Roth 401k vs. Traditional 401k - How Will You Retire Richer?
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- Опубликовано: 1 июл 2024
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. What's better a Roth 401k or a Traditional 401k? In this video you will learn the pros and cons for both a Roth 401k and a Traditional 401k so you know what's better for you.
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Will You Retire Richer With A Roth 401k Or A Traditional 401k
0:11 - There are so many ways to do your retirement planning
1:00 - I’m not a big fan of the 401k
1:35 - How the 401k works | traditional 401k
2:30 - Put some numbers on the traditional 401k example
3:00 - How taxes work on your 401k
5:20 - The tax risk for your 401k
5:59 - Historical perspective on high taxes
6:56 - How the Roth 401k works
7:50 - Taxes on 401 Roth 401k
9:43 - What’s better for you? Traditional 401(k) or Roth 401(k)
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This Video: • Roth 401k vs. Traditio...
Channel: / minoritymindset
Video host: Jaspreet Singh
Thank you for watching! If you enjoyed this video, you should watch - The TRUTH About Your 401k That No One Tells You: ruclips.net/video/4YdlcpxvF6c/видео.html
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Minority Mindset can you make a video on steps to doing a chapter 7 bankruptcy . To fix your credit score. Thanks Minority Mindset
Minority Mindset can you make a video on steps you should take after filing chapter 7 bankruptcy and things you can do to build your credit .. Thanks Minority Mindset ..
Can I hire you for my buiness taxes Jaspree?
Thank you 🙏🏻 I will have to be serious about my retirement
I just retired, but I am uncertain that my 401k and IRA will ensure a stable future. I have $900k set aside, I am seeking an approach that matches my risk tolerance and financial objectives. Please I need advice, should I invest in stocks or real estate ?
You should explore rosters of dividend aristocrats and select six to ten from the compilation. These esteemed companies boast of a remarkable history of consistently paying dividends for over 25 years. Furthermore, it is discerning to engage a financial advisor to help in crafting a meticulously structured portfolio.
I quite agree. Which is why I prefer to entrust my day to day investment decision to a financial advisor. With their specialized knowledge, it is highly unlikely for them to underperform. Their expertise is focused on harnessing the asymmetrical potential of risk while employing measures to safeguard against unfavorable outcomes. I have been collaboting with a financial coach for the past two years netting over $800k profit in all my portfolio holdings.
I need advice on how to rebuild my portfolio and develop more successful tactice. Please who is the advisor you're using?
The adviser I am working with is Jason Herman Pierce, he is a risk manager, financial advisor and a professional trader. You can choose to use someone else, but his strategy works for me hence my results. You can google him to get all the necessary information.
@@EthanRaynolds
Thanks. I just googled him. He is quite the subject matter expert. I have book an appointment with him. Thanks again.
My advice to younger folks when it comes to investing is, just start.
Im a minor, I cant invest yet but im saving so I will have some to invest
@@philtheboi358 your parents could start a Roth IRA for you still and they’d be on account as well
@@theGrayArea2 im 17 1/2, I just dont see the point in making an account where my father could drain it at any second if he wanted to, and have to jump through hoops in 6 months to get him off it. And I want to invest in mutual funds and index funds, not an IRA
@@philtheboi358 understood
@@philtheboi358 wait then
Another thing to consider, which I’ve rarely heard mentioned: tax deductions and credits. I have 5 kids under age 18 right now. That’s 5 large tax breaks I have right now, that I won’t have when I retire. So you better believe I’m doing Roth 401k contributions right now. My taxes are depressed right now because of those deductions and credits, which lessens the tax burden on my Roth contributions.
Agreed. Once I had kids I changed my contributions to Roth.
What deductions? Kids only give u 2000 tax credit that's nothing? Am I missing something
@@ziaulislam87 Well fill lucky, Because i was only getting about 800 a kid in early 2000s with 8% home interest rate and 4.00 a gallon gas 🙄
Jaspreet . Just want you to know you are my favorite investment/ wealth planning badass RUclips channel. Every single video is amazing.
