they're all designed to try and 241 00:12:49,520 --> 00:12:53,000 Speaker 2: get people to invest for retirement so that people aren't 242 00:12:53,040 --> 00:12:56,199 Speaker 2: reliant on the government or on their company pension or 243 00:12:56,600 --> 00:13:01,480 Speaker 2: social security. Okay, so under me retirement accounts, we're gonna 244 00:13:01,480 --> 00:13:04,920 Speaker 2: have two buckets. There's two main buckets, and then you know, 245 00:13:04,960 --> 00:13:07,120 Speaker 2: each of these buckets has many buckets inside of them. 246 00:13:07,160 --> 00:13:10,480 Speaker 2: But there's two main buckets of retirement accounts. There's the 247 00:13:10,480 --> 00:13:15,199 Speaker 2: first bucket, which is employer sponsored plans, and then the 248 00:13:15,240 --> 00:13:19,880 Speaker 2: second bucket, which is individual plans. And so if you 249 00:13:20,280 --> 00:13:23,360 Speaker 2: have a full time job, you have a four to 250 00:13:23,400 --> 00:13:25,920 Speaker 2: one K. Most likely most companies offer a four to 251 00:13:25,960 --> 00:13:29,840 Speaker 2: one K for their employees. Now, there are a lot 252 00:13:29,840 --> 00:13:34,200 Speaker 2: of different versions of the four to one K, but 253 00:13:34,360 --> 00:13:37,240 Speaker 2: these are all employer sponsored plans. So, for instance, if 254 00:13:37,240 --> 00:13:40,720 Speaker 2: you work at a non profit organization, like a charity. 255 00:13:41,840 --> 00:13:43,880 Speaker 2: It's either a four to one A or a four 256 00:13:43,920 --> 00:13:45,959 Speaker 2: oh three B that you have and I can't remember 257 00:13:46,000 --> 00:13:47,280 Speaker 2: off the top of my head which one it is. 258 00:13:47,320 --> 00:13:49,760 Speaker 2: I always get it confused with the like you know, 259 00:13:49,840 --> 00:13:54,480 Speaker 2: firefighters and cops and uh, you know, uh public employees 260 00:13:56,040 --> 00:13:58,839 Speaker 2: versus charities. There's you know, there's a bunch there's a 261 00:13:58,880 --> 00:14:02,400 Speaker 2: couple of different names for the plans. But but these 262 00:14:02,400 --> 00:14:06,160 Speaker 2: are all just retirement accounts sponsored by the employer. The 263 00:14:06,160 --> 00:14:07,800 Speaker 2: four O N A, the four one K, the four 264 00:14:07,800 --> 00:14:11,160 Speaker 2: oh three B, the four fifty seven B. So what 265 00:14:11,240 --> 00:14:13,520 Speaker 2: you what you're going to do if you're not aware, 266 00:14:14,160 --> 00:14:15,800 Speaker 2: first thing you're going to do is you're going to 267 00:14:15,840 --> 00:14:18,280 Speaker 2: contact your HR department or you're going to contact your 268 00:14:18,320 --> 00:14:20,960 Speaker 2: boss or your manager, whoever it is. You're to say, hey, 269 00:14:21,000 --> 00:14:24,600 Speaker 2: I need the information about the retirement account that we 270 00:14:24,680 --> 00:14:28,480 Speaker 2: have that's attached to this job, and they'll they if 271 00:14:28,520 --> 00:14:30,480 Speaker 2: they don't know, they'll tell you who to talk to 272 00:14:30,600 --> 00:14:33,840 Speaker 2: about it, and and they'll give you all the information. 273 00:14:33,960 --> 00:14:35,840 Speaker 2: You'll be able to see, Okay, am I using it? 274 00:14:35,880 --> 00:14:37,840 Speaker 2: Am I not using it? What type of retirement account 275 00:14:37,880 --> 00:14:40,400 Speaker 2: is it? Do I have multiple options? What are what 276 00:14:40,480 --> 00:14:43,520 Speaker 2: are by options? If I do have multiple options and 277 00:14:43,520 --> 00:14:45,440 Speaker 2: and so you'll be able to find all that info. 278 00:14:46,160 --> 00:14:50,920 Speaker 2: They'll probably refer you to the custodian. So what does 279 00:14:50,920 --> 00:14:54,880 Speaker 2: that mean if you if you're familiar with you know 280 00:14:55,000 --> 00:14:58,000 Speaker 2: you you contribute to your four one K. Let's say 281 00:14:58,960 --> 00:15:01,720 Speaker 2: it's not going into a a company or an account 282 00:15:01,760 --> 00:15:06,480 Speaker 2: that's managed by your company. Every company uses some sort 283 00:15:06,520 --> 00:15:12,760 Speaker 2: of external custodian to to manage these accounts, and so 284 00:15:13,280 --> 00:15:15,960 Speaker 2: it's going to be, you know, held somewhere like Vanguard 285 00:15:16,160 --> 00:15:20,320 Speaker 2: or Fidelity or Schwab or Prudential or you know, one 286 00:15:20,360 --> 00:15:25,520 Speaker 2: of these companies. You're going to for most of your information. 287 00:15:25,600 --> 00:15:27,280 Speaker 2: Once you find out where it is, what type of 288 00:15:27,280 --> 00:15:29,360 Speaker 2: account it is, you'll be able to call that company 289 00:15:29,400 --> 00:15:31,600 Speaker 2: and say, hey, I need all the information about this account, 290 00:15:31,600 --> 00:15:32,760 Speaker 2: what I can do with it, what I can't do 291 00:15:32,800 --> 00:15:35,680 Speaker 2: with it, et cetera. And they'll know far more than 292 00:15:35,720 --> 00:15:39,240 Speaker 2: your company will, like your HR department. So this is 293 00:15:39,240 --> 00:15:44,240 Speaker 2: the first bucket. This is employer sponsored accounts. So here 294 00:15:44,320 --> 00:15:48,400 Speaker 2: are some things that are essential to know about these 295 00:15:48,520 --> 00:15:53,920 Speaker 2: employer sponsored accounts. Number one, this is not your company's account. 296 00:15:54,160 --> 00:15:56,680 Speaker 2: It is not their money, It does not belong to them. 297 00:15:56,720 --> 00:15:59,000 Speaker 2: It's not on their balance sheet. They do not own it, 298 00:15:59,040 --> 00:16:01,240 Speaker 2: They do not have any access to it. It is 299 00:16:01,280 --> 00:16:06,720 Speaker 2: not their their account. This is your account. You own 300 00:16:07,040 --> 00:16:10,000 Speaker 2: the money and the investments inside the account. You own 301 00:16:10,040 --> 00:16:13,040 Speaker 2: the assets. It belongs to you. You're able to put 302 00:16:13,040 --> 00:16:16,560 Speaker 2: money in, you're able to take money out, and you 303 00:16:16,680 --> 00:16:19,920 Speaker 2: have full access to it. And guess what, it's yours forever. 304 00:16:20,360 --> 00:16:23,360 Speaker 2: It doesn't stay with the company. So what does that mean? 305 00:16:23,600 --> 00:16:27,560 Speaker 2: When you leave job, that job, you can take all 306 00:16:27,600 --> 00:16:29,800 Speaker 2: the money from that account with you and put it 307 00:16:29,840 --> 00:16:33,720 Speaker 2: into your next retirement account because money can go between 308 00:16:33,720 --> 00:16:38,000 Speaker 2: retirement accounts no problem, And so that money in that 309 00:16:38,040 --> 00:16:39,000 Speaker 2: account is yours. 310 00:16:39,600 --> 00:16:39,840 Speaker 1: Now. 311 00:16:39,920 --> 00:16:43,880 Speaker 2: There are some rules like, for instance, while you're employed there, 312 00:16:43,960 --> 00:16:47,960 Speaker 2: you have to leave that account there because every company 313 00:16:48,120 --> 00:16:50,960 Speaker 2: has some you know, special deals and special rules and 314 00:16:51,000 --> 00:16:54,280 Speaker 2: special plans set up in place in partnership with the custodian. 315 00:16:55,320 --> 00:16:57,800 Speaker 2: And so if you're going to be putting money into 316 00:16:57,880 --> 00:17:01,200 Speaker 2: it from your paycheck, it's got to stay there while 317 00:17:01,400 --> 00:17:04,119 Speaker 2: while you're there. There are a few employers out there 318 00:17:04,240 --> 00:17:07,280 Speaker 2: that every you know, like you know, for instance, like 319 00:17:07,359 --> 00:17:09,359 Speaker 2: something like every year or so, they'll allow you to 320 00:17:09,400 --> 00:17:11,840 Speaker 2: take the money out into another retirement account. But for 321 00:17:11,880 --> 00:17:14,280 Speaker 2: the most part, you're probably gonna have to leave it 322 00:17:14,320 --> 00:17:17,359 Speaker 2: there while you're an employee there. But what this means 323 00:17:17,400 --> 00:17:19,320 Speaker 2: is that if you've had past jobs in the past 324 00:17:19,320 --> 00:17:20,960 Speaker 2: that you had a four to one K or another 325 00:17:21,000 --> 00:17:24,639 Speaker 2: type of employer sponsored retirement account with, you can just 326 00:17:24,640 --> 00:17:27,879 Speaker 2: follow the bread crumbs, find any statements, find any emails, 327 00:17:28,160 --> 00:17:30,840 Speaker 2: call that company and say, hey, I used to work here. Uh, 328 00:17:31,040 --> 00:17:33,080 Speaker 2: you know, I can't remember who managed our four one k. 329 00:17:33,080 --> 00:17:35,240 Speaker 2: Can you give me the name of the of whatever 330 00:17:35,280 --> 00:17:36,920 Speaker 2: company manages the four one K so I can call 331 00:17:36,960 --> 00:17:39,720 Speaker 2: them and track it down. They'll say, oh, yeah, it's Vanguard. 332 00:17:39,760 --> 00:17:42,280 Speaker 2: And so then you look up Vanguard's website and you 333 00:17:42,320 --> 00:17:43,920 Speaker 2: call them and you say, hey, I used to work 334 00:17:43,920 --> 00:17:44,439 Speaker 2: for this company. 335 00:17:44,440 --> 00:17:45,760 Speaker 1: Our four one k was managed by you. 336 00:17:45,800 --> 00:17:47,639 Speaker 2: Can you guys help me access this so I can 337 00:17:47,760 --> 00:17:51,280 Speaker 2: you know, transfer it into my main retirement account and. 338 00:17:51,240 --> 00:17:52,040 Speaker 1: They'll be happy to help. 339 00:17:53,280 --> 00:17:57,320 Speaker 2: So employer sponsored retirement accounts, Uh, that's the first bucket. 340 00:17:57,359 --> 00:17:58,879 Speaker 2: These are the you know, your four one k's, four 341 00:17:58,920 --> 00:18:00,760 Speaker 2: one a's, four to three b's for fifty seven b's 342 00:18:00,760 --> 00:18:01,440 Speaker 2: and things like that. 343 00:18:01,840 --> 00:18:02,439 Speaker 1: It's yours. 344 00:18:03,920 --> 00:18:07,160 Speaker 2: The only caveat to it being yours is any money 345 00:18:07,160 --> 00:18:11,280 Speaker 2: that your employer puts in, and so your employer may 346 00:18:11,320 --> 00:18:12,920 Speaker 2: offer a match. So if you put in a dollar, 347 00:18:12,960 --> 00:18:14,600 Speaker 2: they'll also put in a dollar, or if you put 348 00:18:14,640 --> 00:18:16,920 Speaker 2: in ten dollars, they'll put in two dollars or something 349 00:18:17,000 --> 00:18:20,680 Speaker 2: like that. They'll have a rule on when that money 350 00:18:20,680 --> 00:18:23,640 Speaker 2: becomes yours. So it may be if the money, if 351 00:18:23,640 --> 00:18:26,200 Speaker 2: that money has been in the account for two years 352 00:18:26,440 --> 00:18:27,199 Speaker 2: now it's yours. 