401K - Why you should max it out
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- Опубликовано: 7 июл 2024
- Why you should max out your 401K is explained in detail.
00:00 Intro
00:29 Pretax 401K
00:48 401K Contribution Limit
01:11 401K Employer Match
01:50 401K Vesting Schedule
02:28 401K Advantages
03:01 Tax Rate Difference
04:46 Tax deferred compounding
07:07 Isn't $23K too big for 401K contribution?
Tamil Version: 401K: • 401K Explained in தமிழ...
References:
www.nerdwallet.com/article/ta...
www.moneychimp.com/calculator/...
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Health Insurance: • How to compare health ...
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#VijayMohan #InvestmentInsights #InvestmentInsightsEnglish #401K
DISCLAIMER:
The content of this video is my own opinions and is for information purposes only. It is not intended as a substitute for professional financial advice. It is only intended to provide education about investments.
No one explained this like you before . I wish that you have created this video 10 years before ❤. Thank you so much for such a great information.
Very nicely explained about first dollar in/out and marginal tax rate with regard to 401k. Thanks Sir for educating us.
Amazing clarity! Thank you. Adding to this HSA of $8,300 per year, we can almost bring taxable income below 22% bracket for a 120k joint filing.
Beautifully explained.. I loved it.. thank you so much sir..😀😀
This is tremendous info, much appreciated sir 👍👍👍
Incredible insight. Thanks for explaining in meticulous detail.
Awesome thala..!! great explanation as always..!!
Very well explained. After paying so much in tax this year, i relaized it. I am going with full 401k contribution now.
I had been doing that for 20 yrs.
If I get change to go back in time, I would put 401k upto what company matches, then max out on Roth and then it doable go for remaining allowed 401k.
We save taxes now, but in retirement we will only pay more taxes on 401k withdrawals. SS benefits and others will still brings us to pay good on taxes, which I think I didn’t realized back then.
Vijay Anna your analysis is spot on!!!. Please keep sharing more such videos and enlighten us.
Excellent analysis and presentation of facts
Good explanation ❤ with numbers
Excellent explanation sir 🤩
Sir, I am your ardent follower. Pls make frequent videos :)
Nice explanation.
Thanks Vijay.
It was happy time when you were my boss 10yrs ago ;)
Wonderful times...
Real meaning for insight of 401k :)
Thank you very much sir.. it's amazing..
I have two questions
Can you please suggest this method for H1B holders
Also please advise if we have similar in India tax saving
Please upload more videos
Looking forward to your Roth 401K video. Would like to know which one is better 401K or Roth401K.
It is an ever long debate of traditional vs Roth 401k or IRA. If you can address that debate and tell which is better then would be very thankful to you!
I do all my investments in Roth 401k, Roth IRA, HSA, and brokerage. Employer match goes in traditional bucket. Plan to take SSN earliest possible. Use the brokerage and HSA for gap between early retirement and 62 (SSN earliest start age), then continue until RMD age to then use the Roth dollars.
very nice info. Compounding tax savings is very nice info.
But you missed standard deduction part for 120K income.
Great video, very helpful. I believe there is a slight correction. The 6210$ total tax savings by maxing your 401k will still be taxed when you withdraw post retirement. The best case is 10%tax on it (lowest tax margin). But some of it can be taxed at 22% or higher too, depending on which tax bracket you are during post retirement withdrawals. Also a big unknown is the tax brackets 25yrs from today. Please comment on this. Thanks.
Yes. I mentioned that as part of the first advantage. Contributed at top most marginal tax bracket, withdrawn at bottoms up effective tax rate.
Thank you for the information Sir. I have a question, can my child get paid while he's on h4 ? He's 13 years old. And, the person who pays that write off that towards their tax?
Thank you for the great info. Also can you share your thoughts on managing money saved in HSA
I always invest HSA $ and let it grow. When I get small medical bill pay out of credit card and save the receipt. Big bills, I ask hospitals for interest free 48 months payment and still use credit card. I will only withdraw from HSA (using medical bills I saved for record) if I come across big expense, such as buying a car, International vacations, etc.
I always invest HSA $ and let it grow. When I get small medical bill pay out of credit card and save the receipt. Big bills, I ask hospitals for interest free 48 months payment and still use credit card. I will only withdraw from HSA (using medical bills I saved for record) if I come across big expense, such as buying a car, International vacations, etc.