You explain everything perfectly and make the topics interesting and easy to follow. Thank you!!!!
:)
Same here!
Thank you, Jaspreet! 👍👍
Totally Agree. I learn so much from Jaspreet. Thanks a ton.
Very good explanation. 👍 These are great if someone doesn't have time to spend watching the markets every day.
Thank you SO much for your informative videos! They are easy for me to understand 🙂
Thank you for putting in work on your videos. I am watching and liking your vids.
I love your videos. They are so informative and easy to understand. Thanks so much for doing them.
Thank you for making this video. It was very easy to understand and the visuals really helped.
I watched 3 videos on youtube trying to explain this to me. I finally got the difference when I watched you! TY
Same! Jaspreet does a great job!!
I *really* enjoy the quality and variety of educational videos on this channel. All I can say is *keep* *it* *coming* ! :)
"ROTH" "Thank you very much" Respectfully many blessings n Well being to you n your family.
I love your videos. You are totally right in your advice.thank you, Jaspreet 🤩
Why isn't this channel called Sikh-ing Wealth?!?!
Damn bro 😂
Genius!
👐😂👐
This
Cousin Bunti approved
You are awesome!! Thank you for this info.🙏
Yes!!! Thanks for the explanation!!!
I know I subscribed to you for a reason when you only had 1500 subscribers. Your videos had changed my life!
Hey Jaspreet, I dont have anything to add to this, but wanna let you know you inspired me to start monetizing my side hustle!
great information my friend!
Thanks for the explanation!
Traditional IRA is really for people who start investing late and/or don’t expect much growth in the IRA. If you’re young and invest long term, go with Roth.
I always tell people, It's never too late to start investing. The best time to invest was always yesterday and the second best is always today.
Absolutely Emilio, particularly if the goal is to retire early and rich.
Not every is able to identify lucrative positions to earn from, Investing is a marathon. My best piece of investing advice is to talk with an investing professional. Get someone on your team who’s well enlighten on the global market and it’s conditions at all times.
Absolutely David, this is exactly why I opted for an account manager years ago. Adam Slater guides my investment decisions, he makes research on stocks that will generate massive gains, and does the heavy lifting for me, covering every facet of investing including stocks and crypto. His investing decisions has earned me profits in hundreds of thousands.
Investing is worth the hard work. If you don’t save and invest now, you won’t have anything to live on in retirement.
Very definitive. Thank you.
Thank you so much! You explained this clearly!
Chat me up ☝️☝️
@Minority Mindset
I started watching this because I wondered if I could use part of my 401k for stock investments. When I saw the option, I started clicking through and it prompted me to convert my traditional 401k to a Roth 401k. Now I know the difference, I would actually prefer a Roth 401k but am unsure if my employer with continue to match my 4%. I guess I have to call l HR on Monday and get some questions answered. Oh, and you have a new sub here. Great work.
I am employed by a major bank in the U.S. and they offer both Traditional and Roth 401k. It's almost 20 years and I'm so happy I chose Roth. Great video! Ty
Thank you 😪.
Great knowledge brother love ur videos
You are really knowledgeable love your personality and hustle
I am watching Jaspreet's video on valentine's day with his pink turban.
Another angle to consider: You gotta know your bracket and for moderate income earners, there's very high value in the pre-tax savings since you are stretching the amount you earn at the 12% bracket. You can get up close to 70k earned income before you run out of easy runway. How? Maximum contribution to the 401k, HSA pretax investing and the 12k standard deduction. After that, you'll need taxable investment money to take advantage of other possible options such as charitable donations, tax loss harvesting, etc.
Good Morning Jaspreet! I think having both are good especially if you have an employer that matches. Never leave money on the table is a valuable lesson that I have been taught. I think I could do better with my Roth. I need to max it out. I am almost there, but I need to get there. Almost is not good enough!