353 00:18:27,240 --> 00:18:27,639 Speaker 1: It may be. 354 00:18:29,800 --> 00:18:32,080 Speaker 2: That it's you know, once you've been with the company 355 00:18:32,119 --> 00:18:34,600 Speaker 2: for five years, then all the all the company match 356 00:18:34,680 --> 00:18:37,479 Speaker 2: money is yours. So they'll have some rules on it. 357 00:18:37,880 --> 00:18:40,760 Speaker 2: But if you don't follow those rules, then they can 358 00:18:41,040 --> 00:18:43,880 Speaker 2: they'll they'll get to keep the amount that they put 359 00:18:44,000 --> 00:18:45,520 Speaker 2: into the account. 360 00:18:46,520 --> 00:18:46,919 Speaker 1: For you. 361 00:18:47,200 --> 00:18:49,360 Speaker 2: But any amount that you put in from your paycheck 362 00:18:49,560 --> 00:18:52,560 Speaker 2: is yours just from the get go. You don't have 363 00:18:52,600 --> 00:18:55,600 Speaker 2: to there's no vesting period for that. And then the 364 00:18:55,680 --> 00:18:58,160 Speaker 2: last piece about this is that you have some control 365 00:18:58,280 --> 00:19:01,480 Speaker 2: over how the money is investing it inside these retirement accounts. 366 00:19:02,560 --> 00:19:04,960 Speaker 2: And so this would be where you call you know, 367 00:19:05,080 --> 00:19:07,840 Speaker 2: Van Guard or Fidelity or Schwab or you trader, whoever's 368 00:19:07,840 --> 00:19:10,240 Speaker 2: managing this four to one K for you. You call 369 00:19:10,280 --> 00:19:13,040 Speaker 2: them and you say, hey, look, I want to make 370 00:19:13,080 --> 00:19:16,560 Speaker 2: sure it's invested appropriately for me, and they'll be able 371 00:19:16,560 --> 00:19:18,200 Speaker 2: to tell you. They'll be able to say, Okay, here's 372 00:19:18,200 --> 00:19:20,680 Speaker 2: exactly how it's invested right now. And if you didn't 373 00:19:20,680 --> 00:19:23,480 Speaker 2: make the choice initially, it's, you know, ninety nine percent 374 00:19:23,480 --> 00:19:24,680 Speaker 2: of the time, it's going to be in something called 375 00:19:24,720 --> 00:19:29,040 Speaker 2: a target date fund, which just means if you're you know, twenty, 376 00:19:29,080 --> 00:19:31,320 Speaker 2: it's going to be mostly stocks and a little bit 377 00:19:31,320 --> 00:19:33,800 Speaker 2: of bonds. If you're seventy, it's going to be mostly 378 00:19:33,840 --> 00:19:35,760 Speaker 2: bonds and a little bit of stocks. If you're somewhere 379 00:19:35,760 --> 00:19:39,680 Speaker 2: in between, it'll be somewhere in between. Really the kind 380 00:19:39,680 --> 00:19:44,040 Speaker 2: of the worst cookie cutter type of investment account you 381 00:19:44,080 --> 00:19:47,200 Speaker 2: can be in. And so you'll say, okay, I would 382 00:19:47,200 --> 00:19:50,080 Speaker 2: like to change how it's invested. What are my options, 383 00:19:50,320 --> 00:19:52,040 Speaker 2: and they'll be able to point you on the website 384 00:19:52,040 --> 00:19:54,359 Speaker 2: where you can see what your different options are. You 385 00:19:54,400 --> 00:19:59,760 Speaker 2: can choose it yourself, you can, you know, they usually 386 00:19:59,800 --> 00:20:02,000 Speaker 2: will have an option where you can, you know, have 387 00:20:02,160 --> 00:20:05,720 Speaker 2: somebody help you make that decision or make that decision 388 00:20:05,760 --> 00:20:09,760 Speaker 2: for you, And so you do have some control over 389 00:20:09,800 --> 00:20:12,200 Speaker 2: how it's invested, although you do have to pick from 390 00:20:12,280 --> 00:20:16,560 Speaker 2: their menu. And that's decided between your company and the 391 00:20:17,080 --> 00:20:18,040 Speaker 2: four and K manager. 392 00:20:18,800 --> 00:20:21,159 Speaker 1: So whoever your work for, whoever set that plan up. 393 00:20:21,200 --> 00:20:24,320 Speaker 2: They've talked to Vanguard, let's say, and they said, okay, 394 00:20:24,520 --> 00:20:26,080 Speaker 2: here's the options that we want to have, and they 395 00:20:26,119 --> 00:20:28,560 Speaker 2: came up with that all those all those options, so 396 00:20:28,600 --> 00:20:33,120 Speaker 2: you can choose from those from those options. So that's 397 00:20:33,160 --> 00:20:36,720 Speaker 2: the general rundown on employer sponsored accounts. Now there's another 398 00:20:36,880 --> 00:20:44,040 Speaker 2: bucket of retirement accounts called that are individual retirement accounts. Now, 399 00:20:44,080 --> 00:20:47,000 Speaker 2: this is going to be your IRA, like your traditional IRA, 400 00:20:47,760 --> 00:20:53,040 Speaker 2: your ROTH I RA, your self directed I RA. There 401 00:20:53,040 --> 00:20:56,480 Speaker 2: are a few other other other types of accounts that 402 00:20:56,560 --> 00:21:00,400 Speaker 2: are called I rays, but they're technically I would put 403 00:21:00,400 --> 00:21:04,199 Speaker 2: them in the bucket of employer sponsored accounts. They're just 404 00:21:04,240 --> 00:21:07,359 Speaker 2: for self employed people. So like there's a SEP I 405 00:21:07,560 --> 00:21:10,639 Speaker 2: RA or a simple IRA, or an I four O 406 00:21:10,680 --> 00:21:13,000 Speaker 2: one K called an individual four one K. Those I 407 00:21:13,000 --> 00:21:16,120 Speaker 2: would put in the bucket of employer accounts because they 408 00:21:16,160 --> 00:21:18,199 Speaker 2: still have to be attached, you know, they're attached to 409 00:21:18,200 --> 00:21:20,480 Speaker 2: like the business. They're not just they're not just for 410 00:21:20,600 --> 00:21:24,959 Speaker 2: you know, individuals who work regular W two jobs and 411 00:21:25,040 --> 00:21:29,440 Speaker 2: so for regular most you know, the average individual. The 412 00:21:29,440 --> 00:21:33,080 Speaker 2: the options that you have for retirement accounts that are 413 00:21:33,080 --> 00:21:35,600 Speaker 2: separated from your employer. It's going to be an IRA, 414 00:21:35,760 --> 00:21:39,000 Speaker 2: which is a traditional IRA or a roth IRA or 415 00:21:39,000 --> 00:21:43,840 Speaker 2: a self directed IRA. Now what's the general uh information 416 00:21:43,920 --> 00:21:46,840 Speaker 2: about these about an I RA all three of those 417 00:21:47,080 --> 00:21:51,240 Speaker 2: different types of iras. Number one, you can have these 418 00:21:51,280 --> 00:21:54,720 Speaker 2: accounts like literally anywhere, so you can and you can 419 00:21:54,720 --> 00:21:56,440 Speaker 2: have as many as you want. So you can go 420 00:21:56,520 --> 00:21:58,960 Speaker 2: to Schwab and then tedum Meritrade and then Fidelity and 421 00:21:59,000 --> 00:22:03,080 Speaker 2: then each Trade and Vanguard and probably robin Hood now 422 00:22:03,119 --> 00:22:06,200 Speaker 2: and wherever you want and One Finance that's a really 423 00:22:06,200 --> 00:22:09,159 Speaker 2: good one that I like. You can go wherever you 424 00:22:09,200 --> 00:22:13,159 Speaker 2: want and uh set up these iras. These there are 425 00:22:13,480 --> 00:22:15,639 Speaker 2: you know, IRA stands for individual retirement account. 426 00:22:17,440 --> 00:22:17,520 Speaker 1: Uh. 427 00:22:17,640 --> 00:22:22,520 Speaker 2: So that's that's uh number one. Number two, you have 428 00:22:23,240 --> 00:22:27,959 Speaker 2: basically unlimited access to anything you want to invest, uh 429 00:22:28,160 --> 00:22:32,440 Speaker 2: invest in inside of these accounts. So nobody has decided 430 00:22:32,600 --> 00:22:36,520 Speaker 2: for you what choices you have. Now, depending on the 431 00:22:36,560 --> 00:22:40,440 Speaker 2: company you open up your IRA at, they they obviously 432 00:22:40,800 --> 00:22:43,359 Speaker 2: have choices available to you. So if you go to 433 00:22:43,960 --> 00:22:46,760 Speaker 2: you know, for instance, like and One Finance. The reason 434 00:22:46,800 --> 00:22:48,800 Speaker 2: why I mentioned that is because they make it really 435 00:22:48,840 --> 00:22:51,120 Speaker 2: easy to like, you get to customize what you want 436 00:22:51,160 --> 00:22:53,840 Speaker 2: to invest in, but then it automates it from there. 437 00:22:53,880 --> 00:22:55,760 Speaker 2: So you can say, hey, I like these you know, 438 00:22:55,840 --> 00:22:58,320 Speaker 2: twelve stocks, and then every time you put money in, 439 00:22:58,400 --> 00:23:00,920 Speaker 2: it automatically invests them in those stocks for the percentage 440 00:23:00,920 --> 00:23:03,280 Speaker 2: that you want. So they have It's like, in my opinion, 441 00:23:03,280 --> 00:23:06,000 Speaker 2: the perfect balance of like being active but also making 442 00:23:06,080 --> 00:23:10,679 Speaker 2: it automated versus something like tdum or trade or e 443 00:23:10,840 --> 00:23:15,960 Speaker 2: trade or fidelity. Most most of those regular irays, everything's manual, 444 00:23:16,119 --> 00:23:18,000 Speaker 2: so you can choose what you want to invest in, 445 00:23:19,160 --> 00:23:20,639 Speaker 2: but then you have to actually go and do it. 446 00:23:20,680 --> 00:23:22,359 Speaker 2: So every time you put money in the account, then 447 00:23:22,400 --> 00:23:24,000 Speaker 2: you have to remember to go buy the stocks that 448 00:23:24,320 --> 00:23:27,560 Speaker 2: you know, more shares of the stocks. But essentially you 449 00:23:27,640 --> 00:23:30,360 Speaker 2: have you know, you can go anywhere you want, open 450 00:23:30,440 --> 00:23:33,160 Speaker 2: up an IRA anywhere you want, depending on what options 451 00:23:33,160 --> 00:23:36,080 Speaker 2: they offer, if they offer the choices that you want, 452 00:23:36,440 --> 00:23:39,000 Speaker 2: So you can open up an IRA to invest in stocks. 