Choosing the right retirement account that best suits your needs is a vital step in making sure you are well prepared for retirement. So what is the real difference between a 401(k), an IRA and HSA? And how do you know which one is right for you? Watch the video to find out.
When people think of retirement savings, plans like 401(k)s and IRAs probably come to mind. But there are other unexpected ways to save for retirement, such as health savings account, or HSAs.
“I don’t think they were designed to be a retirement account,” said Angie Chen, assistant director of savings research at the Center for Retirement Research. “I’m just as puzzled in terms of why HSA has become another option for a retirement account.”
First introduced in 2003, HSAs were originally created to incentivize saving for medical expenses for those in a high deductible plan.
“The idea is that you can put money pre-tax into the HSA and set that aside so in the event that you need to spend money on your health care that would not be covered by your insurance plan,” Chen said.
While money in an HSA can also be used for investment, most HSA holders use the funds for its original purpose of covering medical expenses. In 2019, just 7% of health saving accounts had investments other than cash.
“I think folks miss the investment component and that is a major deal in being able to provide for healthcare expenses,” Odyssey Capital Advisors chief investment officer Jason Snipe said.
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I am 40 years old. I rolled over a traditional 401K from a previous employer to by current employer. I am now doing the Roth 401k. Would it make any sense for me to open a Roth Ira now , to get the five year rule out of the way? Even though I am not planning to retire until I am 70? Thanks
Fock it. CNBC needs to stop inserting video conferencing calls in their videos. Its super duper annoying at this point.
We should get rid of social security. I’m better off managing my money than the US government.
god dammit, i come here for info, instead I'm bombarded by your nwo propaganda
Big ups to everyone working effortlessly trying to earn a living while building wealth. I’m 50 and my wife 44 we are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money. Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income.
Thanks to fire movement.
IRA. Anybody can start one. Any bank, insurance company or mutual fund sponsor can offer IRAs. Anybody who offer IRAs can offer a Roth IRA. Roth IRAs have 2 huge advantages: (1) withdrawals are untaxed; and (2) there are no required minimum distributions. Traditional IRAs convert qualified income from equities into ordinary income; this is a huge drawback. A Roth IRA converts taxable investments into untaxed ones.
401k. Have but one advantage: employer contributions. Otherwise, have all of the drawbacks of trad IRAs, plus can only be offered by your current employer. If you change jobs, you should move the balance in the 401k for your former job, into a rollover IRA.
Roth 401ks exist legally, but most employers do not offer them.
Investments is the best way to find balance between saving and living, This way
you have your savings
intact and then live comfortably off the revenue coming in from your investments.
Financial freedom is possible, you just need to know what to do
and when to do it. I am a living testimony.
I don't even have a 401K or IRA account any longer and neither do I need any of those. Truth is; cash is thrash and inherently bound to fail. Storing it is the worst idea anyone can pitch. Few years back, I took it all out into my stock account and through the help of an FA, I made my first million earlier this year. I can comfortably retire today as opposed to most of my colleagues.
If it’s important to understand the different options for retirement plans, why isn’t this topic taught in middle or high school?
Is it legal for my job to cut me off of my 401k without my permission? I think alot of company s in Indiana are racist af
for someone who goes to a few specialists is the HSA worth it?
Why are IRA contribution limits kept so LOW ($6K/$7K)? They should be made the SAME as 401k limits so that folks without a 401K can be on equal footing!
Have an individual (self-employed) 401(k) which allows complete control (no employees and can invest directly in equities, ETFs, etc. without plan or trading fees), a 401(k) from my other employer, a traditional IRA and a Roth IRA. The traditional IRA is for making backdoor Roth IRA contributions only. Wife has a 403(b), a 401(k) from a former employer (no fees), a traditional IRA (for backdoor Roth IRA contributions only) and her own Roth IRA. No HSAs here due to our good healthcare plans. In 4 years or so we will roll her 403(b) and 401(k) into her traditional IRA and eventually into her Roth IRA if it then makes sense to do so. Same time frame should see me rollover my employer 401(k) into my solo 401(k) or IRA depending upon what makes the most sense at that time. Will look at converting to Roth, in whole or in part, if and as it makes sense to do so.
I have a safe in my apartment and I work 50 hours a week I also have a trailer with car wash equipment and I hire some illegals to wash cars everyday I have money deposited into my safe plus what is taken out of my job Paychecks
Angie Chen-stop the god awful vocal fry. Unlistenable.
i have both
Amazing video thank you
HSA is a clear winner in investment. You can invest in stock or ETF directly unlike most 401K company packages. Plus, you can use the funds to make medical related payment anytime. EVERYONE will have to make some sort of medical payment so why not do it tax free? Plus, after retirement, the remaining funds can be use for anything.