Having both is only good because the employer match is tax-deferred, otherwise Roth all the way. Besides the fact that growth is tax-free, a Roth IRA has no RMDs. People who have really saved for retirement in a traditional can get kicked up into high tax brackets with RMDs even if they don't need the money. That screws up your medicare premiums and everything else.
@@RATM1971 agree. There's RMDs if peeps leave their money in a company 401k/457b plan Roth after they retire...if you get your money out of employer plan and rollover outside you must liquidate assets to rollover 401k Roth funds to an individual Roth...also must already have an established individual Roth account opened so can rollover into and best if done as early as possible because have to hold funds in Roth IRA for 5 years before able to withdraw. funds. Bit of strategic planning needed but then can rollover and reinvest!
Great explantion amd sweet disclaimer.😂"I am not your attorney"😂
I always like when he says "I am an attorney, but I am NOT YOUR attorney" lol.
great video bro. representin
Good video,easy to understand
Keep up the good work
My husband uses a Roth 401k at work, and get a certain match. ANY time we contact the brokerage firm about ANYTHING, there is high pressure to switch to a traditional 401k, and to move out of our chosen funds into a target age fund. Nope, those aren't for us, we're happy with what we've got! Great info as always.
Why do they pressure you into switching into traditional... and a targeted age fund??
@@Dgon200 A targeted age fund would make more $$ for the firm in the form of fees, but I'm not sure why he's so convinced traditional is the way to go.
K H-C why would they pressure you to change to a traditional if it’s already a Roth 401k
Always remember if you change jobs or retire you can roll over that account. At least then you can find a more competent advisor to manage it or just do it yourself.
You’re awesome Jaspreet!
Small taxes can affect investment decisions such as whether to choose tax-free municipal bonds over taxable bonds or do a Roth IRA conversion. I’ve been sitting on over $745K equity from a home sale and I want to invest on the stock market, how do I achieve this without being taxed twice?
Having an investment adviser is the best way to go about the stock market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly and I made over $800K within a short time
How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings.
*Sharon Louise Count* my financial counselor, is a well-educated and seasoned expert in the financial industry. She is regarded as an authority in this sector and has a deep understanding of portfolio diversification.
I have Roth 401K, employer match and 17 years more to go!
Love your vidsss 👍🏽
It's interesting to compare American Tax-Advantaged accounts with Canadian ones. It seems like Roth accounts are like our TFSA and traditional accounts are like our RRSP. Always love listening to your videos!
I have both also Roth 401k and 401k from Amazon. Seriously I've been googling trying to find out the difference a few months ago and by chance today I just came up on your video on RUclips and by chance I say because wasn't looking for anything on the subject lol. I want to say thank you because I finally got my answer you made easy enough for me.
@Bd from the 213 well I actually have both of them still. At my age I don't know if I should just leave it like that
If you go with a Roth 401k, open a Roth IRA so it will be mature when you need to roll your money over.
Great info! Do you all ever plan to make videos on REITs?
Roth IRA for me. Also I do contract work now but even when I had a standard 9-5 I had a Roth as my employers didn't have a 401K yet being a startup.
I love the concept of this channel. The Hustle-mindset of today extends beyond identity. And this channel is taking a leadership role. Bravo 👏
Chat me up ☝️☝️
Roth is much better because there are no required distributions. If you live beyond the life expectancy, your traditional 401k or Ira will run dry 👎
Roth 401k also require minimum distributions at 70 1/2, But don't take my word for it.💪😉
@@Je.rone_ I don't understand, could you explain? I'm in both but I'm trying to figure which one is gonna be the main one, thank you
@@blood_sausage9620 when you turn 70 1/2 you have to start taking money out each year from your 401k account, whether you have traditional 401k or a roth-401k doesn't matter. The amount required to take out is *not* a set numerical value for every person (e.g $2,000 a year). I'd be lying if i said i remember off the top of my head how your required amount you need to take out once you reach said age is calculated(i used to know it off the top of my head)
Roth-IRA on the other hand, you are not required to take money out at any age. Often people (including myself in the past) confuse this peculiarity of the roth-ira as being a characteristic of all roth accounts which isn't the case unfortunately.