453 00:23:39,040 --> 00:23:42,400 Speaker 2: You can do options. In some irays, you can do 454 00:23:42,520 --> 00:23:45,239 Speaker 2: you know, mutual funds and ETFs. You can invest in 455 00:23:46,119 --> 00:23:48,960 Speaker 2: you know, like penny stocks. You can invest in stocks 456 00:23:48,960 --> 00:23:52,359 Speaker 2: from you know, other countries, and so there are there 457 00:23:52,400 --> 00:23:55,240 Speaker 2: are plenty of choices available to you, and you're limited 458 00:23:55,280 --> 00:23:59,439 Speaker 2: only by what that specific company like, you know, Schwab 459 00:23:59,480 --> 00:24:02,120 Speaker 2: or Fidel, you're Vanguard, You're you're only limited to what 460 00:24:02,200 --> 00:24:04,919 Speaker 2: they limit, you know, the investments too, And if they 461 00:24:04,920 --> 00:24:06,280 Speaker 2: don't have what you want, you can open up an 462 00:24:06,320 --> 00:24:11,400 Speaker 2: IRA somewhere else. The uh uh and I think that's 463 00:24:11,480 --> 00:24:14,720 Speaker 2: those are the main Oh and then obviously, just like 464 00:24:14,760 --> 00:24:18,440 Speaker 2: with the WELL, with the IRA, you have more flexibility 465 00:24:18,480 --> 00:24:21,159 Speaker 2: on when and where you can transfer those accounts. So 466 00:24:21,200 --> 00:24:24,119 Speaker 2: you can if you have, you know, an IRA with 467 00:24:24,320 --> 00:24:26,280 Speaker 2: you know, ten grand in it, you want to move 468 00:24:26,320 --> 00:24:29,359 Speaker 2: it from Fidelity to Vanguard, you can do that. They'll 469 00:24:29,359 --> 00:24:31,960 Speaker 2: just transfer it over and then you know, and it'll 470 00:24:32,000 --> 00:24:33,800 Speaker 2: keep all the investments too. So you got a bunch 471 00:24:33,840 --> 00:24:35,119 Speaker 2: of stocks in there, you don't want to sell them, 472 00:24:35,119 --> 00:24:37,320 Speaker 2: don't worry, just the whole thing and just they'll send 473 00:24:37,359 --> 00:24:39,680 Speaker 2: it over and then a couple months later you want 474 00:24:39,680 --> 00:24:42,119 Speaker 2: to send it back to Fidelity, no problem, do it U. 475 00:24:42,320 --> 00:24:44,119 Speaker 2: Now they'll charge you money for that. I think they 476 00:24:44,200 --> 00:24:46,560 Speaker 2: charge a couple hundred bucks to move an account from 477 00:24:46,560 --> 00:24:49,199 Speaker 2: one place to another because obviously they don't want they 478 00:24:49,240 --> 00:24:53,320 Speaker 2: don't want to lose your business. But but the freedom 479 00:24:53,400 --> 00:24:56,360 Speaker 2: is there and it's not tied to an employer, so you. 480 00:24:56,359 --> 00:25:00,280 Speaker 1: Never have to worry about that. All right. 481 00:25:00,359 --> 00:25:02,520 Speaker 2: The next thing, and this applies to all retirement accounts, 482 00:25:02,880 --> 00:25:08,240 Speaker 2: there are contribution limits, that's right. So it's not like 483 00:25:08,280 --> 00:25:10,159 Speaker 2: a brokerage acount where you can just throw in as 484 00:25:10,200 --> 00:25:11,800 Speaker 2: much money as you want, you know, on hundred grand 485 00:25:11,800 --> 00:25:13,840 Speaker 2: a month. It's like, no, there are limits to this. 486 00:25:14,000 --> 00:25:17,840 Speaker 2: Why well, because these are accounts designed by Congress to 487 00:25:17,920 --> 00:25:21,719 Speaker 2: give the working man an incentive to save for retirement. 488 00:25:22,600 --> 00:25:24,400 Speaker 2: If you've got the ability to put one hundred grand 489 00:25:24,400 --> 00:25:27,119 Speaker 2: a month into an account, you're likely not worried about 490 00:25:27,160 --> 00:25:30,520 Speaker 2: the little tax savings that you'll get. I mean, no, 491 00:25:30,560 --> 00:25:32,879 Speaker 2: you would be. You would like it, but you don't 492 00:25:32,920 --> 00:25:35,680 Speaker 2: need it. I guess is the is the main picture, 493 00:25:35,760 --> 00:25:38,960 Speaker 2: or at least from Congress's perspective, you wouldn't need it. 494 00:25:39,119 --> 00:25:41,400 Speaker 2: If you've got the ability to contribute that much. It's 495 00:25:41,440 --> 00:25:44,119 Speaker 2: like you're not going to be dependent on this retirement 496 00:25:44,119 --> 00:25:49,120 Speaker 2: account someday, you know, most likely. And so there are 497 00:25:49,200 --> 00:25:53,520 Speaker 2: contribution limits so that the incentives lean more towards the 498 00:25:53,560 --> 00:25:58,119 Speaker 2: people at the lower end of the income spectrum. And 499 00:25:58,280 --> 00:26:01,000 Speaker 2: so there are. Every one of these accounts has a 500 00:26:01,040 --> 00:26:06,440 Speaker 2: different contribution limit, and every year the contribution limits change, 501 00:26:06,520 --> 00:26:10,320 Speaker 2: and so when there's higher inflation, the contribution limits increase more. 502 00:26:11,080 --> 00:26:13,199 Speaker 2: And so the four to one K, for instance, the 503 00:26:13,200 --> 00:26:15,960 Speaker 2: contribution limit is up to something around like twenty thousand 504 00:26:16,000 --> 00:26:18,320 Speaker 2: dollars a year right now, and so if you make 505 00:26:18,320 --> 00:26:21,320 Speaker 2: one hundred thousand dollars you put twenty in, you've got 506 00:26:21,359 --> 00:26:25,840 Speaker 2: eighty left over. With the irays that are you know, 507 00:26:26,080 --> 00:26:28,400 Speaker 2: these are the individual ones not attached to your employer, 508 00:26:28,680 --> 00:26:31,320 Speaker 2: the contribution limit is somewhere around like six thousand bucks, 509 00:26:31,359 --> 00:26:34,720 Speaker 2: sixty five hundred bucks, something like that, so it's much smaller, 510 00:26:36,200 --> 00:26:40,280 Speaker 2: and so there are contribution limits to all of these accounts. 511 00:26:41,800 --> 00:26:44,760 Speaker 2: The next part about these contribution limits is that there 512 00:26:44,760 --> 00:26:48,919 Speaker 2: are limits on what you can contribute depending on how 513 00:26:49,000 --> 00:26:51,520 Speaker 2: much you make as well. So if you're a really 514 00:26:51,600 --> 00:26:54,040 Speaker 2: high income earner you are in you know, three hundred, 515 00:26:54,160 --> 00:26:56,640 Speaker 2: four hundred, five hundred thousand dollars a year, you may 516 00:26:56,680 --> 00:27:02,159 Speaker 2: be ineligible for certain retirement account contributions because some of 517 00:27:02,160 --> 00:27:08,639 Speaker 2: these retirement accounts have tax benefits, and they've wanted to 518 00:27:08,720 --> 00:27:11,000 Speaker 2: keep these tax benefits for people on the lower end 519 00:27:11,000 --> 00:27:14,439 Speaker 2: of the income spectrum rather than giving them to the 520 00:27:14,440 --> 00:27:17,399 Speaker 2: people at the higher end. And so depending on how 521 00:27:17,480 --> 00:27:19,439 Speaker 2: much you make, you may not be eligible to put 522 00:27:19,520 --> 00:27:22,680 Speaker 2: money directly into some of these retirement accounts. 523 00:27:23,200 --> 00:27:23,480 Speaker 1: Now. 524 00:27:23,640 --> 00:27:25,840 Speaker 2: Typically those are going to be the Wroth accounts, which 525 00:27:25,880 --> 00:27:30,320 Speaker 2: we'll get into in a little bit. And so you're 526 00:27:30,359 --> 00:27:33,560 Speaker 2: still eligible to put money in a traditional retirement acount, 527 00:27:33,600 --> 00:27:35,000 Speaker 2: whether it's a four to one k or an ira. 528 00:27:35,920 --> 00:27:38,000 Speaker 2: But that's the first thing to know is that there 529 00:27:38,000 --> 00:27:41,239 Speaker 2: are contribution limits. There are also restrictions on when you 530 00:27:41,280 --> 00:27:44,640 Speaker 2: can take money out of the account obviously, because these 531 00:27:44,640 --> 00:27:49,160 Speaker 2: accounts are designed for retirement, and so if you put 532 00:27:49,200 --> 00:27:51,399 Speaker 2: money in during your twenties and your thirties and then 533 00:27:51,440 --> 00:27:53,480 Speaker 2: suddenly in your forties you want to take money out, 534 00:27:53,640 --> 00:27:57,440 Speaker 2: the government says, nope, nope, nope, this is for retirement 535 00:27:57,480 --> 00:28:00,280 Speaker 2: age people. So fifty nine and a half. If you 536 00:28:00,280 --> 00:28:02,440 Speaker 2: try and take money out of the accounts before that, 537 00:28:02,880 --> 00:28:04,800 Speaker 2: most of the time you're going to have. Number One, 538 00:28:04,840 --> 00:28:06,360 Speaker 2: you're going to be taxed on the money you take 539 00:28:06,400 --> 00:28:09,560 Speaker 2: out as if it's just regular income. So if you 540 00:28:09,600 --> 00:28:11,919 Speaker 2: pull two hundred grand out now you owe taxes as 541 00:28:11,960 --> 00:28:13,760 Speaker 2: if you made an extra two hundred grand this year, 542 00:28:14,119 --> 00:28:17,320 Speaker 2: but you also will have a penalty of ten percent. 543 00:28:17,640 --> 00:28:21,080 Speaker 2: So you pull two hundred grand out BAM twenty grand 544 00:28:21,240 --> 00:28:24,400 Speaker 2: tax as a fine as a penalty further your early withdrawal, 545 00:28:24,840 --> 00:28:28,120 Speaker 2: and then you also have the tax from the income 546 00:28:28,880 --> 00:28:31,640 Speaker 2: the increased income that you have for that year from 547 00:28:31,640 --> 00:28:35,960 Speaker 2: that withdrawal. And so it's it's usually not advisable to 548 00:28:35,960 --> 00:28:38,280 Speaker 2: take money out of these accounts before you're fifty nine 549 00:28:38,320 --> 00:28:42,959 Speaker 2: and a half. So that is something to absolutely something 550 00:28:43,000 --> 00:28:45,000 Speaker 2: to consider. 551 00:28:45,400 --> 00:28:45,760 Speaker 1: All right. 552 00:28:46,160 --> 00:28:50,240 Speaker 2: So underneath employer sponsored accounts, we've got all the different 553 00:28:50,240 --> 00:28:51,600 Speaker 2: ones that I talked about, like the four one K, 554 00:28:51,640 --> 00:28:52,800 Speaker 2: the four one A, the four to three B, the 555 00:28:52,840 --> 00:28:57,360 Speaker 2: fourty seventy. Underneath the non retire non employer accounts, we've 556 00:28:57,400 --> 00:29:00,600 Speaker 2: got your iras, your traditional ira, off ira, and self 557 00:29:00,600 --> 00:29:08,280 Speaker 2: directed IRA. The next biggest buckets that are attached underneath 558 00:29:08,320 --> 00:29:12,000 Speaker 2: each of these is the division between roth and traditional. 559 00:29:12,920 --> 00:29:15,840 Speaker 2: So with your four toh one K or four to 560 00:29:15,880 --> 00:29:19,720 Speaker 2: three B or whatever you have, you may have the 561 00:29:19,840 --> 00:29:24,840 Speaker 2: option to choose traditional or wroth. With your IRA, you 562 00:29:25,240 --> 00:29:27,760 Speaker 2: always have the choice. You can open up a traditional 563 00:29:27,760 --> 00:29:31,920 Speaker 2: ira or a roth ira. And so these buckets exist 564 00:29:32,120 --> 00:29:36,720 Speaker 2: underneath the buckets of retirement versus non retirement I'm sorry, 565 00:29:36,840 --> 00:29:42,120 Speaker 2: employer versus non employer. Each one of these WROTH options 566 00:29:42,160 --> 00:29:46,520 Speaker 2: exists under each of those categories. So what does traditional 567 00:29:47,160 --> 00:29:50,120 Speaker 2: mean and what does ROTH mean? Well, it refers to 568 00:29:50,240 --> 00:29:53,400 Speaker 2: It's very simple. It's when you get taxed on the money. 