Sept. 5, 2025
Maximize Your Match: Celebrating National 401(K) Day
Maximize Your Match: Celebrating National 401(K) Day
In this episode of Something More, Chris Boyd sits down with Jeff Perry and Russ Ball
to celebrate National 401(K) Day and unpack the true power of your workplace
retirement plan. You will learn why pre-tax contributions reduce your taxable income
now, how Roth options let your savings grow tax-free, and exactly why missing out on an
employer match is like leaving cash on the table. We will also cover contribution limits,
catch-up provisions for those over fifty, and strategies for combining traditional and Roth
accounts to optimize your tax liability in retirement. Whether you are just starting your
first job or looking to turbocharge your savings before year-end, this episode delivers the
insights you need to make every dollar work harder for your future.
#National401KDay #RetirementPlanning #EmployerMatch #TaxStrategy
#RothVsTraditional #FinancialWellness #CompoundGrowth #FinancialPlanning
Click the link below to register for our upcoming webinar, “Don’t leave a digital mess.”
https://register.gotowebinar.com/register/6040334700710880088
For more information or to reach TEAM AMR, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
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Welcome to Something More with Chris Boyd.
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Chris Boyd is a certified financial planner, practitioner,
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and senior vice president and financial advisor at
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Wealth Enhancement Group, one of the nation's largest
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registered investment advisors.
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We call it Something More because we'd like
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to talk not only about those important dollar
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and cents issues, but also the quality of
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life issues that make the money matters matter.
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Here he is, your fulfillment facilitator, your partner
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in prosperity, advising clients on Cape Cod and
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across the country.
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Here's your host, Jay Christopher Boyd.
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Welcome to Something More with Chris Boyd.
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I'm Chris Boyd, and I'm here with Jeff
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Perry and Russ Bahl, all of us of
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the AMR team, and glad to have you
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joining us.
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If you're not a regular listener, you can
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find us wherever you like to listen to
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podcasts or by YouTube or going to our
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webpage at somethingmorewithchrisboyd.com.
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So today we are talking about National 401K
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Day.
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Who knew that there was a day to
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celebrate 401Ks?
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But it turns out, what, Jeff, it's the
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same day every year, huh?
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Same thing.
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Yes.
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Since 1996, when the planned sponsor, Council of
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America, created this Awareness Day, and it's the
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first, it's the Friday after the Monday, Labor
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Day holiday.
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All right.
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And that this year is the 5th and
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today, Friday.
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And so we thought it'd be worth talking
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a little bit about some of the things
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to review when it comes to what should
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we know about 401Ks and 401K Day.
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So for those who aren't familiar with what
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is a 401K, or some, it's a form
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of employer retirement plan for savings toward your
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retirement.
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Money goes in, it comes out of your
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paycheck, essentially.
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It is pre-tax, so it avoids income
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tax.
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It diminishes your income in effect.
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So it helps you with your this year's
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tax bill.
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Money grows tax deferred in there.
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And when you take it out is when
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you pay income taxes on it.
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People often think they'll be in a lower
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tax bracket when they retire.
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And so they like the idea of pushing
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off, deferring that income and having less tax
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later on.
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There are other benefits as well, right?
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And that is the likelihood that your employer
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may very well offer to give you some
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incentive to participate in your retirement plan by
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offering a match of some of your benefits.
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So this can vary from employer to employer,
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how much, how readily.
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It's common for people to have some sort
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of initially maybe 100% match let's say
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an example might be 2%.
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Your first 2% of salary that you
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withhold to put toward your 401K, your employer
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will give you the same amount.
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You just made 100% rate of return
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on that money.
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Free money.
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Free money.
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It's like part of your salary you didn't
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know you were going to get.
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And if you don't participate, you miss out
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on.
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So you definitely need that.
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Now, sometimes an employer will say, and then
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after that we'll match half for the next
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2%.
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So I get 3% if I'm doing
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4% or something along those lines, you
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get the gist, hopefully.
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So in any case, 401Ks have a great
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opportunity to help you make savings easy, retirement
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savings easy.
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And now there's not only the opportunity to
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traditional contributions, money going pre-tax to save
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and defer, and then eventually taxed on the
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way out.
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But you can also choose to do Roth
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in many 401Ks, depends on the plan.
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Not every employer has adopted this, but most
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plans today have the opportunity where you can
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choose if you want to pay the taxes
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upfront included in your income this year, but
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whatever that money grows into when you take
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it out is free from tax.
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So that's pretty appealing as well.
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All right.
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Anything to start off?
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Who wants to jump in where I was
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throwing all that around?
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No, it's all very accurate.
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And I think most people have a common
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understanding of it.
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I was looking, I was wondering, what's the
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average 401K balance for someone?
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And of course, then you go down to,
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well, it depends how old they are, right?
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So Fidelity has some information on their website
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and they break it down by generations.
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And so the average Gen Z, which is
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the youngest generation that they have data for,
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has an average balance of $13,500.
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They're young, they're just starting out.
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That's not bad.
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That's not bad.
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And maybe we'll talk about this, but the
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importance of starting young is so powerful in
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the retirement setting.
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Next up are millennials.
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I hear a lot about millennials.
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Their average 401K balance is $67,300.
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So climbing up there.
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Gen X, the average 401K balance is $192
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,300.
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And for the baby boomers, the average 401K
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balance is $249,300.
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So that seems smaller than I would expect.
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Only because they're so close to retirement.
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And you need more.
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I agree.
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And when I saw the, especially the baby
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boomers number, I said, that can't be right.
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And then I started thinking about it.
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So this is the average 401K balance.
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So maybe I had a job from 25
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to 45 and I had a 401K and
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I left and I rolled it over into
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an IRA.
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Right.
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So you're no longer in a 401K.
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Right.
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And maybe I have a half a million
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dollars in that one for those 20 years.
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Right.
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And now I have this other job.
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Oh, that's a good point.
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Okay.
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I was thinking a little differently, but that's
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an excellent point.
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So I have a balance at this employer's
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401K and then I leave it there while
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I go off to my next employer and
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build a new balance in that 401K.
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Right.
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So that decreases the average balance.
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I was thinking your point was, oh, well,
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baby boomers are getting into the retirement years
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and therefore they're rolling over their large balances
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when they retire into their own IRA.
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So the average 401K balance is only those
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people who are working with ages, dates of
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birth between 1964, I think it is, and
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older, that kind of thing.
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So I don't know.
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Anyway, but the point about, hey, people have
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more than one employer and often don't consolidate
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their plans at their new employer, that kind
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of makes more sense to me.
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Yeah, I think so.
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Well, in any case, it's probably not quite
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sufficient to have 236 or whatever it was,
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$250,000.
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If you're close to retirement, you really want
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to be thinking about more.
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There was something you said, maybe there's something
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we want to come back to.
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What was that?
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Let's come back to it.
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You have to tell me what it was.
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I don't remember.
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I don't remember now what it was, but
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it was something worth coming back to.
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Well, it'll come to us later.
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Before we started, I was sharing with you,
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according to the plan council of America-
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Oh, you were talking about compounding, the power
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of compounding.
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Oh, yes, I was.
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I was talking about it.
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It's so important.
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There you go.
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You get the first job and a lot
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of, just out of college perhaps, or maybe
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a little bit after that.
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And you get that first real job, a
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job that has benefits and such.
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And somebody tells you to go to HR
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and fill out some forms.
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And you may not have really thought much
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about a 401k or any of this.
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You may have never been exposed to it
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if your parents or grandparents didn't talk to
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you about it.
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And you might choose, I'll do that later.
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I'm not ready for that.
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Or I don't know, and you take the
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paper or call and you never do it.
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But the importance of your long-term financial
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accumulation and success is so much more benefited
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by making those decisions early to sign up,
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put a contribution in that at least matches,
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at least is equal to what you get
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for the match.
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You gave the example of 2%.
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At least do, take the free money, right?
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Absolutely.
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I mean, you're walking away, you're choosing to
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be paid less for your employment if you
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don't participate in the employer match at 100%,
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whatever that amount is.
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So in my example, you had to participate
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with 4% salary deferral in order to
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get 3% from the employer.
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The numbers may differ from one place to
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the next, but the point is if you
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don't fully participate to get all of the
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match, you are choosing to be compensated for
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less than you're eligible for.
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It's like saying, no, I don't need this
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month's paycheck.
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Thanks anyway.
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Why would you do that?
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You're entitled to that.
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That's what the employer is saying.
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Your value to them is they want you
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to be fully compensated and they want you
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to be well-prepared for your retirement when
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the time comes.
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They're trying to incentivize you to be saving
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for retirement and take advantage of every aspect
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of that, just like you wouldn't turn away
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some benefit that an employer is providing.
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Why would you, right?
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So in any case, let's talk about just
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for a minute, the amounts you can contribute
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into this.
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So the first thing we're talking about there
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is the match, which is the free money
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part of it, but you have the opportunity
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to contribute amounts.
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There are limits though, as to how much
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one can put into their retirement plan.
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So it's worth reviewing that.
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Russ, you got a few things there.
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You want to go over some of that?
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Yeah.
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00:10:52,940 --> 00:10:58,980
So for employees under age 50, the contribution
266
00:10:58,980 --> 00:11:01,620
limit is 23,500 for 2025.
267
00:11:02,880 --> 00:11:04,160
That's per person.
268
00:11:04,680 --> 00:11:06,300
So pretty high limit there.
269
00:11:07,560 --> 00:11:10,120
You can hit that number, especially earlier on
270
00:11:10,120 --> 00:11:11,540
in your career, you're doing pretty well.
271
00:11:11,540 --> 00:11:11,840
Yeah.
272
00:11:11,960 --> 00:11:14,860
That's almost 2,000 a month, right?
273
00:11:15,220 --> 00:11:17,280
That's a lot of money.
274
00:11:18,100 --> 00:11:18,720
So that'd be great.
275
00:11:19,120 --> 00:11:23,500
A lot of colleagues I've had getting jobs
276
00:11:23,500 --> 00:11:24,620
out of school and that sort of thing,
277
00:11:25,640 --> 00:11:27,420
they think about their Roth IRA.
278
00:11:27,620 --> 00:11:29,060
I don't know, for whatever reason in my
279
00:11:29,060 --> 00:11:32,380
generation, it is a popular investment option.
280
00:11:33,420 --> 00:11:34,680
We'll touch on that in a minute.
281
00:11:34,780 --> 00:11:35,820
I think that's a smart thing.
282
00:11:36,080 --> 00:11:36,840
So we can come back to that.
283
00:11:36,860 --> 00:11:37,120
Yeah, definitely.
284
00:11:38,400 --> 00:11:40,960
But I recently had a conversation with my
285
00:11:40,960 --> 00:11:43,940
brother and he was saying, I plan to
286
00:11:43,940 --> 00:11:45,620
contribute to my Roth IRA.
