How much can you save in your 401(k)? Are there “catch up” provisions? Etc. This video will give you a great start at answering your questions.
=== Azul’s “Scammer” Warning & Disclaimers. PLEASE READ!! ===
Be careful of scammers. In the comments, I will NEVER suggest you contact me, offer any investment products, recommend an adviser or anything similar. Some scammers ask for investment help in the comments and later, other commenters post how “great that idea/investment/person is” in the replies. This is a scam. Do not fall for it.
MORE FROM AZUL:
Twitter:
Essays:
NEED FINANCIAL ADVICE?
1) Google “fee-only financial adviser” or visit www.NAPFA.org
2) #1 question to ask any financial adviser is “Are you a fiduciary to me 100% of the time” Get the answer in writing
3) Please note that some people call themselves “fee-based”. This is NOT the same as fee-only. Fee-only advisers have committed to being a fiduciary to you 100% of the time.
4) Speaking just for myself personally, I would only hire an adviser who is a fiduciary to me 100% of the time. This is not a suggestion on what you should do. We are all different and I do not know your personal situation.
MY VIDEOS ARE NOT FINANCIAL ADVICE (Disclaimer):
This information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. To get professional financial advice from a fee-only financial advisor near you, please visit www.napfa.org.
The decisions on how to invest, when to retire and other financial planning topics are some of the most important financial decisions you will make in your life. I urge you to seek professional financial advice as you make this decision. Ideally from a financial adviser, AND a CPA AND an attorney. Having the perspective of all three professions will help you make the decision that is right for you and your family.
This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor may NOT be suitable for all investors.
This information is NOT intended to, and should NOT, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, and/or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
I don’t believe in “get rich” programs. Rather, I believe in doing your homework and working with professionals who are a fiduciary to you 100% of the time….(read more)
LEARN MORE ABOUT: 401k Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
💰401K SECRETS: Everything You Need to Know 🚨
For decades, the 401(k) retirement plan has been a cornerstone of American workers’ retirement savings. However, many individuals are unfamiliar with the intricacies and hidden secrets surrounding this popular retirement vehicle. In this article, we will reveal vital information to help demystify the 401(k) and provide you with everything you need to know to make the most of this valuable retirement tool.
First and foremost, understanding the significance of contributing to a 401(k) is crucial. This tax-advantaged investment account allows employees to allocate a portion of their salary towards retirement savings before taxes are deducted. This means that contributions are made with pre-tax dollars, reducing your taxable income for the year and potentially placing you in a lower tax bracket. Therefore, participating in a 401(k) offers immediate tax savings and allows your investments to grow tax-free until withdrawal.
One of the most crucial secrets to maximizing your 401(k) is taking full advantage of employer matching contributions. Many employers offer a matching program, where they match a certain percentage of your contributions up to a specified limit. It is essential to contribute at least the amount required to receive the full employer match since it equates to free money being added to your retirement account. Skipping or reducing these contributions is essentially turning down an opportunity for increased savings.
Another lesser-known secret is the concept of vesting. Vesting refers to the gradual ownership of your employer’s contributions to your 401(k). While you are always 100% vested in your own contributions, some companies have a vesting schedule for their contributions. This schedule determines how long you must stay with the company to become fully vested in their contributions. It is crucial to understand your company’s vesting schedule to avoid losing potential employer contributions if you leave before being fully vested.
Furthermore, it is important not to neglect your 401(k) investments. Many individuals make the mistake of setting and forgetting their portfolio allocation, missing out on the potential growth and benefits of actively managing their investments. Reviewing and rebalancing your portfolio regularly ensures that your investments align with your financial goals and risk tolerance. Additionally, adjusting your investments as you age or experience changes in your life circumstances can help you maximize returns while minimizing risk.
Lastly, it is crucial to avoid dipping into your 401(k) prematurely. While 401(k) funds are intended for retirement, some individuals may face financial hardships and consider tapping into this account early. However, this should be seen as a last resort due to potential penalties, taxes, and lost growth opportunities. Instead, explore other financial options such as emergency funds, personal loans, or consulting a financial advisor to find alternatives that won’t jeopardize your retirement savings.
In conclusion, understanding the secrets of your 401(k) can significantly impact the trajectory of your retirement savings. By taking full advantage of employer matches, comprehending vesting schedules, actively managing your investments, and avoiding premature withdrawals, you can set yourself up for a comfortable and secure retirement. Remember, the earlier you start contributing towards your 401(k) and utilizing these secrets, the better off you’ll be in the long run. Start planning today and make the most of this powerful retirement tool.
Enjoyed the video. At some point would you cover a pension plan effects on retirement such as if your pension is 45k needs different plans mine has inflation adjusted. Thank you Azul.
Thank you Azul. You are my new go to finance/retirement channel. You add a caring/human touch to all your advice which is not common nowadays. Keep up the videos!
Great videos, recent subscriber. Would be interesting to have videos directed at certain audiences- say, for instance, high earning professionals in their 40s. What should they be thinking about?