569 00:29:53,840 --> 00:29:55,440 Speaker 2: So we're going to use the example of you make 570 00:29:55,480 --> 00:29:58,920 Speaker 2: one hundred thousand dollars a year and you're going to 571 00:29:58,920 --> 00:30:05,160 Speaker 2: be putting ten grand into your retirement account. You make 572 00:30:05,200 --> 00:30:10,520 Speaker 2: one hundred grand if you put ten grand of it 573 00:30:10,840 --> 00:30:16,120 Speaker 2: into a traditional retirement account, and traditional just means regular, 574 00:30:16,160 --> 00:30:19,360 Speaker 2: it's the standard option. Whether it's a four to one 575 00:30:19,400 --> 00:30:22,480 Speaker 2: k or an IRA, you are going to be taxed 576 00:30:22,640 --> 00:30:25,840 Speaker 2: as if you only made ninety grand this year, because 577 00:30:26,600 --> 00:30:30,560 Speaker 2: you really, I mean, you're deferring that income. You're putting 578 00:30:30,560 --> 00:30:32,080 Speaker 2: it into an account that you won't be able to 579 00:30:32,080 --> 00:30:34,520 Speaker 2: touch until you retire, so you're not getting to use 580 00:30:34,640 --> 00:30:37,000 Speaker 2: or enjoy that income. So the IRS is saying, hey, well, 581 00:30:37,160 --> 00:30:40,160 Speaker 2: we'll give you a break on those taxes, and you 582 00:30:40,200 --> 00:30:42,040 Speaker 2: know that's a little bit of an incentive to put 583 00:30:42,080 --> 00:30:43,600 Speaker 2: money in there, so you get the little bit of 584 00:30:43,600 --> 00:30:46,080 Speaker 2: a tax break as well. So you make a hundred 585 00:30:46,160 --> 00:30:49,240 Speaker 2: but you put ten into the traditional retirement account. Now 586 00:30:49,240 --> 00:30:51,200 Speaker 2: they're saying, okay, we're only going to tax you as 587 00:30:51,200 --> 00:30:55,680 Speaker 2: if you made ninety this year. So that's that's great, right, Well, 588 00:30:55,760 --> 00:30:59,080 Speaker 2: there's always a catch, right, you know, there's the stick 589 00:30:59,160 --> 00:31:01,520 Speaker 2: comes either at the beginning or the end. So where's 590 00:31:01,560 --> 00:31:04,120 Speaker 2: the stick? When you pull money out of this account 591 00:31:04,760 --> 00:31:09,640 Speaker 2: when you're sixty, sixty five, seventy, then they tax you 592 00:31:09,720 --> 00:31:13,280 Speaker 2: as if it's regular income. So you've built up a 593 00:31:13,360 --> 00:31:15,960 Speaker 2: nice nest egg, you've got a couple million dollars in there, 594 00:31:16,040 --> 00:31:18,600 Speaker 2: you start taking out one hundred grand a year, they're 595 00:31:18,640 --> 00:31:20,240 Speaker 2: just the irs is just going to tax you on 596 00:31:20,280 --> 00:31:24,080 Speaker 2: that as if that's regular earned income that you're you know, 597 00:31:24,120 --> 00:31:26,240 Speaker 2: you're making one hundred grand a year now, so you 598 00:31:26,400 --> 00:31:30,400 Speaker 2: are going to get taxed on that money even though 599 00:31:30,440 --> 00:31:32,239 Speaker 2: you're not getting taxed on it when you put it in. 600 00:31:32,680 --> 00:31:35,000 Speaker 2: You'll get taxed on it later when you start taking 601 00:31:35,040 --> 00:31:39,440 Speaker 2: it out and it's just taxed as regular income. What 602 00:31:39,560 --> 00:31:42,960 Speaker 2: about the wroth option. The wroth option is exactly the opposite. 603 00:31:42,960 --> 00:31:43,680 Speaker 1: So if you have a. 604 00:31:43,800 --> 00:31:47,320 Speaker 2: Wroth for a one k or a wroth ira, this 605 00:31:47,440 --> 00:31:50,120 Speaker 2: is exactly the opposite. So you have one hundred grand 606 00:31:50,120 --> 00:31:52,480 Speaker 2: of income this year, you take ten of it and 607 00:31:52,520 --> 00:31:55,480 Speaker 2: you put it into your wroth four o one K. Well, 608 00:31:55,560 --> 00:31:59,920 Speaker 2: you really only have ninety left over, But the IRS says, nope, 609 00:32:00,040 --> 00:32:02,320 Speaker 2: we don't care. We're taxing you on the whole amount 610 00:32:02,640 --> 00:32:05,160 Speaker 2: we're taxing. Is if you made one hundred grand, even 611 00:32:05,200 --> 00:32:06,480 Speaker 2: though you took ten of it and put it into 612 00:32:06,520 --> 00:32:10,600 Speaker 2: your wroth four one K. Now you might think that sucks, 613 00:32:11,080 --> 00:32:14,880 Speaker 2: but that means later in life, when you're sixty five 614 00:32:14,960 --> 00:32:17,040 Speaker 2: seventy and you retire, you start to pull money out 615 00:32:17,040 --> 00:32:20,960 Speaker 2: of that account, Well, guess what, no taxes, because the 616 00:32:21,000 --> 00:32:23,800 Speaker 2: IRS already taxed you on the money, and so you 617 00:32:23,840 --> 00:32:26,239 Speaker 2: could pull out. If you have three million dollars in there, 618 00:32:26,240 --> 00:32:28,760 Speaker 2: you could pull all out at once, and the IRS 619 00:32:28,800 --> 00:32:33,080 Speaker 2: would not tax you, you know, for any income, because 620 00:32:33,120 --> 00:32:35,720 Speaker 2: everything in a wrath has already been taxed before it 621 00:32:35,760 --> 00:32:38,959 Speaker 2: went in there. And so this applies even to the gains. 622 00:32:39,040 --> 00:32:41,760 Speaker 2: And so this is really nice that over your life 623 00:32:41,800 --> 00:32:43,720 Speaker 2: you're going to contribute, you know, whether it's a couple 624 00:32:43,840 --> 00:32:45,640 Speaker 2: hundred or a couple thousand dollars a month or whatever 625 00:32:45,680 --> 00:32:48,000 Speaker 2: it is that you're putting into the account, it's going 626 00:32:48,080 --> 00:32:51,920 Speaker 2: to grow and Eventually the amount the growth part of 627 00:32:51,960 --> 00:32:55,160 Speaker 2: it that happened from you know, your investments and the 628 00:32:55,160 --> 00:32:59,360 Speaker 2: dividends and the interest and the growth the capital gains 629 00:32:59,360 --> 00:33:04,120 Speaker 2: of those investments that you purchased. Over the long term, 630 00:33:04,200 --> 00:33:06,360 Speaker 2: that portion becomes much bigger than the portion that you 631 00:33:06,440 --> 00:33:12,160 Speaker 2: actually contributed. And so let's say you're doing two hundred 632 00:33:12,160 --> 00:33:16,320 Speaker 2: bucks a month in the beginning, that's most of what's 633 00:33:16,320 --> 00:33:18,360 Speaker 2: going to be in the account is the amount you 634 00:33:18,400 --> 00:33:20,640 Speaker 2: put in. So it'll it'll be you know, five grand, 635 00:33:20,680 --> 00:33:22,040 Speaker 2: and then it'll be ten grand, and then it'll be 636 00:33:22,080 --> 00:33:26,400 Speaker 2: fifteen grand. But the larger this thing gets, it's like, okay, 637 00:33:26,480 --> 00:33:28,360 Speaker 2: once it's worth one hundred grand, if you're still only 638 00:33:28,400 --> 00:33:31,000 Speaker 2: putting in two hundred dollars a month, well, now it's 639 00:33:31,040 --> 00:33:33,880 Speaker 2: earning five percent or ten percent on two hundred grand, 640 00:33:34,240 --> 00:33:37,480 Speaker 2: and then that steam rolls into a larger and larger 641 00:33:37,520 --> 00:33:40,120 Speaker 2: pool that by the time it's worth three million bucks, 642 00:33:40,120 --> 00:33:43,040 Speaker 2: you're still only contributing two hundred bucks a month over 643 00:33:43,080 --> 00:33:46,160 Speaker 2: the entire life. You may have only contributed three hundred 644 00:33:46,200 --> 00:33:49,200 Speaker 2: grand over your career, but the account is worth three 645 00:33:49,240 --> 00:33:52,160 Speaker 2: or four million, and that's all from the compounding growth. 646 00:33:52,400 --> 00:33:55,280 Speaker 2: And so even that growth part, the part that came 647 00:33:55,320 --> 00:33:58,400 Speaker 2: from growth and not your contributions, is considered tax free, 648 00:33:58,440 --> 00:34:01,360 Speaker 2: which is where the really the power of that wroth 649 00:34:01,680 --> 00:34:05,680 Speaker 2: comes in. So that's the difference between traditional accounts and 650 00:34:05,680 --> 00:34:08,439 Speaker 2: wroth accounts. So if you're sitting here and you're thinking, Okay, 651 00:34:08,440 --> 00:34:10,040 Speaker 2: I don't have any iras, but I have a couple 652 00:34:10,440 --> 00:34:13,360 Speaker 2: four one ks from prior employers, and then I obviously 653 00:34:13,400 --> 00:34:15,240 Speaker 2: I have a four to one K with my current employer. 654 00:34:16,239 --> 00:34:19,200 Speaker 2: Step one is going to be finding all those old 655 00:34:19,200 --> 00:34:21,640 Speaker 2: four one k's and pulling them all together into a 656 00:34:21,680 --> 00:34:24,760 Speaker 2: new account. I'm going to probably lean towards an IRA, 657 00:34:25,040 --> 00:34:27,280 Speaker 2: but for the sake of this discussion at this moment, 658 00:34:27,360 --> 00:34:29,719 Speaker 2: doesn't doesn't matter. The next step is you're going to 659 00:34:29,760 --> 00:34:32,000 Speaker 2: look at your current employer's four one K and you're 660 00:34:32,040 --> 00:34:34,319 Speaker 2: gonna you're gonna call them up and you're gonna say, 661 00:34:34,320 --> 00:34:38,719 Speaker 2: do I have a WROTH option here? Because you want 662 00:34:38,719 --> 00:34:39,960 Speaker 2: to know if it's an option to you. It may 663 00:34:39,960 --> 00:34:42,239 Speaker 2: not be the best option for you, but you want 664 00:34:42,239 --> 00:34:46,240 Speaker 2: to know if it's available to you. And uh, here's 665 00:34:46,320 --> 00:34:48,600 Speaker 2: kind of how you decide whether it's best for you 666 00:34:48,640 --> 00:34:49,680 Speaker 2: to do traditional or wroth. 667 00:34:49,760 --> 00:34:52,240 Speaker 1: Number one, are you even eligible for the WROTH. 