287
00:11:45,760 --> 00:11:47,180
I'm like, well, what about your 401k?
288
00:11:47,780 --> 00:11:50,240
He's like, oh, I thought it was one
289
00:11:50,240 --> 00:11:50,600
or the other.
290
00:11:50,740 --> 00:11:52,520
I didn't know it was all...
291
00:11:52,520 --> 00:11:54,740
So that could kind of come up too.
292
00:11:54,820 --> 00:11:57,660
There's separate retirement accounts that you can contribute
293
00:11:57,660 --> 00:11:59,760
to and each one has a different limit.
294
00:12:00,280 --> 00:12:01,140
Yeah, that's a good point.
295
00:12:01,420 --> 00:12:04,480
And when you have a available to you
296
00:12:04,480 --> 00:12:08,420
at work, that can affect the amount you're
297
00:12:08,420 --> 00:12:14,060
eligible to participate in for your IRA or
298
00:12:14,060 --> 00:12:16,440
whether or not you're eligible to participate in
299
00:12:16,440 --> 00:12:16,720
it.
300
00:12:18,260 --> 00:12:20,100
And a Roth in that case.
301
00:12:20,640 --> 00:12:23,220
And income limits as well for a Roth
302
00:12:23,220 --> 00:12:23,620
IRA.
303
00:12:24,480 --> 00:12:25,120
Yes.
304
00:12:26,120 --> 00:12:30,180
Essentially, if you're doing a Roth IRA, once
305
00:12:30,180 --> 00:12:32,220
you exceed a certain level of income, I
306
00:12:32,220 --> 00:12:34,220
want to say it's around 146,000.
307
00:12:34,280 --> 00:12:35,280
Do you remember what the number is?
308
00:12:37,380 --> 00:12:39,100
150, I believe.
309
00:12:40,140 --> 00:12:40,980
For a Roth.
310
00:12:41,440 --> 00:12:42,500
So for a Roth.
311
00:12:42,680 --> 00:12:42,920
Okay.
312
00:12:43,020 --> 00:12:43,240
Yeah.
313
00:12:43,640 --> 00:12:45,260
This is for a single person.
314
00:12:45,480 --> 00:12:48,140
Once you get to 150,000 and then
315
00:12:48,140 --> 00:12:51,960
you start to have a declining eligibility to
316
00:12:51,960 --> 00:12:56,520
do the full contribution because you make too
317
00:12:56,520 --> 00:12:57,520
much, air quotes.
318
00:12:58,640 --> 00:13:02,840
And then at 165, you're fully phased out
319
00:13:02,840 --> 00:13:05,120
from being able to contribute anything to a
320
00:13:05,120 --> 00:13:10,440
Roth because you have your other work plan
321
00:13:10,440 --> 00:13:11,380
available to you.
322
00:13:11,700 --> 00:13:13,840
But keep in mind in that instance too,
323
00:13:14,120 --> 00:13:16,980
your brother, I think you said, may have
324
00:13:16,980 --> 00:13:19,220
the opportunity for a Roth contribution at the
325
00:13:19,220 --> 00:13:19,880
work plan.
326
00:13:20,620 --> 00:13:23,560
So the IRA only allows you in that
327
00:13:23,560 --> 00:13:26,360
case to under 50 to do $7,000,
328
00:13:26,780 --> 00:13:29,640
but you could be doing 23,000 into
329
00:13:29,640 --> 00:13:30,160
the Roth.
330
00:13:30,820 --> 00:13:33,440
That's what he really wants to do if
331
00:13:33,440 --> 00:13:37,240
he has the availability of a Roth plan
332
00:13:37,240 --> 00:13:39,360
for the 401k plan.
333
00:13:40,460 --> 00:13:43,920
But just quick on this topic of Roth
334
00:13:43,920 --> 00:13:48,740
traditional, maybe we can give some brief guidance
335
00:13:48,740 --> 00:13:51,560
as to who should consider which and when.
336
00:13:52,260 --> 00:13:53,960
Do you want to weigh in on that
337
00:13:53,960 --> 00:13:55,080
or either of you want to weigh in
338
00:13:55,080 --> 00:13:55,720
on that?
339
00:13:56,760 --> 00:13:57,380
Go ahead, Russ.
340
00:13:57,820 --> 00:14:02,380
Well, I think for, especially for high earners,
341
00:14:02,820 --> 00:14:07,520
there is a appeal to the tax treatment
342
00:14:07,520 --> 00:14:10,260
of a traditional 401k where the money is
343
00:14:10,260 --> 00:14:13,500
going in pre-tax and you just less
344
00:14:13,500 --> 00:14:14,980
income that you have to pay on.
345
00:14:16,100 --> 00:14:20,160
So especially during their earning years, the traditional
346
00:14:20,160 --> 00:14:21,360
401k has a lot of appeal.
347
00:14:22,380 --> 00:14:25,320
I would think when income is lower, maybe
348
00:14:25,320 --> 00:14:28,860
earlier on in your career, a Roth 401k
349
00:14:28,860 --> 00:14:29,860
could be a better option.
350
00:14:30,340 --> 00:14:31,020
Yeah, I totally agree.
351
00:14:31,200 --> 00:14:34,040
So early in your career when you're probably
352
00:14:34,040 --> 00:14:38,180
not making your peak earning income is a
353
00:14:38,180 --> 00:14:40,080
great time to think about this.
354
00:14:40,840 --> 00:14:43,520
Additionally, I would argue that people who are
355
00:14:43,520 --> 00:14:47,460
in the highest income tax brackets, why not?
356
00:14:47,540 --> 00:14:49,800
They're already in the high income bracket.
357
00:14:50,160 --> 00:14:52,680
They're probably not going to see a reduction
358
00:14:52,680 --> 00:14:56,540
in income tax bracket when they're retired, just
359
00:14:56,540 --> 00:15:00,500
because they're likely to be having a high
360
00:15:00,500 --> 00:15:01,720
income even in retirement.
361
00:15:02,420 --> 00:15:06,340
And then you could argue that tax rates
362
00:15:06,340 --> 00:15:10,300
are relatively low and maybe it's a good
363
00:15:10,300 --> 00:15:12,580
time to be choosing to pay that tax
364
00:15:12,580 --> 00:15:16,540
if you have a higher propensity for substantial
365
00:15:16,540 --> 00:15:18,240
income later in life as well.
366
00:15:18,880 --> 00:15:21,300
So yeah, you get that dichotomy on the
367
00:15:21,300 --> 00:15:23,260
low end of income, on the high end
368
00:15:23,260 --> 00:15:25,820
of income, probably good times.
369
00:15:26,200 --> 00:15:26,780
Why argue?
370
00:15:26,960 --> 00:15:27,420
Do both.
371
00:15:28,120 --> 00:15:30,280
You can do both in a 401k in
372
00:15:30,280 --> 00:15:31,000
many instances.
373
00:15:31,000 --> 00:15:34,020
You can allocate funds to the traditional and
374
00:15:34,020 --> 00:15:34,580
to the Roth.
375
00:15:34,780 --> 00:15:37,880
And ideally when you reach retirement and you're
376
00:15:37,880 --> 00:15:41,640
in that decumulation phase, it's great to have
377
00:15:41,640 --> 00:15:44,440
both types of accounts so you can better
378
00:15:44,440 --> 00:15:45,480
manage your taxes.
379
00:15:45,660 --> 00:15:48,300
You can decide what accounts you're taking from,
380
00:15:49,100 --> 00:15:50,980
you can decide which accounts are better to
381
00:15:50,980 --> 00:15:51,860
leave to heirs.
382
00:15:53,580 --> 00:15:55,580
So I like both.
383
00:15:55,580 --> 00:15:57,360
No, I, yeah, I agree.
384
00:15:57,520 --> 00:15:58,560
That's a good, good call.
385
00:15:59,540 --> 00:16:02,980
When it comes to the contribution limits, going
386
00:16:02,980 --> 00:16:03,740
back to that.
387
00:16:03,960 --> 00:16:07,300
So we have the opportunity to do $23
388
00:16:07,300 --> 00:16:09,600
,000 in 2025.
389
00:16:10,640 --> 00:16:13,180
So there's still time if you haven't been
390
00:16:13,180 --> 00:16:16,240
planning to max out your 401k, if you
391
00:16:16,240 --> 00:16:18,480
have the ability to do that, there's still
392
00:16:18,480 --> 00:16:21,140
time to talk to your HR, get your
393
00:16:21,140 --> 00:16:23,920
payroll structured where so much is going to
394
00:16:23,920 --> 00:16:24,380
your plan.
395
00:16:25,280 --> 00:16:28,920
But if you're over 50, 50 and over,
396
00:16:29,680 --> 00:16:31,620
there's a catch-up provision.
397
00:16:32,900 --> 00:16:35,520
You want to, so 30,500, is that
398
00:16:35,520 --> 00:16:36,440
the number these days?
399
00:16:38,560 --> 00:16:40,080
31,000, I believe.
400
00:16:40,260 --> 00:16:41,420
31,000.
401
00:16:41,520 --> 00:16:41,680
Okay.
402
00:16:41,800 --> 00:16:42,160
Sorry.
403
00:16:42,480 --> 00:16:45,500
So you've got that.
404
00:16:45,660 --> 00:16:47,880
And there are different numbers for different types
405
00:16:47,880 --> 00:16:50,600
of plans, but yeah, 31,000 is the
406
00:16:50,600 --> 00:16:52,180
number for that now.
407
00:16:52,860 --> 00:16:59,580
And then it gets more convoluted if you're
408
00:16:59,580 --> 00:17:02,280
in your 60s.
409
00:17:02,660 --> 00:17:05,740
There's a little window of period of time
410
00:17:05,740 --> 00:17:09,160
where you have some additional amounts that you
411
00:17:09,160 --> 00:17:09,680
can do.
412
00:17:10,520 --> 00:17:12,160
There's a couple of places where there's little
413
00:17:12,160 --> 00:17:12,680
nuances.
414
00:17:13,460 --> 00:17:17,920
So if you are looking for help on
415
00:17:17,920 --> 00:17:20,800
that, that's probably, if you're in that window
416
00:17:20,800 --> 00:17:23,300
of age range, it's probably worth talking to
417
00:17:23,300 --> 00:17:26,260
someone to get the particular details because it's
418
00:17:26,260 --> 00:17:32,080
changing at different stages of your, in your
419
00:17:32,080 --> 00:17:34,920
60s when you can and can't do more
420
00:17:34,920 --> 00:17:35,700
than these numbers.
421
00:17:36,760 --> 00:17:39,580
In any case, try to max it out
422
00:17:39,580 --> 00:17:40,320
is the point.