The irs are crooks they know how much you make each but you have to do the math and if you mess up they will fine you America should reduce the 7% on to people who make less than 50k a year so we can save and not need a 40k or a stimulus check
Just became a millionaire this year at age 27. Thank you
i dont even have 401K or IRA. i took it all out into my Stock account so i can flip that money. i gain more in the Stock Market then i do in 401k.
I work for the state and have really good insurance. So… I can’t get the HSA but I have the FSA. My job offers a pension but I’m trying to learn about IRAs. I don’t wanna be 80 and still trying to work
7022
Depends. For high income earners, $140k+per year for single adults, a 401k with Vanguard/Fidelity/Schwab are great.
For those those singles earning $123k or less, the Roth IRA is far better. Also 401k plans that aren't with Vanguard/Fidelity/Schwab, just use a Traditional IRA for high income earners.
Do both! Always do at least employer match. 401k + backdoor Roth IRA = peace of mind
The only way anyone these days will make any kind of meaningful retirement money is by investing in crypto. With inflation at 5% a year (last I bothered checking) people need to plan for their money to go 1/4 of what it is expected by the time they retire.
Heath Saving Accounts principles disappear most of the time if not used within a fix time period. So they are not useful unless there is a persistent chronic health problems / cost. IRA can be a good tax shelter for the super rich .. especially the Roth IRA. but most States may tax a regular IRA but some state will not tax 401K … you can move 401k money to another 401k or an IRA but once the money is in a IRA it cannot go back to a 401K.
The commentators, did not mention the State where you live might also tax your 401K and or IRA upon withdrawal, even it may be federal tax free.
Because jobs dont offer retirement plans as much as they used to
Why are there contribution limits to begin with anyway?
Ah yes, retirement.. for most it will be taco bell hot sauce drizzled over friskies sea food from the balcony of an under pass.
What if you die before retirement, do I get that money in the afterlife?
How about remove the cap on contributions? That would be awesome.
Couldn't find any comments from anyone retired. I will provide one. Had a family member who just retired and discovered that only 66% of the 401K money is actually owned and distributed to the recipient. The other 33% all goes to taxes. The income prior to retirement was roughly $45k. So this isn't someone that was rich. SURPRISE! Its called the 401K lie. The taxes owed are huge. Rule of thumb –> Donate heavily to Roth funds while young and move to 401K funds as you age up. Good luck to all.
Well its simple why should i lose money in 402k cus ceos dont know how to run a buisness, when i can manage my own money in my safest funds. I went through 2 recessions n i got less in 402k with max matchings then my ira, n roth
Reason i invest in the crypto market; to make my money work for me, to prevent inflation from eroding my savings, to build generational wealth and to cultivate good habit and financial knowledge.
Move your 401 into an IRA, if it’s Roth, go with Fedility. Get a limited margin account. It’s as close as you get into day trading or managing your money freely like a regular brokerage account. Advantage: fractional shares, free trades, and no set list of funds to choose from.
IRA stands for Individual Retirement Arrangement, refer to IRS publication 590. It is true that it is colloquially known as an Individual Retirement Account, but that is not it’s original name.
If Biden really wants to make changes, have his department of education make financial literacy a 4 year program for all high school students. Imagine if kids learned about budgeting, saving, investing, student loans, home loans, and taxes early on. This program could essentially end the poverty cycle because you ould be giving every single American the knowledge for how to grow their wealth. Just imagine if we told kids the truth, 79% of millionaires in America inherited nothing, 80% invested in their 401k, only 3% of millionaires inherited their money, only 15% have held a senior level position, and 79% did not average a 100k salary over their career. Finally, imagine if people knew all they needed to do was to start investing $95 per month in a market index fund at the age of 25 to be a millionaires by retirement. Thats it, $95 a month.
It would simplify things a lot if the US had free health care but that would require cutting the military budget.
I did a work 401k no employer match I got a 15% of my gross profit sharing and I also had a Roth IRA after taxes.
So much misinformation in this video. I'm buying stocks in my current employer sponsored 401k account. The video claims that the ability of buying individual stocks in an IRA is an advantage of IRAs over 401k. Utter nonsense. And why does nobody ever talk about the rule of 55, which allows you to draw from a 401k without a penalty under certain circumstances? Because financial institutions don't want you to withdraw.
HSA's are a home run.
You really need to start your accounts as early as possible since the time element is crucial in developing that retirement nest egg. I got started saving late in the game and have committed to saving 34% of my gross income to have any hope of an adequate retirement.
Currently, I contribute to my 401K to get the employer match. I max out my HSA and have it invested. I next opened a ROTH IRA and max that out as well. That pretty much maxes out my ability to save as I only earn so much. As I am able, I'll toss a bit into a ROTH 401K.
What doesn't get mentioned is the advantage of having a paid off house. For those who assume they can just pay it off with their retirement savings, watch out! Unless it is coming form a ROTH account, you'll get nailed in income taxes from withdrawing such a huge sum!
We have HSA but it needs to be use within the year- that’s how I understand..
How do you do HSA?