668 00:34:52,960 --> 00:34:54,960 Speaker 2: That's a that's a question right off the bat. Do 669 00:34:54,960 --> 00:34:58,879 Speaker 2: you make too much to directly contribute to roth? Number two? 670 00:34:59,640 --> 00:35:03,480 Speaker 2: Are you are you making significantly more now than you 671 00:35:03,560 --> 00:35:08,800 Speaker 2: will in retirement. For instance, if you're making five seven, 672 00:35:09,239 --> 00:35:12,080 Speaker 2: eight hundred thousand dollars a year right now in your salary, 673 00:35:12,080 --> 00:35:16,000 Speaker 2: you're paying a ton of money on taxes. But maybe 674 00:35:16,040 --> 00:35:20,280 Speaker 2: you're planning on retiring early, doing one of those fire moves, 675 00:35:20,320 --> 00:35:25,160 Speaker 2: the financial independence retire early thing. You're saving up a lot, 676 00:35:25,280 --> 00:35:30,360 Speaker 2: you're putting a lot away. 677 00:35:27,520 --> 00:35:27,600 Speaker 1: And. 678 00:35:29,080 --> 00:35:31,799 Speaker 2: You have a plan where you're going to go down. 679 00:35:31,840 --> 00:35:33,760 Speaker 2: Your income is going to be one hundred thousand dollars 680 00:35:34,600 --> 00:35:37,640 Speaker 2: when you retire, Well, your taxable income is going to 681 00:35:37,719 --> 00:35:41,839 Speaker 2: drop a lot by then, especially if you have dependence 682 00:35:42,040 --> 00:35:45,200 Speaker 2: and if you're married, and so you may look at 683 00:35:45,200 --> 00:35:47,719 Speaker 2: this and think, Okay, if I do the WROTH option 684 00:35:47,840 --> 00:35:50,360 Speaker 2: right now, then I'm paying a lot on those dollars 685 00:35:50,440 --> 00:35:53,480 Speaker 2: right now in taxes, and it may actually work out 686 00:35:53,520 --> 00:35:58,560 Speaker 2: better for me to do traditional right now. The second 687 00:35:58,640 --> 00:36:01,480 Speaker 2: thing is if you plan on you know, doing a 688 00:36:01,520 --> 00:36:03,000 Speaker 2: gap year or something like that, or you're going to 689 00:36:03,040 --> 00:36:05,360 Speaker 2: go start a business, so this is you know, actually 690 00:36:05,400 --> 00:36:09,320 Speaker 2: the path that I went through. I was high earner, 691 00:36:09,920 --> 00:36:14,239 Speaker 2: well somewhat high earner when I was a stockbroker. Right 692 00:36:14,280 --> 00:36:19,759 Speaker 2: before I quit, I was doing somewhere around you know, 693 00:36:20,360 --> 00:36:23,359 Speaker 2: twenty twenty months, so like two hundred and fifty thousand 694 00:36:23,360 --> 00:36:27,520 Speaker 2: a years something like that. In that position, I knew 695 00:36:27,560 --> 00:36:29,120 Speaker 2: that I wasn't going to last forever. I wasn't going 696 00:36:29,200 --> 00:36:30,560 Speaker 2: to stay there for forty years. I wasn't going to 697 00:36:30,680 --> 00:36:32,800 Speaker 2: keep on contributing, and my income was higher than I 698 00:36:32,840 --> 00:36:34,839 Speaker 2: knew it was going to be when I quit uh 699 00:36:34,920 --> 00:36:37,200 Speaker 2: to start a business, and I understood, hey, when you 700 00:36:37,239 --> 00:36:39,360 Speaker 2: start a business, it takes a while to start making money. 701 00:36:39,800 --> 00:36:41,680 Speaker 2: So I said, I'm going to put everything in traditional 702 00:36:41,760 --> 00:36:45,800 Speaker 2: right now because I want the tax break right now. 703 00:36:46,760 --> 00:36:49,400 Speaker 2: And then here's where kind of the we're going to 704 00:36:49,440 --> 00:36:51,640 Speaker 2: start getting into some of the tips and the tricks 705 00:36:51,680 --> 00:36:55,200 Speaker 2: that you can that you can use as you find 706 00:36:55,200 --> 00:37:00,520 Speaker 2: they're available to you. You can change from traditional to wroth, 707 00:37:01,440 --> 00:37:03,960 Speaker 2: that's right. So if you've got one hundred grand in 708 00:37:04,000 --> 00:37:07,719 Speaker 2: your traditional IRA or your traditional four one K, you 709 00:37:07,760 --> 00:37:12,680 Speaker 2: can do what's called a Wroth conversion, and so you move, 710 00:37:12,800 --> 00:37:16,359 Speaker 2: you literally just move the money you're you're gonna have 711 00:37:16,520 --> 00:37:20,640 Speaker 2: you know, your retirement account provider help you out with this. 712 00:37:21,080 --> 00:37:23,440 Speaker 2: But you move the money from a traditional account into 713 00:37:23,560 --> 00:37:28,400 Speaker 2: a roth account, and what that does is produce a 714 00:37:28,440 --> 00:37:32,200 Speaker 2: massive taxable event for you, right, because you just took 715 00:37:32,239 --> 00:37:36,239 Speaker 2: money out of a traditional IRA and so you're gonna 716 00:37:36,239 --> 00:37:39,319 Speaker 2: get taxed on that. So this is what I did. 717 00:37:39,360 --> 00:37:41,520 Speaker 2: I put all my money into my retirement account while 718 00:37:41,520 --> 00:37:44,640 Speaker 2: I was working at a high tax in a high 719 00:37:44,719 --> 00:37:49,680 Speaker 2: tax bracket, in a traditional account, and then the next year, 720 00:37:49,960 --> 00:37:52,279 Speaker 2: when I wasn't making any money, I converted it all 721 00:37:52,320 --> 00:37:55,600 Speaker 2: to wroth, and so I had a tax bill that year, 722 00:37:56,080 --> 00:37:59,560 Speaker 2: but net I paid a lot less in taxes than 723 00:37:59,560 --> 00:38:01,799 Speaker 2: I would have if I would have been directly contributing 724 00:38:01,840 --> 00:38:05,400 Speaker 2: into the wroth. And so you can do a conversion 725 00:38:05,400 --> 00:38:06,640 Speaker 2: into roth, and you don't have to do it all 726 00:38:06,640 --> 00:38:08,399 Speaker 2: at once. You can do a little bit per year, 727 00:38:08,680 --> 00:38:11,960 Speaker 2: you know, whatever, whatever it works best for you. And 728 00:38:11,960 --> 00:38:14,760 Speaker 2: I would highly suggest talking to you know, a tax 729 00:38:14,800 --> 00:38:17,480 Speaker 2: professional about this to make sure you're running the numbers 730 00:38:17,480 --> 00:38:20,799 Speaker 2: correctly and doing the right amount each year. But that 731 00:38:20,960 --> 00:38:25,040 Speaker 2: is an option that is available to you, a wroth conversion, 732 00:38:25,840 --> 00:38:28,640 Speaker 2: all right. So now we get into some of the 733 00:38:28,680 --> 00:38:34,080 Speaker 2: tricks for higher earners. You may look at a roth 734 00:38:34,120 --> 00:38:36,400 Speaker 2: and you may see think, you know, okay, this is 735 00:38:36,920 --> 00:38:39,360 Speaker 2: this is a bummer. I'm not eligible to put money 736 00:38:39,360 --> 00:38:40,280 Speaker 2: into my roth IRA. 737 00:38:40,840 --> 00:38:41,360 Speaker 1: Well guess what. 738 00:38:41,400 --> 00:38:44,280 Speaker 2: You are eligible to put money into a traditional ira. 739 00:38:45,280 --> 00:38:45,799 Speaker 1: And guess what. 740 00:38:45,880 --> 00:38:53,120 Speaker 2: There's no income limit on wroth conversions. So even if 741 00:38:53,120 --> 00:38:55,080 Speaker 2: you're not planning on quitting or going down to a 742 00:38:55,080 --> 00:38:57,399 Speaker 2: lower income and you still want to get money into 743 00:38:57,400 --> 00:38:59,640 Speaker 2: your wrath because you've got a long time for that 744 00:39:00,200 --> 00:39:02,759 Speaker 2: to grow and you want that to be taxed for 745 00:39:02,840 --> 00:39:06,000 Speaker 2: you when you retire, you can put money into your 746 00:39:06,000 --> 00:39:11,000 Speaker 2: traditional because you're not eligible legally, the IRS states you 747 00:39:11,000 --> 00:39:13,480 Speaker 2: cannot put it directly into your wrath because you make 748 00:39:13,520 --> 00:39:16,960 Speaker 2: too much, But the IRS still allows you. This is 749 00:39:17,160 --> 00:39:19,720 Speaker 2: in the Internal Revenue Code and I have no idea why, 750 00:39:20,920 --> 00:39:23,799 Speaker 2: but it's there and this is allowed you. Just every 751 00:39:23,880 --> 00:39:26,320 Speaker 2: year you convert it. You put money into your traditional 752 00:39:26,400 --> 00:39:28,839 Speaker 2: and immediately like you could do it at the same time, 753 00:39:29,080 --> 00:39:31,400 Speaker 2: you call up fidelity and you say, all right, I'm 754 00:39:31,440 --> 00:39:34,440 Speaker 2: doing my yearly contributions. I'm putting six grand into my 755 00:39:34,480 --> 00:39:37,600 Speaker 2: traditional IRA. All right, it's in there, now move it 756 00:39:37,640 --> 00:39:41,680 Speaker 2: over into my wrath and that'll, you know, do that'll 757 00:39:41,920 --> 00:39:45,480 Speaker 2: trigger the roth conversion for you. And you're allowed to 758 00:39:45,480 --> 00:39:49,360 Speaker 2: do that despite how much income you make, and so 759 00:39:49,480 --> 00:39:53,240 Speaker 2: that is a tool in your back pocket that you know. Again, 760 00:39:53,560 --> 00:39:57,000 Speaker 2: this is this is why I say the informed approach 761 00:39:57,160 --> 00:40:00,720 Speaker 2: is so much better than you know, obviously, the voidant approach, 762 00:40:00,719 --> 00:40:03,040 Speaker 2: because avoidant means you're just waiting forever and you never 763 00:40:03,080 --> 00:40:06,040 Speaker 2: get started investing until it feels like it's too late. 764 00:40:06,320 --> 00:40:09,479 Speaker 2: The ignorant approach is, you know, just throwing money into 765 00:40:09,480 --> 00:40:11,279 Speaker 2: a black hole and hoping it's doing the right thing 766 00:40:11,320 --> 00:40:14,799 Speaker 2: for you. The informed approach, maybe you don't change how 767 00:40:14,880 --> 00:40:18,320 Speaker 2: much you're contributing at all. Maybe maybe you contribute a 768 00:40:18,320 --> 00:40:22,040 Speaker 2: little bit less, who knows, but you're doing it in 769 00:40:22,080 --> 00:40:24,960 Speaker 2: a way that's actually benefiting you way more and you'll 770 00:40:25,040 --> 00:40:28,960 Speaker 2: end up with more money in the long run. Here's 771 00:40:29,080 --> 00:40:32,600 Speaker 2: the level up trick of the roth roth. What I 772 00:40:32,680 --> 00:40:36,080 Speaker 2: just described is called the back door roth contribution. It's 773 00:40:36,239 --> 00:40:38,360 Speaker 2: it's where high endcome eerners can get money into a 774 00:40:38,480 --> 00:40:42,319 Speaker 2: roth through the quote unquote back door, and it's it's 775 00:40:42,400 --> 00:40:45,160 Speaker 2: you know, it's essentially just you know, putting into the 776 00:40:45,200 --> 00:40:47,680 Speaker 2: traditional first and then moving it from there into the wroth. 777 00:40:48,920 --> 00:40:53,120 Speaker 2: There is something called a mega back door WROTH contribution. 