What happens to 401k amount when we leave the country in few years and what are penalties involved when we take out the amount earlier than the retirement.thky
The early withdrawal penalty is 10% of the withdrawn amount and you have to pay the taxes on the withdrawn amount as well.
You don't have to withdraw all the money when you move out of USA. You can still keep the account even if you don't have a US address.
Is this worth subscribing to if one gets to work in the US for only 5/10 years? Kindly discuss, thanks.
Watched this video though I am not based in the US. The tax saving compounding is relevant to India as well. Make one video for National Pension Scheme for folks back at home
Roth vs traditional can you please make a video?
Same analogy applies in India for NPS 50K additional contribution and Home loan interest and principal payment, Master can you throw some light
Is there a video on annunity? If not can you explain pros and cons of annunity
Great session .Can you please share a video on 529 plan .
Yes... soon.
My employer caps me at 14k as am considered HCE . How can I invest the difference between federal max and employer capped max ?
Great knowledge and thanks for sharing.
Q. Let's assume I made 2.7M on my account at the age of retirement and I don't want to pay tax on withdrawing money (all of them) so, is there way to avoid or what are the options we have?
should we transfer 2.7M 401k account into ROTH IRA account and then withdraw the money to avoid tax? looking for your insight before I reach to the regiment age...Thanks!
Looking forward to Roth 401K video. Which is better 401K or Roth401K. If you have a choice to invest in both which one should we choose
me too have same question!
Me too
Early career go roth, more mid and sr levels go pretax as you earn more
Roth
Roth should be the priority.
what should be the ideal fund allocation in 401k? can we adjust it once in 6 months or a year? should we have a financial advisor to guide us? or should we select fidelity assistance?
I will cover that in this US retirement series.
can you please share the excel ?
What you think taxes will be when you retire in next 10-20 years . Currently we are in lowest tax bracket of US history.
Also what about Market Volatility??
can you help in tax saving?
Thank you sir for the detail video. It answered lot of questions I am looking for. Have another question, I will max out my 401k and I moved back to India let’s say after 5 or 10 years. What are the options I have? Like leave it or withdraw or any other option? If I decided to withdraw what is the best process? If I keep it here till retirement, how can I take it?
I will cover that in one of the future episodes.
Very issue and timely video . I’m in my early 40s and I regret missing to contribute max to 401k for last 17 yrs I was in US. Is it too late for me ?
Nothing is late in investing. Maximize next 10 to 15 years and pick a good fund such as S&P 500 or total stock market
Hello Sir, instead of 401k, can I contribute to NPS in India, will it be beneficial?
I would stick to 401K here.
Good analysis and explanation. But when you discuss savings on 550k on taxes you didn't consider that amount would be taxed on withdrawal
I mentioned that as part of the advantage #1.
Is it make sense to invest in 401k if employer is not matching? And can you make video on the best etf/mutual funds in USA
The two advantages I mentioned here in this episode alone good enough to contribute to 401K.
Should one need to be legally residing in USA to claim the 401k post retirement?
What if we take a 401k and had to move out of country permanently?
No.
If you are moving out of country, following are the options I know (Double check with your Tax planner):
Option 1. Liquidate the 401K account the year after you move to India so that you are withdrawing the money at the lowest tax bracket.
Option 2. Move the money into Roth IRA every year after you move to India.
Example:
Year 1: Move 20K into Roth IRA and pay tax for 20K
Year 2: Move 20K into Roth IRA and pay tax for 20K
Year 3: Move 20K into Roth IRA and pay tax for 20K
Year 4: Move 20K into Roth IRA and pay tax for 20K
Year 5: Move 20K into Roth IRA and pay tax for 20K
Year 6: Move 20K into Roth IRA and pay tax for 20K and withdraw 20K from Roth IRA with no tax and penalty
Year 7: Repeat above
The reason we can withdraw penalty free from Roth IRA on year 6 is, Roth IRA allows to withdraw conversion contribution after 5 years with no penalty and tax. This strategy is called Roth Conversion Ladder. More on this: www.madfientist.com/how-to-access-retirement-funds-early/
One another thing to note is, the estate tax for US non-resident is 40% with an exemption of 60K. So this is not a concern for anyone with less than 60K. But for bigger balance, this could be a concern as our inheritors will get only 60% of the inheritance.
