Financial planning and taxes in your retirement years does not have to be a scary thing for baby boomers and retirees. In fact, there are very simple ways to safeguard your retirement income from both volatility and taxation. In this video Rob discusses where IRA’s, 401k’s, and 529 Plans fit in the spectrum of taxation and financial planning.
A few of the key topics in this video that you will learn are:
Capital gains versus ordinary income tax
Tax-free versus tax-deferred
Where annuities fit in your retirement plan
How a private pension is a viable alternative investment.
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This video is damn near fraudulent. There are so many errors in his comparison. Beware!
What is a private pension? Never heard the term. Is it another way of saying annuity and the ugh fees they bring,!
Roth IRA and Roth 401(k) is great, if you know you will be in the higher tax bracket after you retire!
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Do you provide personal financial advising and planning? I'd like to run by you a few ideas before I implement them.
let the drawing go
OK so I’m really listening but the private pension example you’re saying that I’m putting $1000 a month in and comparing it to me putting in the $7500 a year for my 401(k). That’s vastly different because if I were putting 1000 a month in then that would be 12,000 a year and then you’d have to change the calculation at the top. What am I missing?
Math at 9:29 is wrong. 50% of 7500 is 3750 not 3250
Great video and I’m about a third of the way through and I’m kind of yelling at the screen. When you’re talking about the difference between putting money in the 401(k) IRA etc. versus the Roth and saying “it’s the same pile of money“ it’s actually not because my employer matches my 401(k) up to 8% which is free money to me. You can’t convince me that taking that free money is bad unless somewhere along the line after the five minute 40 mark you can explain to me why I should give up that 8% match.
That’s great, but the thousand dollars a month you are setting aside to grow your private pension, assuming the 25% tax bracket still, is actually $1,250 dollars gross. You can’t set those two equal from the start like that. I understand it’s money you were going to pay taxes on anyway, but the comparison doesn’t seem accurate.
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Hi – really interesting. I wish you final comparison had looked at 401K, Private Pension AND Roth IRA.
I’m 100% in agreement with the Roth IRA suggestion. However, I don’t see in your presentation where you allow for the 401K funds continue to growing in retirement? You show the impact of inflation, of a 4% withdrawal rate and 25% in taxes, but that $400k + still has the ability to grow. Maybe for the point you’re trying to make that isn’t necessary.
What a wretched video. Full of inaccuracies. First, avoid life insurance as an investment. Period. Anyone who tells you otherwise likely makes money from selling.
Second, if you'll be in a lower tax bracket when you retire, and almost everyone is, traditional IRA and 401k is better than Roth IRA and Roth 401k.
The minute this guy mentioned 'private pension', is the minute you should realize he's a huckster. Avoid this advice.
Good video
This seems like bad advice. The 401k money would be taxed otherwise in the highest bracket of your highest income years. By 401k'ing it you'll be taking it out and taxed at much lower levels in retirement after it grew tax free for decades. Plus the company match the first year. That's a really good deal.
Roth is the best by far.
Follow the money…if they are Hocking something be sceptical.. private pension does nothing for most. Except this guy.
7500 per yr vs 12,000 per year. Not equal.
most people who work for a company that pays them $150k / yr, get a 100% match on the first 5 or 6% they contribute to their 401k. why does your example show a 50% match on the 401k? we are talking about people that work for companies that pay an employee $150k / year, not $15 /hour. you lost me there with your example because "the math" is skewed…
This argument is flawed on so many levels I'm not even sure where to start. First of all, you've contradicted yourself already by saying "free money" is the optimal scenario and then later suggesting a 401k with "company match" is only a "push" or potentially a toss-up as to which is better. Well, first of all, it's a HUGE advantage to get a 50% immediate ROI. What you're really comparing is $7,500 out of pocket (401k) vs. $12,000 ($1k/mo) out of pocket AFTER-TAX… which is probably closer to $18,000 pre-tax equivalent.
Second, I love the way you just brush-off the tax deduction. $7,500 put in tax free produces a nice sized deduction. And if you're truly maxing out your 401k, $18,500 produces an even NICER deduction. That's real money. You've simply eliminated it from the equation suggesting that it will be squandered away and have no material effect. Really? Well, hello – if that's the argument, you could just as easily ague that the tax savings on the BACK side is simply a rounding error, and it makes no material impact. Same argument, different ends of the equation.
The reality is, many people will be in a higher tax bracket during their peak earning years than in retirement. Therefore, the more you can shave off the top in those years, the better.
Bottom line, if you have a 401k with company match, there's no better vehicle for MOST people to save. You're getting the benefit of a tax deduction plus free cash (your bucket #1).