423
00:17:41,360 --> 00:17:47,600
And you're, by the way, your employer, your
424
00:17:47,600 --> 00:17:51,340
HR department, your 401k team, wherever they do
425
00:17:51,340 --> 00:17:54,080
the 401k, they will also be able to
426
00:17:54,080 --> 00:17:57,240
give you details of what's my number at
427
00:17:57,240 --> 00:17:57,940
my age.
428
00:17:58,420 --> 00:17:58,560
Okay.
429
00:17:58,700 --> 00:18:01,500
So if you need help, that's another possibility.
430
00:18:02,880 --> 00:18:06,360
When it comes to 401k, there's a lot
431
00:18:06,360 --> 00:18:09,480
of reasons people choose to do the 401k.
432
00:18:09,660 --> 00:18:11,860
One is the simplicity of it through payroll
433
00:18:11,860 --> 00:18:12,420
deduction.
434
00:18:13,080 --> 00:18:14,980
The other, and it's somewhat out of sight,
435
00:18:15,020 --> 00:18:17,000
out of mind, it helps.
436
00:18:17,880 --> 00:18:21,080
The other is usually the employer is, as
437
00:18:21,080 --> 00:18:25,400
a fiduciary is expected to be vetting for
438
00:18:25,400 --> 00:18:28,820
some decent investment options and they should give
439
00:18:28,820 --> 00:18:30,240
you a range of offerings.
440
00:18:30,940 --> 00:18:35,080
Today, it's very common for employers to be
441
00:18:35,080 --> 00:18:37,860
opting for these target date approaches.
442
00:18:38,860 --> 00:18:42,600
It's somewhat becoming less frequent where you have
443
00:18:42,600 --> 00:18:44,680
the opportunity to sort of do your own
444
00:18:44,680 --> 00:18:45,880
selection of funds.
445
00:18:46,100 --> 00:18:47,300
It's not to say that it's not available,
446
00:18:47,440 --> 00:18:49,520
but it's becoming less frequent.
447
00:18:49,840 --> 00:18:52,540
It's much more common for plans to be
448
00:18:52,540 --> 00:18:57,980
really focusing on a target retirement date structure
449
00:18:57,980 --> 00:19:00,820
where it's intended to be an asset allocation
450
00:19:00,820 --> 00:19:04,160
design that is available to you.
451
00:19:04,520 --> 00:19:07,360
Some of these are better than others and
452
00:19:07,360 --> 00:19:10,520
you don't have as much control of these.
453
00:19:10,920 --> 00:19:13,420
This is probably a topic for another show,
454
00:19:13,620 --> 00:19:16,480
the life cycle funds and target date funds
455
00:19:16,480 --> 00:19:19,220
and some of the strengths and weaknesses that
456
00:19:19,220 --> 00:19:21,500
these offerings have.
457
00:19:22,660 --> 00:19:24,320
For most people, there's usually a little more
458
00:19:24,320 --> 00:19:28,140
international than they might typically select themselves.
459
00:19:28,780 --> 00:19:31,320
There are some that are just index-based.
460
00:19:31,460 --> 00:19:34,360
There are some that are more manager-based,
461
00:19:34,620 --> 00:19:36,760
some that will do a composite of multiple
462
00:19:36,760 --> 00:19:37,240
managers.
463
00:19:38,100 --> 00:19:40,100
So it can really vary in the way
464
00:19:40,100 --> 00:19:40,920
these are structured.
465
00:19:41,720 --> 00:19:45,740
The biggest problem, quote unquote, that I see
466
00:19:45,740 --> 00:19:48,860
with people that we speak with and such
467
00:19:48,860 --> 00:19:51,960
is that they don't know how they're invested.
468
00:19:52,220 --> 00:19:54,760
They go that first day as I described
469
00:19:54,760 --> 00:19:56,640
and go in and they fill out their
470
00:19:56,640 --> 00:20:00,620
forms and there's really no personal advice.
471
00:20:00,800 --> 00:20:02,540
They might be given a paper with choices
472
00:20:02,540 --> 00:20:07,120
or a website to visit, but there's no
473
00:20:07,120 --> 00:20:09,600
due diligence done on behalf of the employee
474
00:20:09,600 --> 00:20:11,640
and saying, how does this fit into my
475
00:20:11,640 --> 00:20:12,400
financial plan?
476
00:20:12,480 --> 00:20:13,540
Do I have other things?
477
00:20:14,240 --> 00:20:17,060
Is it consistent with my own risk tolerance?
478
00:20:17,700 --> 00:20:19,040
What's my time horizon?
479
00:20:19,480 --> 00:20:20,260
And so forth.
480
00:20:20,700 --> 00:20:23,780
And sometimes, they make good decisions or they
481
00:20:23,780 --> 00:20:26,260
make simple decisions or they don't make bad
482
00:20:26,260 --> 00:20:28,040
decisions, maybe the best way to say it.
483
00:20:28,500 --> 00:20:29,520
And sometimes they do.
484
00:20:29,980 --> 00:20:32,420
We've seen people come in with 401ks that
485
00:20:32,420 --> 00:20:35,840
people have been contributing to for long periods
486
00:20:35,840 --> 00:20:38,300
of time and they're in a very conservative
487
00:20:38,300 --> 00:20:44,060
type cash preservation setting and they missed the
488
00:20:44,060 --> 00:20:46,980
opportunity for some growth that they would have
489
00:20:46,980 --> 00:20:48,260
had if they had sought some counsel.
490
00:20:48,260 --> 00:20:49,180
And you can see the other end of
491
00:20:49,180 --> 00:20:52,100
the spectrum, with people who have kept all
492
00:20:52,100 --> 00:20:53,860
in these high risk and now they're getting
493
00:20:53,860 --> 00:20:57,640
close to retirement and saying, is this a
494
00:20:57,640 --> 00:20:58,240
good idea?
495
00:20:58,520 --> 00:21:01,640
And they're maybe taking an abundance of risks
496
00:21:01,640 --> 00:21:02,860
that might be right.
497
00:21:04,200 --> 00:21:05,040
Questionable as well.
498
00:21:05,200 --> 00:21:07,020
So that's a great point.
499
00:21:07,840 --> 00:21:09,620
This is the kind of thing that's best
500
00:21:09,620 --> 00:21:12,600
done with a little bit of guidance and
501
00:21:12,600 --> 00:21:16,620
counsel and conversation, context of your overall plan
502
00:21:17,540 --> 00:21:19,720
and not to just ignore it, which I
503
00:21:19,720 --> 00:21:20,960
think is often the case.
504
00:21:21,080 --> 00:21:23,380
And as we talked about earlier, it's very
505
00:21:23,380 --> 00:21:25,460
common for people to have an employer plan
506
00:21:25,460 --> 00:21:27,500
that they have at one place and then
507
00:21:27,500 --> 00:21:29,240
just move on to the next one and
508
00:21:29,240 --> 00:21:31,500
not really give much attention to the one
509
00:21:31,500 --> 00:21:34,340
that they had a decade ago or whatever
510
00:21:34,340 --> 00:21:35,540
it might be.
511
00:21:35,840 --> 00:21:39,180
And it needs some consideration and review and
512
00:21:39,180 --> 00:21:41,280
revision from time to time.
513
00:21:41,740 --> 00:21:44,760
And it could be, let's say you didn't
514
00:21:44,760 --> 00:21:46,360
do a target date fund in that original
515
00:21:46,360 --> 00:21:48,320
401k when you first started working.
516
00:21:49,100 --> 00:21:51,120
That might be at a very different allocation
517
00:21:51,120 --> 00:21:56,340
than you would want 10, 15 years later
518
00:21:56,340 --> 00:21:57,620
at this new job.
519
00:21:57,720 --> 00:21:58,740
And you kind of forget about it and
520
00:21:58,740 --> 00:21:59,600
it's all equity.
521
00:21:59,760 --> 00:22:02,600
It's all tech stocks or whatever it might
522
00:22:02,600 --> 00:22:02,720
be.
523
00:22:03,680 --> 00:22:06,880
So yeah, it's easy to kind of forget
524
00:22:06,880 --> 00:22:09,660
these little nuances with 401ks especially.
525
00:22:10,300 --> 00:22:11,900
Well, right on topic with one of the
526
00:22:11,900 --> 00:22:14,700
things that 401k day is about and one
527
00:22:14,700 --> 00:22:16,640
of the things that they're suggesting that people
528
00:22:16,640 --> 00:22:20,760
do is to consider consolidating the old accounts,
529
00:22:20,840 --> 00:22:23,760
if you will, into whether it's an IRA
530
00:22:23,760 --> 00:22:27,380
or another 401k and do some homework about
531
00:22:27,380 --> 00:22:30,400
what their asset allocation should be in that
532
00:22:30,400 --> 00:22:31,300
consolidated account.
533
00:22:31,480 --> 00:22:33,680
So we're right on target with one of
534
00:22:33,680 --> 00:22:34,860
the reasons that we're having.
535
00:22:35,380 --> 00:22:37,660
It's a great reason to have it and
536
00:22:37,660 --> 00:22:39,580
to think about it is to maybe give
537
00:22:39,580 --> 00:22:42,000
some attention to those old accounts and whether
538
00:22:42,000 --> 00:22:44,180
to keep them where they are or to
539
00:22:44,180 --> 00:22:46,320
make a change of some kind, whether it's
540
00:22:46,320 --> 00:22:49,660
into your IRA or into your 401k.
541
00:22:50,040 --> 00:22:52,660
This is again where the context can matter.
542
00:22:53,540 --> 00:22:55,140
What's going on with the rest of the
543
00:22:55,140 --> 00:22:59,120
plan might help you identify what's the right
544
00:22:59,120 --> 00:23:00,460
answer for that question.
545
00:23:02,300 --> 00:23:04,060
How soon will you be retiring?
546
00:23:04,280 --> 00:23:05,480
How soon will you need the money?
547
00:23:06,220 --> 00:23:08,440
We have clients sometimes who say, I think
548
00:23:08,440 --> 00:23:12,240
I'm thinking of making a loan against my
549
00:23:12,240 --> 00:23:13,020
401k.
550
00:23:13,100 --> 00:23:14,100
Is that a good idea?
551
00:23:14,620 --> 00:23:17,740
Are there other alternatives as to where to
552
00:23:17,740 --> 00:23:18,340
do that?
553
00:23:18,800 --> 00:23:23,860
Pros and cons, things to be discussed, but
554
00:23:23,860 --> 00:23:28,220
sometimes you have that availability of borrowing from
555
00:23:28,220 --> 00:23:29,100
your 401k.
556
00:23:29,340 --> 00:23:34,160
However, it does diminish your earning capacity, the
557
00:23:34,160 --> 00:23:35,560
performance expectation.
558
00:23:36,240 --> 00:23:38,120
People often think, well, I'm just paying myself
559
00:23:38,120 --> 00:23:41,080
back and that has appeal, but it also
560
00:23:41,080 --> 00:23:44,540
does impact your compounding and your rate of
561
00:23:44,540 --> 00:23:47,800
return from that experience.