778 00:40:55,680 --> 00:40:57,960 Speaker 2: All right, So here's how this works. This is using 779 00:40:57,960 --> 00:41:00,919 Speaker 2: your four one K and so so you will need 780 00:41:01,080 --> 00:41:03,440 Speaker 2: a WROTH four to one K option available to you. 781 00:41:04,239 --> 00:41:06,600 Speaker 2: But remember how we talked about how traditional iras have 782 00:41:06,640 --> 00:41:09,920 Speaker 2: contribution limits of you know, like twenty thousand dollars. Well, 783 00:41:10,840 --> 00:41:13,799 Speaker 2: some four to one K plans will allow you to 784 00:41:13,920 --> 00:41:17,040 Speaker 2: make your own contributions to the account in excess of 785 00:41:17,080 --> 00:41:20,040 Speaker 2: that limit. That limit refers to how much you can 786 00:41:20,040 --> 00:41:22,520 Speaker 2: put in and still get the tax deduction. So you 787 00:41:22,560 --> 00:41:27,879 Speaker 2: make one hundred thousand dollars and you put twenty thousand in, 788 00:41:28,200 --> 00:41:30,360 Speaker 2: they're only going to taxi as if you made eighty. 789 00:41:30,920 --> 00:41:33,840 Speaker 2: But if you put you can put and the amount changes. 790 00:41:33,880 --> 00:41:35,880 Speaker 2: I think the amount right now that you can put in, 791 00:41:35,880 --> 00:41:39,600 Speaker 2: including your after tax dollars, and this is after tax 792 00:41:39,640 --> 00:41:43,760 Speaker 2: dollars into a traditional IRA, it's up to like sixty 793 00:41:43,800 --> 00:41:46,600 Speaker 2: thousand dollars now, I think, so if you put sixty 794 00:41:46,640 --> 00:41:48,759 Speaker 2: grand into there, twenty of it is going to have 795 00:41:48,760 --> 00:41:52,000 Speaker 2: a tax deduction. The next forty won't, so you'll still 796 00:41:52,000 --> 00:41:54,440 Speaker 2: get taxed on it. Now you have money in your 797 00:41:54,440 --> 00:41:57,640 Speaker 2: traditional four one K that's already been taxed. Well, guess what, 798 00:41:58,560 --> 00:42:02,080 Speaker 2: just put it in the WROTH. Now you don't trigger 799 00:42:02,120 --> 00:42:04,759 Speaker 2: another taxable event because that those dollars have already been 800 00:42:04,800 --> 00:42:08,879 Speaker 2: taxed and now it can grow tax free. So you're 801 00:42:08,920 --> 00:42:11,440 Speaker 2: going to have to do this. It's called a backdoor 802 00:42:11,560 --> 00:42:15,440 Speaker 2: mega backdoor WROTH contribution and it's only available to, you know, 803 00:42:15,520 --> 00:42:18,399 Speaker 2: obviously a very small percentage of the population. Number One, 804 00:42:18,400 --> 00:42:20,600 Speaker 2: You've got to be earning enough to be able to, 805 00:42:22,320 --> 00:42:25,160 Speaker 2: you know, to take advantage of it, right, you know, 806 00:42:25,280 --> 00:42:27,919 Speaker 2: most people don't have an extra sixty grand a year 807 00:42:28,760 --> 00:42:31,680 Speaker 2: in their paychecks to be able to take advantage of this, 808 00:42:31,760 --> 00:42:35,440 Speaker 2: so that's obvious, you know, number one. Number two, you 809 00:42:35,719 --> 00:42:38,319 Speaker 2: are going to need to contact your four one K 810 00:42:38,480 --> 00:42:41,920 Speaker 2: provider and see if they allow you to contribute the 811 00:42:41,960 --> 00:42:44,920 Speaker 2: extra money, the after tax money, and they're also going 812 00:42:44,960 --> 00:42:47,200 Speaker 2: to have to have a WROTH option available to you 813 00:42:47,360 --> 00:42:50,640 Speaker 2: so that you can do that conversion. But if these 814 00:42:50,680 --> 00:42:53,400 Speaker 2: options are available to you, and more and more employers, 815 00:42:53,760 --> 00:42:56,640 Speaker 2: especially at bigger companies, are allowing these today, and if 816 00:42:56,640 --> 00:42:58,839 Speaker 2: you work for a small company, chances are you can 817 00:42:58,880 --> 00:43:01,319 Speaker 2: rework out a new plan and you know, talk with 818 00:43:01,360 --> 00:43:03,520 Speaker 2: your boss the owner and get a new plan worked 819 00:43:03,560 --> 00:43:06,640 Speaker 2: out to where something like this is an option. This 820 00:43:06,719 --> 00:43:10,680 Speaker 2: is another tool in your back pocket because let's say 821 00:43:10,840 --> 00:43:12,960 Speaker 2: you you do have an extra fifty to one hundred 822 00:43:12,960 --> 00:43:15,279 Speaker 2: grand every year that you're investing your maybe your buying 823 00:43:15,320 --> 00:43:17,479 Speaker 2: rental properties or putting into your brokerage account or whatever, 824 00:43:17,760 --> 00:43:19,600 Speaker 2: and you've been just thinking, man, it would be nice 825 00:43:19,640 --> 00:43:21,680 Speaker 2: to have this in my retirement account. Well, you didn't 826 00:43:21,719 --> 00:43:23,560 Speaker 2: know it was an option to you, and now it's 827 00:43:23,600 --> 00:43:26,560 Speaker 2: an option to you, so you don't necessary None of 828 00:43:26,600 --> 00:43:31,120 Speaker 2: this is necessarily about investing more or going without or 829 00:43:31,640 --> 00:43:34,400 Speaker 2: having less money available to you. It's about using the 830 00:43:34,400 --> 00:43:38,280 Speaker 2: tools properly so that you end up with more given 831 00:43:38,400 --> 00:43:41,839 Speaker 2: what you're you know exactly, you know, maintaining exactly what 832 00:43:41,880 --> 00:43:44,799 Speaker 2: you're doing. And so this is a tool that can 833 00:43:44,840 --> 00:43:50,399 Speaker 2: be used very very powerfully. Obviously you can imagine how 834 00:43:50,440 --> 00:43:56,960 Speaker 2: fast that could compound. All right, Now, there's another thing 835 00:43:56,960 --> 00:43:59,280 Speaker 2: when when when I talked about moving money from traditional 836 00:43:59,280 --> 00:44:01,640 Speaker 2: to ROTH, you're probably thinking, well, can you go the 837 00:44:01,680 --> 00:44:04,920 Speaker 2: other way? And the answer is yeah, kind of. This 838 00:44:04,960 --> 00:44:08,239 Speaker 2: is something it's called a recharacterization, and it's hard to do. 839 00:44:08,360 --> 00:44:09,799 Speaker 2: There are limits on when you can do it. It's 840 00:44:09,840 --> 00:44:14,000 Speaker 2: basically undoing a mistake. Where you move money from a 841 00:44:14,000 --> 00:44:17,759 Speaker 2: wrath into a traditional it's called a recharacterization. So if 842 00:44:17,760 --> 00:44:20,200 Speaker 2: you're putting money into a wrath, you want to make 843 00:44:20,280 --> 00:44:24,359 Speaker 2: sure that it's going to stay in there. You don't 844 00:44:24,360 --> 00:44:32,160 Speaker 2: want to have to try and do recharacterizations. Next, there 845 00:44:32,200 --> 00:44:35,160 Speaker 2: are some caveats to taking money out of your retirement 846 00:44:35,160 --> 00:44:41,320 Speaker 2: accounts early without having you know the penalties. So in general, 847 00:44:41,400 --> 00:44:44,440 Speaker 2: these obviously, like I said, are designed for by Congress 848 00:44:44,480 --> 00:44:46,239 Speaker 2: to give you an incentive to save for retirement. So 849 00:44:46,239 --> 00:44:47,280 Speaker 2: that's what they want to try. 850 00:44:47,080 --> 00:44:47,560 Speaker 1: And make you do. 851 00:44:48,080 --> 00:44:50,839 Speaker 2: But there are a couple of loopholes, or I shouldn't say. 852 00:44:50,840 --> 00:44:53,840 Speaker 2: I don't like the word loophole because that implies that 853 00:44:53,880 --> 00:44:55,759 Speaker 2: you're doing something that they don't want you to do. 854 00:44:56,520 --> 00:44:58,239 Speaker 2: But it's just written out in the rules that you 855 00:44:58,280 --> 00:45:02,040 Speaker 2: can do this. So remember how in the wroth all 856 00:45:02,120 --> 00:45:05,080 Speaker 2: the dollars you put in have already been taxed. Well, 857 00:45:05,160 --> 00:45:07,480 Speaker 2: what that means is that you can take the dollars 858 00:45:07,560 --> 00:45:11,120 Speaker 2: out of those accounts that you put in at any time. 859 00:45:11,960 --> 00:45:14,720 Speaker 2: And so let's say you put money into a wroth 860 00:45:15,000 --> 00:45:18,640 Speaker 2: every month, every year, and you've built up a sizable 861 00:45:18,640 --> 00:45:21,120 Speaker 2: nest egg in a roth account let's say it's worth 862 00:45:21,400 --> 00:45:23,959 Speaker 2: you know, let's just say you know, a hundred grand 863 00:45:24,040 --> 00:45:27,000 Speaker 2: is in there, and eighty grand of it came from 864 00:45:27,080 --> 00:45:30,759 Speaker 2: your own contributions, twenty grand of it came from gains. Well, 865 00:45:30,800 --> 00:45:33,520 Speaker 2: you could take eighty grand out of it and you 866 00:45:33,560 --> 00:45:37,200 Speaker 2: wouldn't have a taxable event, no fines, no penalties, no taxes, 867 00:45:37,200 --> 00:45:39,680 Speaker 2: because those dollars were already taxed before you put them 868 00:45:39,680 --> 00:45:41,640 Speaker 2: in that account. It's similar to putting money in a 869 00:45:41,640 --> 00:45:43,279 Speaker 2: bank account and taking it out. You don't get taxed 870 00:45:43,320 --> 00:45:46,120 Speaker 2: on that because those dollars were already taxed. And so 871 00:45:46,360 --> 00:45:49,480 Speaker 2: keep that in mind that contributions can be removed from 872 00:45:49,520 --> 00:45:54,719 Speaker 2: a roth any time, tax and penalty free. There are 873 00:45:54,760 --> 00:45:59,640 Speaker 2: some other exceptions, like for a traditional ira, that you 874 00:45:59,640 --> 00:46:03,960 Speaker 2: can take take money out without incurring penalties or taxes. 875 00:46:04,880 --> 00:46:07,240 Speaker 2: I would stay away from these as much as possible 876 00:46:07,280 --> 00:46:09,279 Speaker 2: because the whole idea here is to have as much 877 00:46:09,280 --> 00:46:11,080 Speaker 2: money in there as possible, so it grows as fast 878 00:46:11,120 --> 00:46:13,040 Speaker 2: as possible, so it's as much as possible by the 879 00:46:13,040 --> 00:46:15,759 Speaker 2: time you need it. So anytime you take a dollar out, 880 00:46:15,960 --> 00:46:18,480 Speaker 2: that's like imagine it like you're taking a seed out 881 00:46:18,680 --> 00:46:20,480 Speaker 2: that will turn into a tree that will turn into 882 00:46:20,560 --> 00:46:23,200 Speaker 2: hundreds of apples that will each themselves turn into thousands 883 00:46:23,239 --> 00:46:26,920 Speaker 2: of trees that will produce millions of apples. And so 884 00:46:27,080 --> 00:46:29,880 Speaker 2: every time you take a dollar out, it's like removing 885 00:46:30,120 --> 00:46:34,480 Speaker 2: millions of apples in the future. That's the way it's 886 00:46:34,600 --> 00:46:37,840 Speaker 2: your I want you to think about this. But sometimes 887 00:46:37,840 --> 00:46:39,319 Speaker 2: people are in a tough spot and they need to 888 00:46:39,680 --> 00:46:42,239 Speaker 2: so there are exceptions for being able to take money 889 00:46:42,239 --> 00:46:44,880 Speaker 2: out of retirement account that you can look up on 890 00:46:44,920 --> 00:46:47,480 Speaker 2: the iris's website for like you know, hardship and stuff. 