The rule of thumb for our family’s savings rate is as follows: adults = 10% per adult (ie mom & dad = 10% x2 =$20% total savings) per minors = 5% per child (ie I have 2 kids so 5% x2 = 10% total savings). In conclusion, my family saved 30% total per year. But of course, children left so we are back down to 20% annually.
However, the twist is that total % saving was put in at the beginning or start of the year. So for example, we tried to put 30% at the beginning of the year and we didn’t take a paycheck until total % planned was invested——-during which time we used the savings to get by and of course thus saving account was replenish asap once contribution was taken care of and pay checks can be collected again.
Hi Azul, if I make over 170K per year and am single…am I not allowed to contribute to the Roth 401K? I'm confused by some of the videos on Youtube (not yours), but if this is true I will need to readjust my contributions. Thanks!
I'll say it again; you need a dead cat (starting at 4:35). Thank you for your content!
I am debt free in my low 40s. It is hard. Lots of discipline
Rule #1 – save as much as you can when you are young. I made plenty of mistakes when I was in my 20s and 30s buying new cars every 3 to 5 years. As I accumulate more wealth, I live more frugal. I bought a few years old used car now. A dollar saved 20 years ago will become $10 to $15 20 years later
Rule#2 – if you plan to retire early, make sure you do not follow what the financial planners told you about 6x your annual salary at the age of 40. You need to save a whole lot more since you have a longer time to burn off your savings and your salary in 40s will be less than in your 60s. So, I would propose to retire at 20x your annual salary in your 40s, 15x in your 50s and no less than 12x in your 60s
One should be debt free by the age of 45 and actively planning on their retirement. When you reach 50, you are counting on days unless you really love your work.
When you are in 20s, try to save at least 30% before tax
25% in 30s
20% in 40s
15% in 50s
I think the important thing is to remember is, if you find yourself short at retirement time but you can tap social security, you can LEAVE the US and live comfortably and HAPPY by LEAVING the US! This option is becoming more and more attractive to my wife and I. Bonus is not all of this world is as NUTSO as the US.
Question: Do you have to keep a Roth open for 5 yrs before you can use any of the money?
That SDIRA for a Florida rental sounds pretty good. Can you do something on that?
What about persons that will retire with not much in savings but will have a pension
Roth during your younger years. Traditional during your high earning years (if above 30% combined tax bracket). Roth convert as much as possible after retiring to avoid those RMD and widow tax bombs looming later in retirement!
Build up a separate taxable brokerage account or rental real estate portfolio. Completely tax free, six figure income in retirement is possible!
Retired 12/22..maxed out 401 and Roth up until 2 years prior, at which time I switched to “cash like”savings. Working so far.
I discovered the Mega Backdoor Roth a couple of years ago where, after reaching the $30K limit for those of us over 55, contributions convert to taxable until hitting the upper limit near $70K. These taxable contributions can be converted to a Roth IRA and is a great way to maximize Roth contributions for retirement. I wish I would have known about this earlier, though it's hard to afford such high contributions for most of us when we're younger.
Even though your topics cover general guidelines of what an individual should do for a successful enough retirement that don’t really align with my goals, I love hearing your opinions and guidelines on various topics. I can sense the experience you bring to the table per se. My retirement account balance isn’t up to snuff but my income and assets other than 401k make up my confidence . I’ll try to refer people to your channel that need some general guidance. Thank you.
The last 10 years before I retired I saved 35%. The thing was that if you don't see it you don't miss it. It's amazing how much money you waste each year. Just remember that the numbers are for living at the same income as working if you can live on less you can have less savings. I lived on what SS was projected a few years before I retired. Now that the market is down I live on SS. Other people have larger 401k accounts and some are still working but I have "Enough" in my 401k. Have a great time retired!
Is it true that even with without putting anything in 401k, that generally, it doubles in value about every seven years. So if you had $100,000 in 401k, even if you didn't put anything in, it would be worth $200,000 seven years later and $400,000 seven years after that and $800,000 seven years after that?
401K's are great, but having a tax strategy during withdrawal is an absolute must. You can get royally hosed if you don't withdraw enough or if you take too much out in any given year. I take enough out to just barely stay in the 12% tax bracket. My plan is to take SS at 70 to get the max amount. I never thought my taxable income would be nearly double from when I was working and no debt.
Live is good, I am maxed at 30k in 401(k), then overflow to backdoor ROTH, TOD and most recently I-Bonds
FYI only 4 plus minutes into your video the strong wind effected your sound..
Love you videos. I’m retired from the Army, 28 years. I receive a monthly retirement check from the federal govt. How would you calculate that when figuring you’re net worth, and your nest egg required to truly retire with?
I never hear if it’s house hold as my wife has as much saved as Me and I never hear it referred to as house hold income ! Some Wife’s work some don’t !
Should be allowed to contribute 20-25% to 401K, regardless of what other people are contributing . It’s too tempting to use the money in the savings account.
If I cash out my 401K early without penalty ?
My wages were too low to save 10%, however, I always maxed my 401k with the employer match, 6%. I would suspect that most people borrow from 401k because their income is too low to support a modest middle class lifestyle. I used mine along with employee stock options, to pay off All debt before taking early ss. My retirement income is more than sufficient to take care of our needs.
Thanks for another great video
Thanks your very informative.