562
00:23:48,320 --> 00:23:52,040
There's trade-offs that need to be considered
563
00:23:52,040 --> 00:23:54,100
and then what are the alternatives?
564
00:23:55,520 --> 00:23:56,120
Absolutely.
565
00:23:56,260 --> 00:23:57,700
One of my favorite things that I like
566
00:23:57,700 --> 00:24:01,520
to talk about with people is to increase
567
00:24:01,520 --> 00:24:04,600
your contributions on some period.
568
00:24:05,160 --> 00:24:08,360
We talked about when you're young, get started,
569
00:24:08,780 --> 00:24:09,980
at least do the match.
570
00:24:10,140 --> 00:24:13,220
Get involved, do the match, start your process.
571
00:24:14,480 --> 00:24:17,380
This applies to everyone, but when you get
572
00:24:17,380 --> 00:24:19,720
a raise annually, you get a review, you
573
00:24:19,720 --> 00:24:23,180
change jobs, whatever it is, whenever something happens
574
00:24:23,180 --> 00:24:26,580
positively, bump that up 1%.
575
00:24:26,580 --> 00:24:29,680
Just keep increasing your annual contribution.
576
00:24:29,680 --> 00:24:31,080
Easy way to do it.
577
00:24:31,260 --> 00:24:34,680
You get a 3% raise, 1%
578
00:24:34,680 --> 00:24:37,940
goes to your retirement plan, 2% goes
579
00:24:37,940 --> 00:24:38,960
to your cost of living.
580
00:24:39,780 --> 00:24:39,880
Absolutely.
581
00:24:40,620 --> 00:24:43,440
The truth is none of us miss that
582
00:24:43,440 --> 00:24:43,700
1%.
583
00:24:45,100 --> 00:24:49,240
No matter how tight your budget is, it's
584
00:24:49,240 --> 00:24:50,800
typically that you don't even miss it.
585
00:24:51,360 --> 00:24:53,400
That's a great way to keep increasing that
586
00:24:53,400 --> 00:24:54,860
benefit, that little bit.
587
00:24:54,960 --> 00:24:56,380
Each time you get a bump in pay,
588
00:24:56,940 --> 00:24:59,480
just allocate a portion of it to the
589
00:24:59,480 --> 00:25:00,060
savings.
590
00:25:00,700 --> 00:25:02,760
Oftentimes, when you're setting up the 401k in
591
00:25:02,760 --> 00:25:04,040
the first place, they have an option.
592
00:25:04,760 --> 00:25:06,720
It says, do you want to increase this
593
00:25:06,720 --> 00:25:08,160
by 1% each year?
594
00:25:08,280 --> 00:25:12,740
It's an easy way when you start to
595
00:25:12,740 --> 00:25:15,160
just have that go on without really thinking
596
00:25:15,160 --> 00:25:15,540
about it.
597
00:25:15,900 --> 00:25:20,820
Big picture, 401k or 403b or simple IRA,
598
00:25:20,920 --> 00:25:23,740
whatever retirement plan you have at work is
599
00:25:23,740 --> 00:25:26,180
a great resource to take advantage of.
600
00:25:26,540 --> 00:25:28,700
It's going to help you to be better
601
00:25:28,700 --> 00:25:32,020
prepared for retirement and to do that savings
602
00:25:32,020 --> 00:25:32,980
you need to do.
603
00:25:33,480 --> 00:25:36,080
When it comes to as the amounts grow,
604
00:25:36,260 --> 00:25:39,740
as you go through the period of years,
605
00:25:39,820 --> 00:25:42,460
it's time to get some counsel in the
606
00:25:42,460 --> 00:25:43,880
process periodically.
607
00:25:44,740 --> 00:25:47,040
You may want to talk to your financial
608
00:25:47,040 --> 00:25:48,580
advisor, your financial planner.
609
00:25:49,400 --> 00:25:52,040
It's certainly something we talk to clients about
610
00:25:52,040 --> 00:25:55,140
routinely in the context of what else is
611
00:25:55,140 --> 00:25:56,820
going on in their financial plan.
612
00:25:56,820 --> 00:25:59,860
If you need any help, don't hesitate to
613
00:25:59,860 --> 00:26:00,680
reach out to us.
614
00:26:00,800 --> 00:26:02,540
Hopefully, we can be a resource to you.
615
00:26:02,720 --> 00:26:03,580
Thanks for being with us.
616
00:26:03,820 --> 00:26:06,460
Until next time, keep striving for something more.
617
00:26:37,040 --> 00:26:46,860
Transcribed
618
00:26:46,860 --> 00:26:56,800
by https://otter.ai
619
00:26:59,140 --> 00:27:01,700
Readers should consult their own financial advisors or
620
00:27:01,700 --> 00:27:03,780
conduct their own due diligence before making any
621
00:27:03,780 --> 00:27:04,620
financial decisions.
00:00:00,260 --> 00:00:02,740
Welcome to Something More with Chris Boyd.
2
00:00:03,120 --> 00:00:05,920
Chris Boyd is a certified financial planner, practitioner,
3
00:00:06,180 --> 00:00:08,680
and senior vice president and financial advisor at
4
00:00:08,680 --> 00:00:10,960
Wealth Enhancement Group, one of the nation's largest
5
00:00:10,960 --> 00:00:12,580
registered investment advisors.
6
00:00:13,100 --> 00:00:15,000
We call it Something More because we'd like
7
00:00:15,000 --> 00:00:17,140
to talk not only about those important dollar
8
00:00:17,140 --> 00:00:19,320
and cents issues, but also the quality of
9
00:00:19,320 --> 00:00:21,740
life issues that make the money matters matter.
10
00:00:22,140 --> 00:00:25,480
Here he is, your fulfillment facilitator, your partner
11
00:00:25,480 --> 00:00:28,660
in prosperity, advising clients on Cape Cod and
12
00:00:28,660 --> 00:00:29,700
across the country.
13
00:00:30,060 --> 00:00:32,520
Here's your host, Jay Christopher Boyd.
14
00:00:33,280 --> 00:00:35,300
Welcome to Something More with Chris Boyd.
15
00:00:35,360 --> 00:00:38,120
I'm Chris Boyd, and I'm here with Jeff
16
00:00:38,120 --> 00:00:40,280
Perry and Russ Bahl, all of us of
17
00:00:40,280 --> 00:00:42,880
the AMR team, and glad to have you
18
00:00:42,880 --> 00:00:43,440
joining us.
19
00:00:43,920 --> 00:00:45,940
If you're not a regular listener, you can
20
00:00:45,940 --> 00:00:47,760
find us wherever you like to listen to
21
00:00:47,760 --> 00:00:51,140
podcasts or by YouTube or going to our
22
00:00:51,140 --> 00:00:53,460
webpage at somethingmorewithchrisboyd.com.
23
00:00:53,840 --> 00:00:56,900
So today we are talking about National 401K
24
00:00:56,900 --> 00:00:57,240
Day.
25
00:00:57,340 --> 00:00:59,460
Who knew that there was a day to
26
00:00:59,460 --> 00:01:01,080
celebrate 401Ks?
27
00:01:01,740 --> 00:01:03,720
But it turns out, what, Jeff, it's the
28
00:01:03,720 --> 00:01:05,000
same day every year, huh?
29
00:01:05,060 --> 00:01:06,180
Same thing.
30
00:01:06,520 --> 00:01:06,620
Yes.
31
00:01:06,620 --> 00:01:11,200
Since 1996, when the planned sponsor, Council of
32
00:01:11,200 --> 00:01:15,740
America, created this Awareness Day, and it's the
33
00:01:15,740 --> 00:01:19,340
first, it's the Friday after the Monday, Labor
34
00:01:19,340 --> 00:01:19,900
Day holiday.
35
00:01:20,220 --> 00:01:21,020
All right.
36
00:01:21,100 --> 00:01:24,440
And that this year is the 5th and
37
00:01:24,440 --> 00:01:26,000
today, Friday.
38
00:01:26,500 --> 00:01:29,520
And so we thought it'd be worth talking
39
00:01:29,520 --> 00:01:30,720
a little bit about some of the things
40
00:01:30,720 --> 00:01:33,900
to review when it comes to what should
41
00:01:33,900 --> 00:01:36,860
we know about 401Ks and 401K Day.
42
00:01:37,100 --> 00:01:41,280
So for those who aren't familiar with what
43
00:01:41,280 --> 00:01:46,340
is a 401K, or some, it's a form
44
00:01:46,340 --> 00:01:51,340
of employer retirement plan for savings toward your
45
00:01:51,340 --> 00:01:51,780
retirement.
46
00:01:54,740 --> 00:01:58,580
Money goes in, it comes out of your
47
00:01:58,580 --> 00:01:59,600
paycheck, essentially.
48
00:01:59,920 --> 00:02:04,100
It is pre-tax, so it avoids income
49
00:02:04,100 --> 00:02:04,500
tax.
50
00:02:04,640 --> 00:02:06,300
It diminishes your income in effect.
51
00:02:06,500 --> 00:02:08,600
So it helps you with your this year's
52
00:02:08,600 --> 00:02:09,160
tax bill.
53
00:02:09,620 --> 00:02:11,580
Money grows tax deferred in there.
54
00:02:11,840 --> 00:02:14,000
And when you take it out is when
55
00:02:14,000 --> 00:02:16,100
you pay income taxes on it.
56
00:02:16,380 --> 00:02:18,240
People often think they'll be in a lower
57
00:02:18,240 --> 00:02:20,060
tax bracket when they retire.
58
00:02:20,420 --> 00:02:23,300
And so they like the idea of pushing
59
00:02:23,300 --> 00:02:27,500
off, deferring that income and having less tax
60
00:02:27,500 --> 00:02:27,980
later on.
61
00:02:28,180 --> 00:02:31,040
There are other benefits as well, right?
62
00:02:31,960 --> 00:02:34,540
And that is the likelihood that your employer
63
00:02:35,260 --> 00:02:38,820
may very well offer to give you some
64
00:02:38,820 --> 00:02:43,100
incentive to participate in your retirement plan by
65
00:02:44,080 --> 00:02:46,980
offering a match of some of your benefits.
66
00:02:47,180 --> 00:02:49,720
So this can vary from employer to employer,
67
00:02:49,760 --> 00:02:51,280
how much, how readily.
68
00:02:51,940 --> 00:02:55,380
It's common for people to have some sort
69
00:02:55,380 --> 00:02:58,660
of initially maybe 100% match let's say
70
00:02:58,660 --> 00:03:00,380
an example might be 2%.
71
00:03:00,380 --> 00:03:02,960
Your first 2% of salary that you
72
00:03:02,960 --> 00:03:06,440
withhold to put toward your 401K, your employer
73
00:03:06,440 --> 00:03:08,440
will give you the same amount.