891 00:46:49,360 --> 00:46:52,319 Speaker 2: There's also with a four to one K, there's an 892 00:46:52,360 --> 00:46:54,680 Speaker 2: option where you can take a loan against your four 893 00:46:54,760 --> 00:46:58,600 Speaker 2: one K, and so instead of taking money just directly 894 00:46:58,680 --> 00:47:00,560 Speaker 2: out of it and then spending it, take out a 895 00:47:00,640 --> 00:47:03,560 Speaker 2: loan from your four one K. The limit is fifty 896 00:47:03,600 --> 00:47:08,719 Speaker 2: percent or fifty grand, whichever is smaller. You'll want to 897 00:47:08,800 --> 00:47:10,680 Speaker 2: check on the IRS's website to make sure that that 898 00:47:10,800 --> 00:47:14,279 Speaker 2: number is correct today. But you can take out a 899 00:47:14,320 --> 00:47:16,240 Speaker 2: loan from your four on and K worth either fifty 900 00:47:16,239 --> 00:47:19,600 Speaker 2: percent or fifty grand, whichever is less. You have to 901 00:47:19,600 --> 00:47:22,759 Speaker 2: pay it back and pay yourself back interest. But let's 902 00:47:22,800 --> 00:47:24,960 Speaker 2: say you have you know, you got yourself into a 903 00:47:24,960 --> 00:47:26,920 Speaker 2: tough spot. Over the last couple of years, You've got 904 00:47:26,920 --> 00:47:29,760 Speaker 2: fifty thousand dollars worth of credit card debt. It's charging 905 00:47:29,800 --> 00:47:33,600 Speaker 2: you twenty percent interest. You just can't get ahead. Might 906 00:47:33,680 --> 00:47:36,200 Speaker 2: be worth it to stop paying the credit card company 907 00:47:36,239 --> 00:47:38,440 Speaker 2: interest and start paying your self interest. So you take 908 00:47:38,440 --> 00:47:40,000 Speaker 2: out a fifty grand loan from your four one K, 909 00:47:41,760 --> 00:47:44,840 Speaker 2: you pay off your credit cards. Now you have the same. 910 00:47:44,640 --> 00:47:45,239 Speaker 1: Amount of debt. 911 00:47:45,440 --> 00:47:47,160 Speaker 2: Remember you're not debt free now because now you owe 912 00:47:47,200 --> 00:47:49,000 Speaker 2: your four one k instead of the credit card companies. 913 00:47:49,440 --> 00:47:51,799 Speaker 2: But now you're paying back your four to one K 914 00:47:52,360 --> 00:47:55,680 Speaker 2: and you're paying it back with interest. But that interest 915 00:47:55,719 --> 00:47:58,120 Speaker 2: is going into your accounts that can grow for you, 916 00:47:58,520 --> 00:48:01,719 Speaker 2: so you're paying yourself a little extra. You can even 917 00:48:01,719 --> 00:48:04,120 Speaker 2: set it up to where automatically deducts the payback from 918 00:48:04,200 --> 00:48:07,799 Speaker 2: your paychecks, so that makes it really easy. And so 919 00:48:08,000 --> 00:48:10,759 Speaker 2: that is an option that prevent that allows you to 920 00:48:10,800 --> 00:48:14,799 Speaker 2: access some of that money sometimes without paying you know, 921 00:48:15,000 --> 00:48:20,280 Speaker 2: taxes and penalties. Traditional retirement accounts like four one ks 922 00:48:20,280 --> 00:48:23,080 Speaker 2: and traditional iras. One thing to note about these is 923 00:48:23,120 --> 00:48:27,399 Speaker 2: they have something called an RMD required minimum distribution That 924 00:48:27,440 --> 00:48:30,640 Speaker 2: means that when you turn you're gonna have to double 925 00:48:30,680 --> 00:48:32,960 Speaker 2: check this age, it's something like seventy and a half. 926 00:48:33,000 --> 00:48:34,960 Speaker 2: The year in which you turn seventy and a half, 927 00:48:35,040 --> 00:48:37,560 Speaker 2: I believe you have to start taking money out of 928 00:48:37,600 --> 00:48:42,360 Speaker 2: the account because the IRS is aware that you've deferred 929 00:48:42,400 --> 00:48:43,960 Speaker 2: all the taxes on that, so they don't want you 930 00:48:44,000 --> 00:48:47,760 Speaker 2: to die and then have a whole, you know, couple 931 00:48:47,800 --> 00:48:50,600 Speaker 2: million bucks in that account and then you know, they 932 00:48:50,600 --> 00:48:52,480 Speaker 2: haven't been able to tax any of it, and it goes, 933 00:48:52,520 --> 00:48:54,839 Speaker 2: you know, as part of the inheritance, so they want 934 00:48:54,880 --> 00:48:57,240 Speaker 2: to be able to tax that. So they have something 935 00:48:57,280 --> 00:49:00,440 Speaker 2: called required minimum distribution. They look at your a, your 936 00:49:00,480 --> 00:49:03,600 Speaker 2: gender and they say, okay, and the amount in the account, 937 00:49:03,760 --> 00:49:06,919 Speaker 2: and there's a calculation that your retirement plan company will 938 00:49:06,920 --> 00:49:09,719 Speaker 2: do for you, and it'll tell you this is how 939 00:49:09,800 --> 00:49:11,680 Speaker 2: much you have to take out every single year or 940 00:49:11,760 --> 00:49:13,640 Speaker 2: else you're going to pay a penalty to the IRS. 941 00:49:14,160 --> 00:49:16,200 Speaker 2: So you know, in your first year, you might have 942 00:49:16,280 --> 00:49:18,719 Speaker 2: to take out you know, one hundred grand, the next 943 00:49:18,760 --> 00:49:20,080 Speaker 2: year you might have to take on one hundred and 944 00:49:20,080 --> 00:49:22,440 Speaker 2: ten grand. Whatever it is. They're going to tell you 945 00:49:22,480 --> 00:49:25,919 Speaker 2: the required minimum distribution that has to come out of 946 00:49:25,960 --> 00:49:30,920 Speaker 2: that account every single year, and uh, that's just that 947 00:49:30,920 --> 00:49:32,840 Speaker 2: they calculate it based on when they think you're going 948 00:49:32,920 --> 00:49:34,480 Speaker 2: to die. They want the account to be empty by 949 00:49:34,520 --> 00:49:36,560 Speaker 2: the time they think you're going to die. That's basically it. 950 00:49:36,600 --> 00:49:38,319 Speaker 2: So they can tax you on every dollar in there. 951 00:49:38,719 --> 00:49:41,480 Speaker 2: There's no getting around it. There's absolutely nothing you can 952 00:49:41,520 --> 00:49:43,080 Speaker 2: do about this. So if you've got a large four 953 00:49:43,120 --> 00:49:46,719 Speaker 2: one K it's traditional or large traditional IRA, you are 954 00:49:46,840 --> 00:49:49,040 Speaker 2: going to have to take that money out before you die. 955 00:49:49,640 --> 00:49:51,560 Speaker 2: And starting at the year I believe it's the year 956 00:49:51,560 --> 00:49:53,040 Speaker 2: in which you turn seventy and a half is when 957 00:49:53,040 --> 00:49:58,800 Speaker 2: that starts. All right, let's see what else investment choices. Okay, 958 00:49:58,840 --> 00:50:01,799 Speaker 2: so in your employers sponsor plan we already covered you're 959 00:50:01,800 --> 00:50:05,200 Speaker 2: going to have very limited choices in your iras. You're 960 00:50:05,239 --> 00:50:07,319 Speaker 2: going to have the choices available to you depending on 961 00:50:07,400 --> 00:50:11,520 Speaker 2: where you choose to open up your IRA. If you 962 00:50:11,600 --> 00:50:15,400 Speaker 2: open up ten different irays, remember your contribution limit applies 963 00:50:15,440 --> 00:50:18,719 Speaker 2: to all of your iras combined. So you can't just 964 00:50:18,800 --> 00:50:22,600 Speaker 2: open up an IRA with Schwab and Fidelity and Vanguard 965 00:50:22,640 --> 00:50:25,640 Speaker 2: and now suddenly be able to contribute three times as much. 966 00:50:26,000 --> 00:50:28,920 Speaker 2: It's all together. They won't know, but the IRS will know, 967 00:50:29,080 --> 00:50:31,520 Speaker 2: and they'll slim you for it. So don't don't don't 968 00:50:31,520 --> 00:50:35,280 Speaker 2: think you can escape by doing this across multiple companies, 969 00:50:36,719 --> 00:50:38,799 Speaker 2: because each of those companies will send a form to 970 00:50:38,880 --> 00:50:41,200 Speaker 2: the IRS saying, hey, this is how much this person contributed, 971 00:50:41,200 --> 00:50:44,040 Speaker 2: and then the IRS will realize, oh, you contributed, you know, 972 00:50:44,239 --> 00:50:46,560 Speaker 2: fifteen grand more than you were allowed to, and so 973 00:50:46,960 --> 00:50:51,160 Speaker 2: contribution limits apply in total investment choices though in general 974 00:50:51,239 --> 00:50:55,520 Speaker 2: are going to be a lot more accessible to people 975 00:50:55,560 --> 00:50:59,360 Speaker 2: who have iras. So with an IRA you can you 976 00:50:59,400 --> 00:51:03,720 Speaker 2: can choose any investment. The one that has the most 977 00:51:03,719 --> 00:51:06,200 Speaker 2: options is going to be called a self directed iray. 978 00:51:06,360 --> 00:51:09,319 Speaker 2: So you can open up a self directed iray at 979 00:51:09,320 --> 00:51:12,680 Speaker 2: many different companies these days that allow you to invest 980 00:51:12,800 --> 00:51:15,960 Speaker 2: in things called alternative investments. So these would be things 981 00:51:16,080 --> 00:51:18,919 Speaker 2: other than stocks, other than bonds, other than mutual funds, 982 00:51:18,960 --> 00:51:20,400 Speaker 2: other than e TF So this would allow you to 983 00:51:20,400 --> 00:51:26,520 Speaker 2: invest in things like physical gold, cryptocurrency, real estate, you know, well, 984 00:51:26,920 --> 00:51:32,440 Speaker 2: you know, private companies, and so self directed iras you 985 00:51:32,480 --> 00:51:34,319 Speaker 2: can open them up at all sorts of places to 986 00:51:34,400 --> 00:51:36,600 Speaker 2: invest in these things that you're that you're not going 987 00:51:36,640 --> 00:51:38,719 Speaker 2: to be given access to at a place like Vanguard, 988 00:51:39,560 --> 00:51:41,920 Speaker 2: and they still operate like an IRA, it's just they 989 00:51:41,920 --> 00:51:46,160 Speaker 2: give you other investment options. One other little trick. In 990 00:51:46,200 --> 00:51:49,319 Speaker 2: your workplace retirement account, like your four to one K, 991 00:51:50,680 --> 00:51:53,160 Speaker 2: many times they will have an option in there. 