That said if i missed any or further clarification let me know💪
@@Je.rone_ thanks brother!! I need to learn this language haha. Living to that age alone is a great accomplishment these days🙏
@@blood_sausage9620 my pleasure, and yes I always hope I'm lucky enough to make it there but I'm dubious of that.
And the language can be the hardest part of learning something knew. The concepts of a new subject of acquisition typically is 100% easier after learning the language.
I invest up to the 4% match in a Roth 403(b) and the remaining retirement contributions go into a Roth IRA. I invest more in my HSA though. I love that thing.
I started with the Roth and went to traditional when I had higher income but I switched back to the Roth because tax rates are lower.
Smart woman!
What happens to the traditional 401k investment when you switch to a roth? Does the money get taxed and then transfers or does it all transfer in not taxed? Or does it not transfer at all?
@@reyreyes5182 doesn't transfer just stays there
Good plan.
Question: I haven't heard it mentioned in videos like this one, nor read it in the comments - Is a Roth 401k an option the employer gives folks instead of a traditional 401k, or is the method to find an independent investment firm that offers a 401k, then just put one's money in it after paying the taxes from the employer's paycheck?
I was hoping you’d break down the difference in compound interest gains vs tax losses between tradition and Roth investments.
Man you are awesome you inspired me to create this channel i have only 22 subs now but i hope one day i'll succeed like you, thank you!!
I contribute to both a traditional and Roth 401 through my employer. Also contribute to a Roth IRA outside of my employer
Good plan. I'm gonna try to do that and make my traditional Roth a divided account
Hi Jaspreet,
I have been watching your videos a few weeks ago it is very good information from you, my question is if there are some states where someone can move before retirement to avoid paying taxes on the traditional 401k?
You are the best!
Currently in a roth pretty satisfied with it
Thank you for this video, you are the first person I've seen to explain the difference. you have one of the best financial channels out there. .
Sadly, mine was a pre-tax deduction so when I pulled out money, I had to pay tax on the entire amount. 😢 Rolled it over into an IRA before taking a distribution.
I pulled out a large sum to purchase a rental property. Now I have to pay tax on the money I pulled out this year to pay the tax for what I took out last year. Live and learn. I should have bought the property inside of a self directed IRA.
Good comment
Yeah, those taxes do get you when you need to pull more than planned.
I cashed out the little I had on my 401k bought rental property and due to having more deductions paid very little to the fuzz. Also the property is worth a lot more now then the stocks ever would have been worth with limited choices in a company 401k.
Chat me up ☝️☝️
Can you do more videos on options for Self Employed people and small business owners?
Gold!!
I like your head wrap
I did traditional 401k when I was younger and single. Now that I have kids and TCJA is in effect I put it all in Roth. If rates go back up and/or when the kids age out of dependency I will switch back...
We have a lot of old 401K standard $ but, now we are putting away all we can with ROTH!
I think we are going to be lucky to have enough!
We bought some Rental Houses a few years ago so, we are hopeful that will help!
That will surely help unless the rentals are nit performing.
@@TheFirstRealChewy They are doing better than I ever imagined they would do!
One thing I’m lucky in>
Not: Cards, Games, Sports, etc. but, I’m happy with this option!
Back when the BELOW was so soft and cuddly.
Skih always such badass and smart people! never met one who doesnt provide such great life advice.
Chat me up ☝️☝️
Da Plan
1. 5 rental properties owned, 1 currently. Move headache to property mgmt when i retire.
2. 10% traditional ira
3. Max out Roth for wife and I
4. I'm in Iowa, so farmland in a location that will be in high demand 20-30 yrs down the road.
5. Create a trust for assets to pass along benefits to future generations.
Both & stock market and Treasury’s and precious metals
And real estate
Hopefully it’ll work out
It still sounds like a guess as to what will happen in the future , either way...