74
00:03:08,660 --> 00:03:10,780
You just made 100% rate of return
75
00:03:10,780 --> 00:03:11,560
on that money.
76
00:03:11,860 --> 00:03:12,180
Free money.
77
00:03:12,340 --> 00:03:13,180
Free money.
78
00:03:13,380 --> 00:03:15,180
It's like part of your salary you didn't
79
00:03:15,180 --> 00:03:15,880
know you were going to get.
80
00:03:16,020 --> 00:03:18,920
And if you don't participate, you miss out
81
00:03:18,920 --> 00:03:19,120
on.
82
00:03:19,340 --> 00:03:20,880
So you definitely need that.
83
00:03:20,960 --> 00:03:23,060
Now, sometimes an employer will say, and then
84
00:03:23,060 --> 00:03:25,740
after that we'll match half for the next
85
00:03:25,740 --> 00:03:26,620
2%.
86
00:03:26,620 --> 00:03:29,380
So I get 3% if I'm doing
87
00:03:29,380 --> 00:03:31,580
4% or something along those lines, you
88
00:03:31,580 --> 00:03:32,900
get the gist, hopefully.
89
00:03:33,500 --> 00:03:39,020
So in any case, 401Ks have a great
90
00:03:39,020 --> 00:03:44,060
opportunity to help you make savings easy, retirement
91
00:03:44,060 --> 00:03:45,000
savings easy.
92
00:03:45,700 --> 00:03:48,920
And now there's not only the opportunity to
93
00:03:48,920 --> 00:03:55,660
traditional contributions, money going pre-tax to save
94
00:03:55,660 --> 00:03:57,980
and defer, and then eventually taxed on the
95
00:03:57,980 --> 00:03:58,400
way out.
96
00:03:58,680 --> 00:04:00,820
But you can also choose to do Roth
97
00:04:00,820 --> 00:04:02,900
in many 401Ks, depends on the plan.
98
00:04:03,280 --> 00:04:06,800
Not every employer has adopted this, but most
99
00:04:06,800 --> 00:04:09,040
plans today have the opportunity where you can
100
00:04:09,040 --> 00:04:11,660
choose if you want to pay the taxes
101
00:04:11,660 --> 00:04:15,620
upfront included in your income this year, but
102
00:04:15,620 --> 00:04:19,100
whatever that money grows into when you take
103
00:04:19,100 --> 00:04:20,579
it out is free from tax.
104
00:04:21,280 --> 00:04:23,340
So that's pretty appealing as well.
105
00:04:23,760 --> 00:04:24,020
All right.
106
00:04:24,440 --> 00:04:25,640
Anything to start off?
107
00:04:25,700 --> 00:04:26,940
Who wants to jump in where I was
108
00:04:26,940 --> 00:04:27,820
throwing all that around?
109
00:04:28,560 --> 00:04:31,580
No, it's all very accurate.
110
00:04:31,760 --> 00:04:33,440
And I think most people have a common
111
00:04:33,440 --> 00:04:34,440
understanding of it.
112
00:04:34,920 --> 00:04:37,460
I was looking, I was wondering, what's the
113
00:04:37,460 --> 00:04:40,420
average 401K balance for someone?
114
00:04:41,060 --> 00:04:43,540
And of course, then you go down to,
115
00:04:43,700 --> 00:04:45,240
well, it depends how old they are, right?
116
00:04:45,320 --> 00:04:48,500
So Fidelity has some information on their website
117
00:04:49,160 --> 00:04:50,920
and they break it down by generations.
118
00:04:51,800 --> 00:04:54,580
And so the average Gen Z, which is
119
00:04:54,580 --> 00:04:56,980
the youngest generation that they have data for,
120
00:04:57,420 --> 00:05:00,720
has an average balance of $13,500.
121
00:05:01,580 --> 00:05:03,300
They're young, they're just starting out.
122
00:05:03,600 --> 00:05:04,340
That's not bad.
123
00:05:04,640 --> 00:05:05,280
That's not bad.
124
00:05:05,680 --> 00:05:08,060
And maybe we'll talk about this, but the
125
00:05:08,060 --> 00:05:11,900
importance of starting young is so powerful in
126
00:05:11,900 --> 00:05:13,160
the retirement setting.
127
00:05:14,240 --> 00:05:16,440
Next up are millennials.
128
00:05:16,780 --> 00:05:18,060
I hear a lot about millennials.
129
00:05:18,680 --> 00:05:23,420
Their average 401K balance is $67,300.
130
00:05:24,140 --> 00:05:25,380
So climbing up there.
131
00:05:26,580 --> 00:05:30,720
Gen X, the average 401K balance is $192
132
00:05:30,720 --> 00:05:31,740
,300.
133
00:05:32,360 --> 00:05:35,360
And for the baby boomers, the average 401K
134
00:05:35,360 --> 00:05:39,140
balance is $249,300.
135
00:05:42,040 --> 00:05:48,480
So that seems smaller than I would expect.
136
00:05:49,000 --> 00:05:51,880
Only because they're so close to retirement.
137
00:05:54,480 --> 00:05:56,640
And you need more.
138
00:05:57,240 --> 00:05:57,620
I agree.
139
00:05:58,260 --> 00:06:00,420
And when I saw the, especially the baby
140
00:06:00,420 --> 00:06:04,320
boomers number, I said, that can't be right.
141
00:06:04,740 --> 00:06:06,480
And then I started thinking about it.
142
00:06:06,900 --> 00:06:09,440
So this is the average 401K balance.
143
00:06:11,400 --> 00:06:14,300
So maybe I had a job from 25
144
00:06:14,300 --> 00:06:17,840
to 45 and I had a 401K and
145
00:06:17,840 --> 00:06:19,240
I left and I rolled it over into
146
00:06:19,240 --> 00:06:19,680
an IRA.
147
00:06:20,540 --> 00:06:20,820
Right.
148
00:06:20,980 --> 00:06:22,580
So you're no longer in a 401K.
149
00:06:22,840 --> 00:06:23,080
Right.
150
00:06:23,160 --> 00:06:24,320
And maybe I have a half a million
151
00:06:24,320 --> 00:06:26,880
dollars in that one for those 20 years.
152
00:06:27,520 --> 00:06:27,640
Right.
153
00:06:27,940 --> 00:06:29,440
And now I have this other job.
154
00:06:29,640 --> 00:06:31,120
Oh, that's a good point.
155
00:06:31,320 --> 00:06:31,720
Okay.
156
00:06:31,960 --> 00:06:34,480
I was thinking a little differently, but that's
157
00:06:34,480 --> 00:06:35,080
an excellent point.
158
00:06:35,160 --> 00:06:38,380
So I have a balance at this employer's
159
00:06:38,380 --> 00:06:40,900
401K and then I leave it there while
160
00:06:40,900 --> 00:06:43,220
I go off to my next employer and
161
00:06:43,220 --> 00:06:45,600
build a new balance in that 401K.
162
00:06:46,580 --> 00:06:47,280
Right.
163
00:06:49,320 --> 00:06:52,540
So that decreases the average balance.
164
00:06:52,920 --> 00:06:54,840
I was thinking your point was, oh, well,
165
00:06:54,920 --> 00:06:57,220
baby boomers are getting into the retirement years
166
00:06:57,220 --> 00:07:01,880
and therefore they're rolling over their large balances
167
00:07:01,880 --> 00:07:04,700
when they retire into their own IRA.
168
00:07:05,360 --> 00:07:08,960
So the average 401K balance is only those
169
00:07:08,960 --> 00:07:12,860
people who are working with ages, dates of
170
00:07:12,860 --> 00:07:16,720
birth between 1964, I think it is, and
171
00:07:16,720 --> 00:07:19,200
older, that kind of thing.
172
00:07:19,280 --> 00:07:20,160
So I don't know.
173
00:07:20,300 --> 00:07:22,840
Anyway, but the point about, hey, people have
174
00:07:22,840 --> 00:07:26,380
more than one employer and often don't consolidate
175
00:07:26,380 --> 00:07:31,220
their plans at their new employer, that kind
176
00:07:31,220 --> 00:07:32,460
of makes more sense to me.
177
00:07:32,580 --> 00:07:33,120
Yeah, I think so.
178
00:07:33,700 --> 00:07:37,220
Well, in any case, it's probably not quite
179
00:07:37,220 --> 00:07:42,100
sufficient to have 236 or whatever it was,
180
00:07:42,180 --> 00:07:43,140
$250,000.
181
00:07:44,380 --> 00:07:46,900
If you're close to retirement, you really want
182
00:07:46,900 --> 00:07:48,120
to be thinking about more.
183
00:07:48,580 --> 00:07:50,020
There was something you said, maybe there's something
184
00:07:50,020 --> 00:07:51,020
we want to come back to.
185
00:07:51,120 --> 00:07:51,760
What was that?
186
00:07:52,020 --> 00:07:53,160
Let's come back to it.
187
00:07:54,580 --> 00:07:55,680
You have to tell me what it was.
188
00:07:55,680 --> 00:07:56,200
I don't remember.
189
00:07:58,320 --> 00:07:59,940
I don't remember now what it was, but
190
00:07:59,940 --> 00:08:01,800
it was something worth coming back to.
191
00:08:01,880 --> 00:08:03,120
Well, it'll come to us later.
192
00:08:04,760 --> 00:08:07,740
Before we started, I was sharing with you,
193
00:08:07,860 --> 00:08:11,100
according to the plan council of America-
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00:08:11,100 --> 00:08:12,680
Oh, you were talking about compounding, the power
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00:08:12,680 --> 00:08:13,300
of compounding.
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00:08:13,340 --> 00:08:14,080
Oh, yes, I was.
197
00:08:14,180 --> 00:08:15,080
I was talking about it.
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00:08:15,180 --> 00:08:15,720
It's so important.
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00:08:16,740 --> 00:08:17,360
There you go.
200
00:08:17,640 --> 00:08:20,260
You get the first job and a lot
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00:08:20,260 --> 00:08:22,480
of, just out of college perhaps, or maybe
202
00:08:22,480 --> 00:08:23,400
a little bit after that.
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00:08:23,720 --> 00:08:26,800
And you get that first real job, a
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job that has benefits and such.
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00:08:28,980 --> 00:08:30,820
And somebody tells you to go to HR
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00:08:30,820 --> 00:08:32,260
and fill out some forms.
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00:08:33,020 --> 00:08:35,559
And you may not have really thought much
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00:08:35,559 --> 00:08:37,780
about a 401k or any of this.
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00:08:37,840 --> 00:08:39,220
You may have never been exposed to it
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00:08:39,220 --> 00:08:41,500
if your parents or grandparents didn't talk to
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00:08:41,500 --> 00:08:41,900
you about it.