992 00:51:52,840 --> 00:51:53,399 Speaker 1: Called a. 993 00:51:54,800 --> 00:52:03,719 Speaker 2: Let's see a self directed retirement plan or an individual 994 00:52:03,840 --> 00:52:11,080 Speaker 2: choice retirement plan or something along those lines, where they'll 995 00:52:11,120 --> 00:52:13,279 Speaker 2: give you an option where you can say, I want 996 00:52:13,280 --> 00:52:15,960 Speaker 2: this treated as if it's an IRA, because I don't 997 00:52:16,000 --> 00:52:18,920 Speaker 2: want to choose from the list of seven mutual funds 998 00:52:18,920 --> 00:52:21,240 Speaker 2: you've given me. I want to be able to buy stocks. 999 00:52:21,360 --> 00:52:23,280 Speaker 2: I want to be able to sell calls for income. 1000 00:52:23,320 --> 00:52:25,520 Speaker 2: I want to be able to buy puts. If you 1001 00:52:25,560 --> 00:52:27,239 Speaker 2: don't know what that is, I have a whole course 1002 00:52:27,239 --> 00:52:29,520 Speaker 2: in my membership program on options that allows you to 1003 00:52:29,520 --> 00:52:34,359 Speaker 2: hedge and produce income on your investments and you know, 1004 00:52:34,440 --> 00:52:37,200 Speaker 2: do it in a way that actually minimizes risk. And 1005 00:52:37,280 --> 00:52:40,879 Speaker 2: so if you're interested in that, check out Heresy Financial University. 1006 00:52:41,600 --> 00:52:43,520 Speaker 2: I've got a membership program where you get access to 1007 00:52:43,560 --> 00:52:46,080 Speaker 2: all my all my courses, and by the way, everything 1008 00:52:46,080 --> 00:52:48,359 Speaker 2: we've talked about today, I've got a course coming out 1009 00:52:48,440 --> 00:52:53,120 Speaker 2: in the next couple of weeks on retirement accounts that 1010 00:52:53,160 --> 00:52:55,839 Speaker 2: goes even more into detail on each of these and 1011 00:52:56,680 --> 00:52:58,880 Speaker 2: we put together you know kind of like a planned 1012 00:52:59,040 --> 00:53:02,000 Speaker 2: for you know, being able to say, Okay, I need 1013 00:53:02,000 --> 00:53:04,200 Speaker 2: to do X, Y and z, you know, step one, two, three, 1014 00:53:04,719 --> 00:53:09,000 Speaker 2: depending on my situation. And so if you're interested in that, 1015 00:53:09,160 --> 00:53:11,680 Speaker 2: check it out. It's a membership program, so you get 1016 00:53:11,719 --> 00:53:16,000 Speaker 2: access to the entire library of training content as long 1017 00:53:16,040 --> 00:53:21,400 Speaker 2: as you're a member, and all additional or future material 1018 00:53:21,520 --> 00:53:23,480 Speaker 2: that I put on there automatically comes available to you. 1019 00:53:23,520 --> 00:53:25,680 Speaker 2: It's you know, consider think of it like Netflix, but 1020 00:53:25,800 --> 00:53:30,080 Speaker 2: for financial literacy, financial education, and so as long as 1021 00:53:30,080 --> 00:53:32,200 Speaker 2: you're a member, you get access to the entire training library, 1022 00:53:32,280 --> 00:53:34,080 Speaker 2: including all the additional future courses. 1023 00:53:34,880 --> 00:53:35,240 Speaker 1: Okay. 1024 00:53:37,280 --> 00:53:41,600 Speaker 2: In summary, it's important to know how these accounts work. 1025 00:53:41,920 --> 00:53:45,760 Speaker 2: So the general steps of like what to do now 1026 00:53:45,800 --> 00:53:48,960 Speaker 2: that you've listened to this. Number one, you have to 1027 00:53:49,000 --> 00:53:52,040 Speaker 2: see where you're at, so call everybody up. Track down 1028 00:53:52,080 --> 00:53:55,080 Speaker 2: all your old accounts. Number two, you want to consolidate 1029 00:53:55,120 --> 00:53:57,160 Speaker 2: your accounts because there's no use to having them spread 1030 00:53:57,200 --> 00:54:01,719 Speaker 2: out everywhere, and so I would always lean towards if 1031 00:54:01,719 --> 00:54:04,600 Speaker 2: you have a bunch of old accounts, consolidate them all 1032 00:54:04,640 --> 00:54:08,040 Speaker 2: into one IRA. If you have some traditional out there 1033 00:54:08,080 --> 00:54:12,200 Speaker 2: and some wrath out there, consolidate the traditional portions into 1034 00:54:12,200 --> 00:54:14,520 Speaker 2: one traditional IRA and then all the WROTH portions into 1035 00:54:14,520 --> 00:54:17,759 Speaker 2: one ROTH IRA. Contact your employer to figure out what 1036 00:54:17,880 --> 00:54:19,360 Speaker 2: kind of plan you have, what kind of options are 1037 00:54:19,400 --> 00:54:22,839 Speaker 2: available to you, including can I make after tax contributions 1038 00:54:22,840 --> 00:54:25,120 Speaker 2: to the traditional? Can I do we have a ROTH option? 1039 00:54:25,200 --> 00:54:29,359 Speaker 2: So I can do the megabackdoor Roth conversion? And so 1040 00:54:29,440 --> 00:54:32,560 Speaker 2: you want to find out this is your Step one 1041 00:54:32,600 --> 00:54:36,480 Speaker 2: is investigation. You find out everything you have everywhere, it 1042 00:54:36,520 --> 00:54:40,000 Speaker 2: is what other rules are. Step two consolidation. Consolidate everything 1043 00:54:40,040 --> 00:54:43,919 Speaker 2: into You've got one retirement plan through your employer, one 1044 00:54:43,960 --> 00:54:46,239 Speaker 2: traditional account and then one WROTH account. If you have 1045 00:54:46,400 --> 00:54:49,120 Speaker 2: both of those or you know, combine them into one. 1046 00:54:49,600 --> 00:54:52,319 Speaker 2: Step number two is to talk to I'm sorry. Three 1047 00:54:52,920 --> 00:54:57,320 Speaker 2: is talk to a tax advisor, tax professional, CPA, your accountant, 1048 00:54:57,360 --> 00:55:00,360 Speaker 2: your tax guy, whoever it is. And I'm up with 1049 00:55:00,400 --> 00:55:02,160 Speaker 2: a plan and look at okay, this is how much 1050 00:55:02,200 --> 00:55:03,719 Speaker 2: I make, is how much I'm going to make in 1051 00:55:03,719 --> 00:55:05,760 Speaker 2: the future. This is what I'm going to stop earning money. 1052 00:55:05,960 --> 00:55:08,080 Speaker 2: These are my tax rates right now. These are going 1053 00:55:08,120 --> 00:55:10,000 Speaker 2: to be my tax rates in the future. Most likely. 1054 00:55:10,920 --> 00:55:13,000 Speaker 2: Should I do RAS? Should I your traditional? Should I 1055 00:55:13,000 --> 00:55:15,960 Speaker 2: convert from traditional to ROTH? And you've got to do 1056 00:55:16,040 --> 00:55:18,640 Speaker 2: the calculations with a tax guy who knows your your 1057 00:55:18,680 --> 00:55:21,279 Speaker 2: whole tax situation to come up with that answer. That's 1058 00:55:21,320 --> 00:55:24,520 Speaker 2: not Unfortunately, that's not something I can you know, do 1059 00:55:24,600 --> 00:55:27,600 Speaker 2: a blanket recommendation because it's going to be different for everybody. 1060 00:55:29,400 --> 00:55:32,640 Speaker 2: And uh, and so that's the that's the step three, 1061 00:55:32,960 --> 00:55:34,640 Speaker 2: and then step four. Once you have it all in 1062 00:55:34,680 --> 00:55:36,759 Speaker 2: the right accounts and you're contributing the right amount to 1063 00:55:36,760 --> 00:55:41,200 Speaker 2: each account, then it's to invest appropriately. And that is 1064 00:55:41,400 --> 00:55:44,160 Speaker 2: you know, actually, that's I also have a course on 1065 00:55:44,600 --> 00:55:49,719 Speaker 2: choosing your investments, portfolio allocation and fundamental analysis in the 1066 00:55:49,800 --> 00:55:54,040 Speaker 2: membership program Heresy Financial University. But that's something you know, 1067 00:55:54,120 --> 00:55:57,000 Speaker 2: financial literacy that you'll need to do to figure out. Okay, 1068 00:55:57,480 --> 00:56:00,560 Speaker 2: I'm you know, very young, I got a long time 1069 00:56:00,640 --> 00:56:03,160 Speaker 2: to invest. I'm gonna choose the more aggressive things. I'm 1070 00:56:03,200 --> 00:56:06,799 Speaker 2: gonna choose stocks, you know, or maybe I'm gonna be 1071 00:56:06,840 --> 00:56:08,920 Speaker 2: cash heavy. I want to invest in try invest in 1072 00:56:08,960 --> 00:56:12,760 Speaker 2: gold in my retirem account. Whatever it is. That's something 1073 00:56:12,840 --> 00:56:15,520 Speaker 2: that that's the next step is Okay, choosing the right 1074 00:56:15,600 --> 00:56:19,480 Speaker 2: investments in general. Personally this is not a recommendation, but 1075 00:56:19,719 --> 00:56:23,560 Speaker 2: personally I stay away from bonds, yields are just not 1076 00:56:23,880 --> 00:56:26,840 Speaker 2: high enough compared to the inflation rate right now. And 1077 00:56:27,120 --> 00:56:29,640 Speaker 2: you know, with the chance of default, it's like high risk, 1078 00:56:29,960 --> 00:56:34,399 Speaker 2: low return. I'd personally rather be in something like cash 1079 00:56:34,440 --> 00:56:37,360 Speaker 2: if I was super concerned about a coming up crash. 1080 00:56:37,480 --> 00:56:40,560 Speaker 2: More than that, I'd want to be invested in risk assets, 1081 00:56:40,560 --> 00:56:47,040 Speaker 2: but have them hedged with some advanced investing strategies. So 1082 00:56:47,760 --> 00:56:50,080 Speaker 2: you'll need to learn how to invest in those accounts, 1083 00:56:50,120 --> 00:56:52,799 Speaker 2: but that would be step four. So step one investigation, 1084 00:56:52,880 --> 00:56:56,040 Speaker 2: Step two consolidation, Step three tax advice, and then step 1085 00:56:56,120 --> 00:57:00,120 Speaker 2: four in investing all the money in there correctly. And 1086 00:57:00,200 --> 00:57:03,600 Speaker 2: with with those four steps, in the end, you're gonna 1087 00:57:03,600 --> 00:57:07,160 Speaker 2: have a lot more money available to you, uh uh 1088 00:57:07,680 --> 00:57:10,080 Speaker 2: than you would if you don't go through them, because 1089 00:57:10,480 --> 00:57:13,160 Speaker 2: you're going to be taxed appropriately, which means you're gonna 1090 00:57:13,160 --> 00:57:15,680 Speaker 2: be having more money going into your retirement account and 1091 00:57:15,719 --> 00:57:18,920 Speaker 2: less money going to the I R s when you retire. 1092 00:57:19,240 --> 00:57:25,200 Speaker 2: It's gonna grow faster from investing appropriately, and uh it's 1093 00:57:25,280 --> 00:57:27,800 Speaker 2: just you know, even without investing more, you're gonna make 1094 00:57:27,800 --> 00:57:31,960 Speaker 2: ground much faster. As always, thanks so much for listening. 1095 00:57:32,000 --> 00:57:34,480 Speaker 2: I hope you enjoyed it, hope you learned something, and uh, 1096 00:57:35,000 --> 00:57:38,040 Speaker 2: best of luck to you investing through these crazy times, 1097 00:57:38,240 --> 00:57:40,240 Speaker 2: and we'll talk to you next week.