Lastly, anything that suggests someone ELSE is going to manage your money is something I want no part of. Pile your money into as many tax advantaged accounts as you can, followed by normal taxable accounts. Invest it in a combination of low-cost index funds tracking the S&P 500 and total bond market in whatever allocation makes sense for your age/circumstance. Enjoy.
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waste of time video
Interesting…while working I was paying about $17K/year is fed and state income taxes. Last year, first year of retirement, it was $2K with income at about 40% of working income. Works for me!
are you understanding my current needs. i want to be a self funded retiree who has control, not. people committing fraud on my my behalf and me picking up their pieces when they get caught out for fraud.
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What does "all of this is taxable" mean? Only the amount you withdraw from an IRA or 401k will be taxable every year. No one withdraws all of it at one time. Most people drop into a lower tax bracket when they retire than the tax bracket they were in when they put the money into the IRA/401k. With a Roth IRA, you are paying higher taxes now for tax-free withdrawals later. You are giving up current consumption for a future tax benefit. And a 25% tax bracket in retirement? I don't know about the new tax plan but in the old one, that doesn't kick in until one earns over $122,000 a year (married, filing jointly). That is unlikely for someone who only has $400,000 in an IRA/401k account. In your scenario, only about $17,000 is being taken out every year. Even with social security added in, that person will not be close to a 25% tax bracket, much closer to a zero tax bracket given taxable income doesn't even start until $22,800. This isn't the first video maligning traditional IRAs. One has to conclude someone wants to scare people into investing in something else.
Can't believe you are this stupid. I stopped watching at the point where you say both pots grow to the same amount.
You’re crazy if you think Roth IRA is better as far as taxes go. Let’s say you are making 100k a year and putting in your Roth IRA, your money is being taxed at the 100k tax bracket. Same deal but putting money in a 401k, later on when you are retired, you have your house paid off and your kids are out of the house, you only need 50k. Then you only have to pay 50k in income taxes
Sounds to me this guys is a bit confused about what he's talking about
Both are subject to market volatility
401k limit in 2017 is $18,000 a year + employer match + pre-tax + you get a tax break at the end of the tax season.
Roth IRA is $5,500/year AFTER tax.
How's Roth IRA superior again?
I am maxing out both and there are no contests. 401k goes up more than quadruple in comparison. That is waaay more enough to offset ANY taxes at the end. Especially if you do gradual ladder withdraw from your 401k.
Never heard of a private pension option!! Where do you get that?
!!!And
What? You pay $$ taxes on the Roth money as you add it to the Roth at the HIGHER working tax bracket! It is not "tax free" it is as you say , "after tax"….. If I put $10 into the roth I pay taxes at say 25% while working; Same $10 into 401K I defer the taxes to a retirement time and lower tax bracket!!! This is ridiculous salesmanship. Listen to advice from people who will not profit from your decisions, not from sales people. (Insurance sales people especially)
Do the 401k, Max it out to get the full match from the employer, however 5 years before you retire, transfer that and re-characterize to a Roth (In Service Transfer), Pay the taxes and invest in a Hybrid Annuity that allows growth and income for when you retire. You have to do it 5 years before because the IRS will look back and not allow the Tax free withdrawals in the Roth unless it's been sitting there for 5 years. Yes I'm a Financial advisor (RIA)
About 5 or so minutes in the video, you say the value of a Traditional IRA would increase at the same rate as the Roth, however wouldn't there be more money deferred into the Traditional because it's before tax? This is of course without taking contribution limits into consideration. In other words, the amount actually being deferred to the account could be less for Roth because one may not be able to contribute the same amount since some of it would have to be reserved to pay taxes. Therefore, while there is an inherent advantage to having tax free interest for a Roth, one may be able to earn more money in a Trad since deferrals would be higher. The question is whether the tax free interest for a Roth would be more tax advantageous than the interest earned from being able to invest the pretax savings in a Traditional.
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Unless I missed something. 50% match is $3,750, not $3,250,
With compounding interest involved, and considering you're losing the company match PLUS whatever is paid in taxes up front, to assume that a Roth will grow as large as a traditional is COMPLETELY incorrect. If that were the case, traditional IRAs would have never eclipsed Roth's with respect to majority preference. PLEASE tell me that If I invest $100 today (in the 25% tax bracket) in a traditional, in the same fund as a Roth, that it will be the same amount as $52 (-$23 due to no employee contribution and -25% due to taxes) invested in a Roth in 10 years? Not to mention the traditional has the ability to bump me from the 25% bracket to the 15%, but we won't take those savings into account for my question….