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00:08:42,820 --> 00:08:45,240
And you might choose, I'll do that later.
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00:08:45,960 --> 00:08:47,140
I'm not ready for that.
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00:08:47,240 --> 00:08:48,380
Or I don't know, and you take the
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00:08:48,380 --> 00:08:49,780
paper or call and you never do it.
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00:08:49,900 --> 00:08:53,700
But the importance of your long-term financial
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00:08:53,700 --> 00:08:58,400
accumulation and success is so much more benefited
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00:08:58,400 --> 00:09:01,660
by making those decisions early to sign up,
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00:09:01,780 --> 00:09:04,200
put a contribution in that at least matches,
220
00:09:04,560 --> 00:09:06,200
at least is equal to what you get
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00:09:06,200 --> 00:09:06,800
for the match.
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00:09:06,900 --> 00:09:08,520
You gave the example of 2%.
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00:09:08,520 --> 00:09:12,180
At least do, take the free money, right?
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00:09:13,880 --> 00:09:14,440
Absolutely.
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00:09:14,840 --> 00:09:17,820
I mean, you're walking away, you're choosing to
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00:09:17,820 --> 00:09:20,920
be paid less for your employment if you
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00:09:20,920 --> 00:09:25,500
don't participate in the employer match at 100%,
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00:09:25,500 --> 00:09:26,600
whatever that amount is.
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00:09:26,820 --> 00:09:29,240
So in my example, you had to participate
230
00:09:29,240 --> 00:09:33,080
with 4% salary deferral in order to
231
00:09:33,080 --> 00:09:34,720
get 3% from the employer.
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00:09:36,020 --> 00:09:38,440
The numbers may differ from one place to
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00:09:38,440 --> 00:09:41,240
the next, but the point is if you
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00:09:41,240 --> 00:09:44,220
don't fully participate to get all of the
235
00:09:44,220 --> 00:09:47,520
match, you are choosing to be compensated for
236
00:09:47,520 --> 00:09:50,080
less than you're eligible for.
237
00:09:50,240 --> 00:09:52,700
It's like saying, no, I don't need this
238
00:09:52,700 --> 00:09:53,560
month's paycheck.
239
00:09:54,100 --> 00:09:54,780
Thanks anyway.
240
00:09:55,720 --> 00:09:56,840
Why would you do that?
241
00:09:57,280 --> 00:09:59,100
You're entitled to that.
242
00:09:59,200 --> 00:10:00,260
That's what the employer is saying.
243
00:10:00,720 --> 00:10:03,140
Your value to them is they want you
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00:10:03,140 --> 00:10:06,640
to be fully compensated and they want you
245
00:10:06,640 --> 00:10:09,420
to be well-prepared for your retirement when
246
00:10:09,420 --> 00:10:10,120
the time comes.
247
00:10:10,400 --> 00:10:13,280
They're trying to incentivize you to be saving
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for retirement and take advantage of every aspect
249
00:10:17,560 --> 00:10:21,180
of that, just like you wouldn't turn away
250
00:10:21,180 --> 00:10:23,600
some benefit that an employer is providing.
251
00:10:23,780 --> 00:10:24,540
Why would you, right?
252
00:10:24,900 --> 00:10:28,020
So in any case, let's talk about just
253
00:10:28,020 --> 00:10:30,760
for a minute, the amounts you can contribute
254
00:10:30,760 --> 00:10:32,460
into this.
255
00:10:32,600 --> 00:10:34,480
So the first thing we're talking about there
256
00:10:34,480 --> 00:10:36,640
is the match, which is the free money
257
00:10:36,640 --> 00:10:40,580
part of it, but you have the opportunity
258
00:10:40,580 --> 00:10:42,920
to contribute amounts.
259
00:10:43,040 --> 00:10:45,740
There are limits though, as to how much
260
00:10:45,740 --> 00:10:48,140
one can put into their retirement plan.
261
00:10:48,780 --> 00:10:49,920
So it's worth reviewing that.
262
00:10:50,040 --> 00:10:51,200
Russ, you got a few things there.
263
00:10:51,240 --> 00:10:52,360
You want to go over some of that?
264
00:10:52,680 --> 00:10:52,800
Yeah.
265
00:10:52,940 --> 00:10:58,980
So for employees under age 50, the contribution
266
00:10:58,980 --> 00:11:01,620
limit is 23,500 for 2025.
267
00:11:02,880 --> 00:11:04,160
That's per person.
268
00:11:04,680 --> 00:11:06,300
So pretty high limit there.
269
00:11:07,560 --> 00:11:10,120
You can hit that number, especially earlier on
270
00:11:10,120 --> 00:11:11,540
in your career, you're doing pretty well.
271
00:11:11,540 --> 00:11:11,840
Yeah.
272
00:11:11,960 --> 00:11:14,860
That's almost 2,000 a month, right?
273
00:11:15,220 --> 00:11:17,280
That's a lot of money.
274
00:11:18,100 --> 00:11:18,720
So that'd be great.
275
00:11:19,120 --> 00:11:23,500
A lot of colleagues I've had getting jobs
276
00:11:23,500 --> 00:11:24,620
out of school and that sort of thing,
277
00:11:25,640 --> 00:11:27,420
they think about their Roth IRA.
278
00:11:27,620 --> 00:11:29,060
I don't know, for whatever reason in my
279
00:11:29,060 --> 00:11:32,380
generation, it is a popular investment option.
280
00:11:33,420 --> 00:11:34,680
We'll touch on that in a minute.
281
00:11:34,780 --> 00:11:35,820
I think that's a smart thing.
282
00:11:36,080 --> 00:11:36,840
So we can come back to that.
283
00:11:36,860 --> 00:11:37,120
Yeah, definitely.
284
00:11:38,400 --> 00:11:40,960
But I recently had a conversation with my
285
00:11:40,960 --> 00:11:43,940
brother and he was saying, I plan to
286
00:11:43,940 --> 00:11:45,620
contribute to my Roth IRA.
287
00:11:45,760 --> 00:11:47,180
I'm like, well, what about your 401k?
288
00:11:47,780 --> 00:11:50,240
He's like, oh, I thought it was one
289
00:11:50,240 --> 00:11:50,600
or the other.
290
00:11:50,740 --> 00:11:52,520
I didn't know it was all...
291
00:11:52,520 --> 00:11:54,740
So that could kind of come up too.
292
00:11:54,820 --> 00:11:57,660
There's separate retirement accounts that you can contribute
293
00:11:57,660 --> 00:11:59,760
to and each one has a different limit.
294
00:12:00,280 --> 00:12:01,140
Yeah, that's a good point.
295
00:12:01,420 --> 00:12:04,480
And when you have a available to you
296
00:12:04,480 --> 00:12:08,420
at work, that can affect the amount you're
297
00:12:08,420 --> 00:12:14,060
eligible to participate in for your IRA or
298
00:12:14,060 --> 00:12:16,440
whether or not you're eligible to participate in
299
00:12:16,440 --> 00:12:16,720
it.
300
00:12:18,260 --> 00:12:20,100
And a Roth in that case.
301
00:12:20,640 --> 00:12:23,220
And income limits as well for a Roth
302
00:12:23,220 --> 00:12:23,620
IRA.
303
00:12:24,480 --> 00:12:25,120
Yes.
304
00:12:26,120 --> 00:12:30,180
Essentially, if you're doing a Roth IRA, once
305
00:12:30,180 --> 00:12:32,220
you exceed a certain level of income, I
306
00:12:32,220 --> 00:12:34,220
want to say it's around 146,000.
307
00:12:34,280 --> 00:12:35,280
Do you remember what the number is?
308
00:12:37,380 --> 00:12:39,100
150, I believe.
309
00:12:40,140 --> 00:12:40,980
For a Roth.
310
00:12:41,440 --> 00:12:42,500
So for a Roth.
311
00:12:42,680 --> 00:12:42,920
Okay.
312
00:12:43,020 --> 00:12:43,240
Yeah.
313
00:12:43,640 --> 00:12:45,260
This is for a single person.
314
00:12:45,480 --> 00:12:48,140
Once you get to 150,000 and then
315
00:12:48,140 --> 00:12:51,960
you start to have a declining eligibility to
316
00:12:51,960 --> 00:12:56,520
do the full contribution because you make too
317
00:12:56,520 --> 00:12:57,520
much, air quotes.
318
00:12:58,640 --> 00:13:02,840
And then at 165, you're fully phased out
319
00:13:02,840 --> 00:13:05,120
from being able to contribute anything to a
320
00:13:05,120 --> 00:13:10,440
Roth because you have your other work plan
321
00:13:10,440 --> 00:13:11,380
available to you.
322
00:13:11,700 --> 00:13:13,840
But keep in mind in that instance too,
323
00:13:14,120 --> 00:13:16,980
your brother, I think you said, may have
324
00:13:16,980 --> 00:13:19,220
the opportunity for a Roth contribution at the
325
00:13:19,220 --> 00:13:19,880
work plan.
326
00:13:20,620 --> 00:13:23,560
So the IRA only allows you in that
327
00:13:23,560 --> 00:13:26,360
case to under 50 to do $7,000,
328
00:13:26,780 --> 00:13:29,640
but you could be doing 23,000 into
329
00:13:29,640 --> 00:13:30,160
the Roth.
330
00:13:30,820 --> 00:13:33,440
That's what he really wants to do if
331
00:13:33,440 --> 00:13:37,240
he has the availability of a Roth plan
332
00:13:37,240 --> 00:13:39,360
for the 401k plan.
333
00:13:40,460 --> 00:13:43,920
But just quick on this topic of Roth
334
00:13:43,920 --> 00:13:48,740
traditional, maybe we can give some brief guidance
335
00:13:48,740 --> 00:13:51,560
as to who should consider which and when.
336
00:13:52,260 --> 00:13:53,960
Do you want to weigh in on that
337
00:13:53,960 --> 00:13:55,080
or either of you want to weigh in
338
00:13:55,080 --> 00:13:55,720
on that?
339
00:13:56,760 --> 00:13:57,380
Go ahead, Russ.
340
00:13:57,820 --> 00:14:02,380
Well, I think for, especially for high earners,
341
00:14:02,820 --> 00:14:07,520
there is a appeal to the tax treatment
342
00:14:07,520 --> 00:14:10,260
of a traditional 401k where the money is
343
00:14:10,260 --> 00:14:13,500
going in pre-tax and you just less
344
00:14:13,500 --> 00:14:14,980
income that you have to pay on.
345
00:14:16,100 --> 00:14:20,160
So especially during their earning years, the traditional
346
00:14:20,160 --> 00:14:21,360
401k has a lot of appeal.
347
00:14:22,380 --> 00:14:25,320
I would think when income is lower, maybe
348
00:14:25,320 --> 00:14:28,860
earlier on in your career, a Roth 401k
349
00:14:28,860 --> 00:14:29,860
could be a better option.