Contribute to a traditional/401k during your highest earning years (for lowering to tax bracket, but contribute to Roth when you have lower income (like when you are in school, on maternity, etc). Also then convert everything to a Self-Directed IRA
That used to be my thought, until I started calculating RMDs and medicare costs. There is a reason many retirees convert all of their traditional IRAs/401ks to Roth and pay the taxes involved out of pocket upon retiring. If you have the option to do the Roth, do it sooner rather than later.
i dont usually comment. your videos are awesome and it is crazy and a sign. I just stopped my pre-tax contributions after it hit me that I rather put in my taxed money. yes my take home will be less but I will adjust.
@minoritymindset when are you going to launch the second edition of your Investment course?
Need to add the effects of marginal vs effective tax as well as the effects of AGI based credits and deductions to your analysis.
Traditional 403b. Is a way to think of this as just income in retirement. if you make or if you withdraw 100K a year that is what you pay taxes on. It is a question of lifestyle in retirement and having enough to live off earnings without touching the actual contributions portion once you stop working.
It's not only that though... say I only need $40k a year in retirement, but I've done great saving in my 403b and have a sizeable amount. I could hit 72 and be forced (via RMD) to withdraw $140k when I only need $40k. What will that do to my taxes? To my medicare premiums?
Hey jaspreet, I’m 23 just learning about these. is it better to not do Roth IRA and 401k ? What if I use that money instead on other liquid investments ?
Doing traditional now. Gonna switch to Roth soon as I pay off my debt.
@@EdgerDelgado Usually no if you stay with the same fund family
@@timm7098 Yes, you pay the taxes on the traditional If you decide to roll that account balance into a roth.
Yes taxes if you convert from a IRA but no taxes on a regular investment account to a Roth assuming the taxes were paid. I thought the question was about fees though.
I’m doing both and my company matches 10%
I am investing in stocks and invested in a military career, which I am able to collect a modest retirement from while I work and go to college.
what do you think about strategies for paying less taxes, cant you save on teaxes by using 401k and therefore having less income?
subscribed !
Enjoy your video, have traditional 401k right now and can This be roll over to Roth 401k? Or is it to late? Will there be a charge?
Rolling from traditional IRA to Roth IRA is a taxable event.
Rolling from a traditional 401(k) to a Roth 401(k) is a taxable event.
Your 401(k) plan may or may not allow you to roll your t-401(k) to a Roth 401(k).
With a t-401(k) from a previous job you may roll your t-401(k) to a t-IRA and then convert to a Roth IRA.
Love your videos. Usually we don't get that type of information unless hire a professional. I have a question: can 401k be use for buying a investment property without having to pay taxes and penalties?. Thank you.
You can do a 401k loan up to half of your balance, but that is usually highly frowned upon as it robs your compounding interest potential and the mortgage rate you can get right now is much lower than even the S&P 500s historical return.
Investing in both!
Until a few years ago I was contributing to a 401K for several reasons, the main one being I didn't know about investing so never really touched the accounts until then. Sure wasted those valuable years spending every dollar on crap and contributing almost nothing to retirement (wasn't even receiving the full match).😮💨
I'm a different person today. I'm now contributing 100% to a Roth 401K. I'll switch back to contributing to a 401K closer to retirement.
Can you a video about life insurance benefits?
I like this intro, keep this intro in all your videos. I think it’s very cool to have, but stick w the smash like button sound & the emphasized link “below”
I LOVE your pink turban!!!
I have a quick question that might not be related to this video: Is it better to invest in a global fund or one that follows the S&P 500? The US fund has higher highs, and higher lows compared to the global fund. Global one costs 0.11%, and the US one costs 0.21%. I don't live in the USA, so this is what I can choose from. Which one would be better to invest in? The way I see it is that it's the US stocks that weigh the most in the global fund. Some say US stocks are overvalued and that's why a global fund is better. Thoughts?
When leaving your employer, transfer the Roth 401k over to a Roth IRA, all withdraws tax free at retirement age, the better investment.