350
00:14:30,340 --> 00:14:31,020
Yeah, I totally agree.
351
00:14:31,200 --> 00:14:34,040
So early in your career when you're probably
352
00:14:34,040 --> 00:14:38,180
not making your peak earning income is a
353
00:14:38,180 --> 00:14:40,080
great time to think about this.
354
00:14:40,840 --> 00:14:43,520
Additionally, I would argue that people who are
355
00:14:43,520 --> 00:14:47,460
in the highest income tax brackets, why not?
356
00:14:47,540 --> 00:14:49,800
They're already in the high income bracket.
357
00:14:50,160 --> 00:14:52,680
They're probably not going to see a reduction
358
00:14:52,680 --> 00:14:56,540
in income tax bracket when they're retired, just
359
00:14:56,540 --> 00:15:00,500
because they're likely to be having a high
360
00:15:00,500 --> 00:15:01,720
income even in retirement.
361
00:15:02,420 --> 00:15:06,340
And then you could argue that tax rates
362
00:15:06,340 --> 00:15:10,300
are relatively low and maybe it's a good
363
00:15:10,300 --> 00:15:12,580
time to be choosing to pay that tax
364
00:15:12,580 --> 00:15:16,540
if you have a higher propensity for substantial
365
00:15:16,540 --> 00:15:18,240
income later in life as well.
366
00:15:18,880 --> 00:15:21,300
So yeah, you get that dichotomy on the
367
00:15:21,300 --> 00:15:23,260
low end of income, on the high end
368
00:15:23,260 --> 00:15:25,820
of income, probably good times.
369
00:15:26,200 --> 00:15:26,780
Why argue?
370
00:15:26,960 --> 00:15:27,420
Do both.
371
00:15:28,120 --> 00:15:30,280
You can do both in a 401k in
372
00:15:30,280 --> 00:15:31,000
many instances.
373
00:15:31,000 --> 00:15:34,020
You can allocate funds to the traditional and
374
00:15:34,020 --> 00:15:34,580
to the Roth.
375
00:15:34,780 --> 00:15:37,880
And ideally when you reach retirement and you're
376
00:15:37,880 --> 00:15:41,640
in that decumulation phase, it's great to have
377
00:15:41,640 --> 00:15:44,440
both types of accounts so you can better
378
00:15:44,440 --> 00:15:45,480
manage your taxes.
379
00:15:45,660 --> 00:15:48,300
You can decide what accounts you're taking from,
380
00:15:49,100 --> 00:15:50,980
you can decide which accounts are better to
381
00:15:50,980 --> 00:15:51,860
leave to heirs.
382
00:15:53,580 --> 00:15:55,580
So I like both.
383
00:15:55,580 --> 00:15:57,360
No, I, yeah, I agree.
384
00:15:57,520 --> 00:15:58,560
That's a good, good call.
385
00:15:59,540 --> 00:16:02,980
When it comes to the contribution limits, going
386
00:16:02,980 --> 00:16:03,740
back to that.
387
00:16:03,960 --> 00:16:07,300
So we have the opportunity to do $23
388
00:16:07,300 --> 00:16:09,600
,000 in 2025.
389
00:16:10,640 --> 00:16:13,180
So there's still time if you haven't been
390
00:16:13,180 --> 00:16:16,240
planning to max out your 401k, if you
391
00:16:16,240 --> 00:16:18,480
have the ability to do that, there's still
392
00:16:18,480 --> 00:16:21,140
time to talk to your HR, get your
393
00:16:21,140 --> 00:16:23,920
payroll structured where so much is going to
394
00:16:23,920 --> 00:16:24,380
your plan.
395
00:16:25,280 --> 00:16:28,920
But if you're over 50, 50 and over,
396
00:16:29,680 --> 00:16:31,620
there's a catch-up provision.
397
00:16:32,900 --> 00:16:35,520
You want to, so 30,500, is that
398
00:16:35,520 --> 00:16:36,440
the number these days?
399
00:16:38,560 --> 00:16:40,080
31,000, I believe.
400
00:16:40,260 --> 00:16:41,420
31,000.
401
00:16:41,520 --> 00:16:41,680
Okay.
402
00:16:41,800 --> 00:16:42,160
Sorry.
403
00:16:42,480 --> 00:16:45,500
So you've got that.
404
00:16:45,660 --> 00:16:47,880
And there are different numbers for different types
405
00:16:47,880 --> 00:16:50,600
of plans, but yeah, 31,000 is the
406
00:16:50,600 --> 00:16:52,180
number for that now.
407
00:16:52,860 --> 00:16:59,580
And then it gets more convoluted if you're
408
00:16:59,580 --> 00:17:02,280
in your 60s.
409
00:17:02,660 --> 00:17:05,740
There's a little window of period of time
410
00:17:05,740 --> 00:17:09,160
where you have some additional amounts that you
411
00:17:09,160 --> 00:17:09,680
can do.
412
00:17:10,520 --> 00:17:12,160
There's a couple of places where there's little
413
00:17:12,160 --> 00:17:12,680
nuances.
414
00:17:13,460 --> 00:17:17,920
So if you are looking for help on
415
00:17:17,920 --> 00:17:20,800
that, that's probably, if you're in that window
416
00:17:20,800 --> 00:17:23,300
of age range, it's probably worth talking to
417
00:17:23,300 --> 00:17:26,260
someone to get the particular details because it's
418
00:17:26,260 --> 00:17:32,080
changing at different stages of your, in your
419
00:17:32,080 --> 00:17:34,920
60s when you can and can't do more
420
00:17:34,920 --> 00:17:35,700
than these numbers.
421
00:17:36,760 --> 00:17:39,580
In any case, try to max it out
422
00:17:39,580 --> 00:17:40,320
is the point.
423
00:17:41,360 --> 00:17:47,600
And you're, by the way, your employer, your
424
00:17:47,600 --> 00:17:51,340
HR department, your 401k team, wherever they do
425
00:17:51,340 --> 00:17:54,080
the 401k, they will also be able to
426
00:17:54,080 --> 00:17:57,240
give you details of what's my number at
427
00:17:57,240 --> 00:17:57,940
my age.
428
00:17:58,420 --> 00:17:58,560
Okay.
429
00:17:58,700 --> 00:18:01,500
So if you need help, that's another possibility.
430
00:18:02,880 --> 00:18:06,360
When it comes to 401k, there's a lot
431
00:18:06,360 --> 00:18:09,480
of reasons people choose to do the 401k.
432
00:18:09,660 --> 00:18:11,860
One is the simplicity of it through payroll
433
00:18:11,860 --> 00:18:12,420
deduction.
434
00:18:13,080 --> 00:18:14,980
The other, and it's somewhat out of sight,
435
00:18:15,020 --> 00:18:17,000
out of mind, it helps.
436
00:18:17,880 --> 00:18:21,080
The other is usually the employer is, as
437
00:18:21,080 --> 00:18:25,400
a fiduciary is expected to be vetting for
438
00:18:25,400 --> 00:18:28,820
some decent investment options and they should give
439
00:18:28,820 --> 00:18:30,240
you a range of offerings.
440
00:18:30,940 --> 00:18:35,080
Today, it's very common for employers to be
441
00:18:35,080 --> 00:18:37,860
opting for these target date approaches.
442
00:18:38,860 --> 00:18:42,600
It's somewhat becoming less frequent where you have
443
00:18:42,600 --> 00:18:44,680
the opportunity to sort of do your own
444
00:18:44,680 --> 00:18:45,880
selection of funds.
445
00:18:46,100 --> 00:18:47,300
It's not to say that it's not available,
446
00:18:47,440 --> 00:18:49,520
but it's becoming less frequent.
447
00:18:49,840 --> 00:18:52,540
It's much more common for plans to be
448
00:18:52,540 --> 00:18:57,980
really focusing on a target retirement date structure
449
00:18:57,980 --> 00:19:00,820
where it's intended to be an asset allocation
450
00:19:00,820 --> 00:19:04,160
design that is available to you.
451
00:19:04,520 --> 00:19:07,360
Some of these are better than others and
452
00:19:07,360 --> 00:19:10,520
you don't have as much control of these.
453
00:19:10,920 --> 00:19:13,420
This is probably a topic for another show,
454
00:19:13,620 --> 00:19:16,480
the life cycle funds and target date funds
455
00:19:16,480 --> 00:19:19,220
and some of the strengths and weaknesses that
456
00:19:19,220 --> 00:19:21,500
these offerings have.
457
00:19:22,660 --> 00:19:24,320
For most people, there's usually a little more
458
00:19:24,320 --> 00:19:28,140
international than they might typically select themselves.
459
00:19:28,780 --> 00:19:31,320
There are some that are just index-based.
460
00:19:31,460 --> 00:19:34,360
There are some that are more manager-based,
461
00:19:34,620 --> 00:19:36,760
some that will do a composite of multiple
462
00:19:36,760 --> 00:19:37,240
managers.
463
00:19:38,100 --> 00:19:40,100
So it can really vary in the way
464
00:19:40,100 --> 00:19:40,920
these are structured.
465
00:19:41,720 --> 00:19:45,740
The biggest problem, quote unquote, that I see
466
00:19:45,740 --> 00:19:48,860
with people that we speak with and such
467
00:19:48,860 --> 00:19:51,960
is that they don't know how they're invested.
468
00:19:52,220 --> 00:19:54,760
They go that first day as I described
469
00:19:54,760 --> 00:19:56,640
and go in and they fill out their
470
00:19:56,640 --> 00:20:00,620
forms and there's really no personal advice.
471
00:20:00,800 --> 00:20:02,540
They might be given a paper with choices
472
00:20:02,540 --> 00:20:07,120
or a website to visit, but there's no
473
00:20:07,120 --> 00:20:09,600
due diligence done on behalf of the employee
474
00:20:09,600 --> 00:20:11,640
and saying, how does this fit into my
475
00:20:11,640 --> 00:20:12,400
financial plan?
476
00:20:12,480 --> 00:20:13,540
Do I have other things?
477
00:20:14,240 --> 00:20:17,060
Is it consistent with my own risk tolerance?
478
00:20:17,700 --> 00:20:19,040
What's my time horizon?
479
00:20:19,480 --> 00:20:20,260
And so forth.
480
00:20:20,700 --> 00:20:23,780
And sometimes, they make good decisions or they
481
00:20:23,780 --> 00:20:26,260
make simple decisions or they don't make bad
482
00:20:26,260 --> 00:20:28,040
decisions, maybe the best way to say it.
483
00:20:28,500 --> 00:20:29,520
And sometimes they do.