Yes!!
Ideally yes, unless you have financial issues as 401ks often are protected from garnishment and iras may not be.
I'm not planning on rolling my 401k into my Ira. I'm planning on retiring before 59 and you have the option of making withdrawals from a 401k at 55 if you retire then.
@@Andrew-it7fb
I hope that your 401k administrator lets you withdraw your funds in increments at 55. Many require a lump sum withdrawal, which will hit you with high taxes.
Sounds like it depends on the current tax rate. If you are taxed high at the moment then traditional is best. If next year you are taxed low, then Roth is best at that time. Reassess your situation when milestones appear which affect your tax rate.
I converted to the Roth 401k. Dividend stocks all the way
Traditional 401k lowers your AGI, so you pay less taxes while you are working
And more when you're retired ....
@@travis1240 do you know what to standard deduction is?
At minimum I want enough for my traditional to take advantage of the standard deduction
Both! And real Estate
You deserve more subs. I see people with more subs who aren’t as good as you.
As a Canadian we have different investments so I have an investment TFSA (tax free savings account) that I contribute to weekly. As well as an RRSP
Absolutely, Loved the Video, Surely a couple of unique points compared to other youtube videos. Jaspreet, I have 2 questions that seem pretty basic yet they confuse me and haven't had any other videos address it. 1> Firstly for Married filing jointly, is the Max 401k deductions: 38000 or is the 19000 for the couple. I'm assuming its 38k but have never heard anyone mention this number. 2> With regards to 401k deduction phase-out: if the total income is over 123000 does that mean even if I contributed 10k in 401k would I still be taxed like I was earning 123k instead of 113k, if so would it makes sense to only invest in Roth 401k instead of traditional one at that point. Thanks in advance
There is no tax deduction for contributions to one's 401(k).
"I contributed 10k in 401k would I still be taxed like I was earning 123k instead of 113k" - If your annual income is $123k and you contribute $10k to *traditional* 401(k), you owe tax on $113k.
Hi, can you make same/similar video for Traditional IRA and Roth IRA for self-employment people??
Thank you
Sweet pagri color today!
I have a Roth IRA already that I've funded the last couple years.. I will be starting a new career and will choose a Roth 401k with 3% company match because my income will be low to start.
Thanks for posting in the morning right before I head on my commute lol
MeowMerch Same! It’ll get me thinking through out the day 😄
MeowMerch honestly so convenient lol
MeowMerch I love your cat videos 😸😸
Resident Advisor thanks for checking meowwwtt 😻😻
You make a lot of sense with the low tax rates right now to go Roth
The important thing is to get into at least one or the other. As statistics show, people have a very difficult time saving money. A 401k requires very little effort...the money is invested without you lifting a finger, and you can't get to it very easily, meaning it will stay in your account, plus there is generally a match involved. A Roth requires you to write a check or set up direct payments, allows you access to the money, making it very tempting and easy to pull it out, defeating and eroding your retirement goals. We know how life gets in the way of our plans, many people intend to invest but somehow they never get around to it....a 401k is funded before you get your check. Taxes can change on the Roth also. The gov. is licking it's chops to tax the earnings, and don't think they wont pass a law to get to it. All the "free" stuff that is so casually tossed about, is not free to those who have to fund it.
So you need to do something. The thing is you can do both. The more you save, the better off you will be. I have never complained about making money.
Many employers offer a Roth 401k, so it's as little effort as a traditional 401k.
MM you mentioned that while we are not taxed on the amount that our Roth 401k earns, we are taxed on the amount our employers contributed over time. My question is how does the IRS keep track of that amount over the years so they can tax us correctly and how do we know that the IRS is taxing us correctly? I've had several different employers 401k Roths and some employers have changed the amount they match from year to year. Great video. It made me consider things that I dont think I've considered before.
Your 401(k) account should show two balances, one for your Roth 401(k) balance and the other your traditional 401(k) balance. The latter is taxable upon distribution.