484
00:20:29,980 --> 00:20:32,420
We've seen people come in with 401ks that
485
00:20:32,420 --> 00:20:35,840
people have been contributing to for long periods
486
00:20:35,840 --> 00:20:38,300
of time and they're in a very conservative
487
00:20:38,300 --> 00:20:44,060
type cash preservation setting and they missed the
488
00:20:44,060 --> 00:20:46,980
opportunity for some growth that they would have
489
00:20:46,980 --> 00:20:48,260
had if they had sought some counsel.
490
00:20:48,260 --> 00:20:49,180
And you can see the other end of
491
00:20:49,180 --> 00:20:52,100
the spectrum, with people who have kept all
492
00:20:52,100 --> 00:20:53,860
in these high risk and now they're getting
493
00:20:53,860 --> 00:20:57,640
close to retirement and saying, is this a
494
00:20:57,640 --> 00:20:58,240
good idea?
495
00:20:58,520 --> 00:21:01,640
And they're maybe taking an abundance of risks
496
00:21:01,640 --> 00:21:02,860
that might be right.
497
00:21:04,200 --> 00:21:05,040
Questionable as well.
498
00:21:05,200 --> 00:21:07,020
So that's a great point.
499
00:21:07,840 --> 00:21:09,620
This is the kind of thing that's best
500
00:21:09,620 --> 00:21:12,600
done with a little bit of guidance and
501
00:21:12,600 --> 00:21:16,620
counsel and conversation, context of your overall plan
502
00:21:17,540 --> 00:21:19,720
and not to just ignore it, which I
503
00:21:19,720 --> 00:21:20,960
think is often the case.
504
00:21:21,080 --> 00:21:23,380
And as we talked about earlier, it's very
505
00:21:23,380 --> 00:21:25,460
common for people to have an employer plan
506
00:21:25,460 --> 00:21:27,500
that they have at one place and then
507
00:21:27,500 --> 00:21:29,240
just move on to the next one and
508
00:21:29,240 --> 00:21:31,500
not really give much attention to the one
509
00:21:31,500 --> 00:21:34,340
that they had a decade ago or whatever
510
00:21:34,340 --> 00:21:35,540
it might be.
511
00:21:35,840 --> 00:21:39,180
And it needs some consideration and review and
512
00:21:39,180 --> 00:21:41,280
revision from time to time.
513
00:21:41,740 --> 00:21:44,760
And it could be, let's say you didn't
514
00:21:44,760 --> 00:21:46,360
do a target date fund in that original
515
00:21:46,360 --> 00:21:48,320
401k when you first started working.
516
00:21:49,100 --> 00:21:51,120
That might be at a very different allocation
517
00:21:51,120 --> 00:21:56,340
than you would want 10, 15 years later
518
00:21:56,340 --> 00:21:57,620
at this new job.
519
00:21:57,720 --> 00:21:58,740
And you kind of forget about it and
520
00:21:58,740 --> 00:21:59,600
it's all equity.
521
00:21:59,760 --> 00:22:02,600
It's all tech stocks or whatever it might
522
00:22:02,600 --> 00:22:02,720
be.
523
00:22:03,680 --> 00:22:06,880
So yeah, it's easy to kind of forget
524
00:22:06,880 --> 00:22:09,660
these little nuances with 401ks especially.
525
00:22:10,300 --> 00:22:11,900
Well, right on topic with one of the
526
00:22:11,900 --> 00:22:14,700
things that 401k day is about and one
527
00:22:14,700 --> 00:22:16,640
of the things that they're suggesting that people
528
00:22:16,640 --> 00:22:20,760
do is to consider consolidating the old accounts,
529
00:22:20,840 --> 00:22:23,760
if you will, into whether it's an IRA
530
00:22:23,760 --> 00:22:27,380
or another 401k and do some homework about
531
00:22:27,380 --> 00:22:30,400
what their asset allocation should be in that
532
00:22:30,400 --> 00:22:31,300
consolidated account.
533
00:22:31,480 --> 00:22:33,680
So we're right on target with one of
534
00:22:33,680 --> 00:22:34,860
the reasons that we're having.
535
00:22:35,380 --> 00:22:37,660
It's a great reason to have it and
536
00:22:37,660 --> 00:22:39,580
to think about it is to maybe give
537
00:22:39,580 --> 00:22:42,000
some attention to those old accounts and whether
538
00:22:42,000 --> 00:22:44,180
to keep them where they are or to
539
00:22:44,180 --> 00:22:46,320
make a change of some kind, whether it's
540
00:22:46,320 --> 00:22:49,660
into your IRA or into your 401k.
541
00:22:50,040 --> 00:22:52,660
This is again where the context can matter.
542
00:22:53,540 --> 00:22:55,140
What's going on with the rest of the
543
00:22:55,140 --> 00:22:59,120
plan might help you identify what's the right
544
00:22:59,120 --> 00:23:00,460
answer for that question.
545
00:23:02,300 --> 00:23:04,060
How soon will you be retiring?
546
00:23:04,280 --> 00:23:05,480
How soon will you need the money?
547
00:23:06,220 --> 00:23:08,440
We have clients sometimes who say, I think
548
00:23:08,440 --> 00:23:12,240
I'm thinking of making a loan against my
549
00:23:12,240 --> 00:23:13,020
401k.
550
00:23:13,100 --> 00:23:14,100
Is that a good idea?
551
00:23:14,620 --> 00:23:17,740
Are there other alternatives as to where to
552
00:23:17,740 --> 00:23:18,340
do that?
553
00:23:18,800 --> 00:23:23,860
Pros and cons, things to be discussed, but
554
00:23:23,860 --> 00:23:28,220
sometimes you have that availability of borrowing from
555
00:23:28,220 --> 00:23:29,100
your 401k.
556
00:23:29,340 --> 00:23:34,160
However, it does diminish your earning capacity, the
557
00:23:34,160 --> 00:23:35,560
performance expectation.
558
00:23:36,240 --> 00:23:38,120
People often think, well, I'm just paying myself
559
00:23:38,120 --> 00:23:41,080
back and that has appeal, but it also
560
00:23:41,080 --> 00:23:44,540
does impact your compounding and your rate of
561
00:23:44,540 --> 00:23:47,800
return from that experience.
562
00:23:48,320 --> 00:23:52,040
There's trade-offs that need to be considered
563
00:23:52,040 --> 00:23:54,100
and then what are the alternatives?
564
00:23:55,520 --> 00:23:56,120
Absolutely.
565
00:23:56,260 --> 00:23:57,700
One of my favorite things that I like
566
00:23:57,700 --> 00:24:01,520
to talk about with people is to increase
567
00:24:01,520 --> 00:24:04,600
your contributions on some period.
568
00:24:05,160 --> 00:24:08,360
We talked about when you're young, get started,
569
00:24:08,780 --> 00:24:09,980
at least do the match.
570
00:24:10,140 --> 00:24:13,220
Get involved, do the match, start your process.
571
00:24:14,480 --> 00:24:17,380
This applies to everyone, but when you get
572
00:24:17,380 --> 00:24:19,720
a raise annually, you get a review, you
573
00:24:19,720 --> 00:24:23,180
change jobs, whatever it is, whenever something happens
574
00:24:23,180 --> 00:24:26,580
positively, bump that up 1%.
575
00:24:26,580 --> 00:24:29,680
Just keep increasing your annual contribution.
576
00:24:29,680 --> 00:24:31,080
Easy way to do it.
577
00:24:31,260 --> 00:24:34,680
You get a 3% raise, 1%
578
00:24:34,680 --> 00:24:37,940
goes to your retirement plan, 2% goes
579
00:24:37,940 --> 00:24:38,960
to your cost of living.
580
00:24:39,780 --> 00:24:39,880
Absolutely.
581
00:24:40,620 --> 00:24:43,440
The truth is none of us miss that
582
00:24:43,440 --> 00:24:43,700
1%.
583
00:24:45,100 --> 00:24:49,240
No matter how tight your budget is, it's
584
00:24:49,240 --> 00:24:50,800
typically that you don't even miss it.
585
00:24:51,360 --> 00:24:53,400
That's a great way to keep increasing that
586
00:24:53,400 --> 00:24:54,860
benefit, that little bit.
587
00:24:54,960 --> 00:24:56,380
Each time you get a bump in pay,
588
00:24:56,940 --> 00:24:59,480
just allocate a portion of it to the
589
00:24:59,480 --> 00:25:00,060
savings.
590
00:25:00,700 --> 00:25:02,760
Oftentimes, when you're setting up the 401k in
591
00:25:02,760 --> 00:25:04,040
the first place, they have an option.
592
00:25:04,760 --> 00:25:06,720
It says, do you want to increase this
593
00:25:06,720 --> 00:25:08,160
by 1% each year?
594
00:25:08,280 --> 00:25:12,740
It's an easy way when you start to
595
00:25:12,740 --> 00:25:15,160
just have that go on without really thinking
596
00:25:15,160 --> 00:25:15,540
about it.
597
00:25:15,900 --> 00:25:20,820
Big picture, 401k or 403b or simple IRA,
598
00:25:20,920 --> 00:25:23,740
whatever retirement plan you have at work is
599
00:25:23,740 --> 00:25:26,180
a great resource to take advantage of.
600
00:25:26,540 --> 00:25:28,700
It's going to help you to be better
601
00:25:28,700 --> 00:25:32,020
prepared for retirement and to do that savings
602
00:25:32,020 --> 00:25:32,980
you need to do.
603
00:25:33,480 --> 00:25:36,080
When it comes to as the amounts grow,
604
00:25:36,260 --> 00:25:39,740
as you go through the period of years,
605
00:25:39,820 --> 00:25:42,460
it's time to get some counsel in the
606
00:25:42,460 --> 00:25:43,880
process periodically.
607
00:25:44,740 --> 00:25:47,040
You may want to talk to your financial
608
00:25:47,040 --> 00:25:48,580
advisor, your financial planner.
609
00:25:49,400 --> 00:25:52,040
It's certainly something we talk to clients about
610
00:25:52,040 --> 00:25:55,140
routinely in the context of what else is
611
00:25:55,140 --> 00:25:56,820
going on in their financial plan.
612
00:25:56,820 --> 00:25:59,860
If you need any help, don't hesitate to
613
00:25:59,860 --> 00:26:00,680
reach out to us.
614
00:26:00,800 --> 00:26:02,540
Hopefully, we can be a resource to you.
615
00:26:02,720 --> 00:26:03,580
Thanks for being with us.
616
00:26:03,820 --> 00:26:06,460
Until next time, keep striving for something more.
617
00:26:37,040 --> 00:26:46,860
Transcribed
618
00:26:46,860 --> 00:26:56,800
by https://otter.ai
619
00:26:59,140 --> 00:27:01,700
Readers should consult their own financial advisors or
620
00:27:01,700 --> 00:27:03,780
conduct their own due diligence before making any
621
00:27:03,780 --> 00:27:04,620
financial decisions.