For US residents this exemption is little over 13.6M - Just FYI.
Option 3. Leave the money to grow here till your retirement age. Tax in India - I do not know. I know that we have double tax treaty with India, so that our income in US is not double taxed in India. But I am not sure about Roth withdrawals. You need to check with a CA in India who is familiar with US retirement accounts.
@@InvestmentInsightsEnglish thanks sir !!! Appreciate your effort in sharing the details.
@@InvestmentInsightsEnglish India doesnt consider Roth as retirement account. Right?.
Sir when is the Roth 401K video getting uploaded ? Also I learnt that the employer contribution amount is taxed during Roth 401K withdrawal time. Please confirm if that’s true.
Employer matching contribution does not get into Roth 401K at all. It goes into pretax 401K account and so yeah, you would pay tax like in regular income when you withdraw. But any money that goes into Roth 401K will grow tax free when you withdraw.
Great video, are you sure that you can go above 23k total? I think that might be a miss on your side. as far as I understand 23000 limit is including your employer match so you can't exceed total limit of 23k (including employer match) - correct me if I am wrong?
Yes. Just your contribution is limited to 23K for Pretax and Roth 401K. Employer match is not part of it. If you don't trust me, ask google. 😜
@@InvestmentInsightsEnglish Amazing! Thank you so much for clarifying!
Thanks for the informative video. What happens to 401k if we get back to India. How do we withdraw them.
Sir please make your videos in English more that way both Tamil and non Tamil speaking people can watch and learn !
Can you explain about Whole Life Insurance does it worth it ?
It is already covered here: ruclips.net/video/TyAxL8gFN_c/видео.html
@@InvestmentInsightsEnglish Thank you so much I thought you may not read my comments but you did. You are awesome is there any way I can contact you? My employer does not give me 401k and I am not eligible for Roth only thing I am doing is trad. Ira but I want to invest for my retirement. Even after seeing your videos couldn’t conclude what to do.
But if i move out of USA and withdraw this amount, 401k contribution is taxed at flat 30%. Then isnt that a loss?
Consider Roth Conversion ladder strategy for that purpose: www.investopedia.com/how-roth-conversion-ladder-works-5214808
@@InvestmentInsightsEnglish Vanakkam Sir, Long time follower and a big admirer of you! you have shared great amount of Financial knowledge to our indian community in USA. It will be very helpful if you could share more insights about this type of situation, where an indian (on work visas like H1 who can get GC only in Dream) earning in USA but want to retire in India or move to india before retirement. What would be the best ways to save the retirement corpus using available retirement savings accounts and schemes. I heard that after we move to india we will be taxed at flat 30% on our US income as we will be non residents here in USA, is that true? If so, even Roth Conversion ladder will not be a good option as conversion includes taxing the converted amounts. In that case we will end up paying 30% tax on conversion amount.
thanks for asking this @dineshb6915 . thats a great question which I was having in mind for a long time.
@@KANNAN-JAYAN where is the rule about flat 30% tax?
Thanks for the video; subscribed !!
Can you help me with options if I want to move back to India for good with little decent accumulated funds in 401k account.
My question may not be interested by many people.
I am planning to leave to india for good and for a investor like me. Is it worth to invest in any 401k and if yes, can i access the money back from india and how?
I will be covering that as part of this US retirement series.
This is growth rate 10% without market decline what happens if market goes down ?
Watch the Risks in Index Fund episode: ruclips.net/video/pKsH-OWXRec/видео.html
Dear sir.. from tamil nadu..im nri in gulf.. im regular viewer of your videos.. im investing in us.. how to save tax for non residents.. can u pls make a video?? Can i invest in ireland based etfs in Us making use of tax treaty??pls explain.
That can be a good topic for a separate episode.👍🏽
@@InvestmentInsightsEnglish Nanri sir..Seekiram podunga sir..usefulaa..irukkum. Vaalga valamudan.
My 401k is already maxed out. How can I invest in Roth?
I will cover that in IRA episode.
if my income is within Roth limits then I can directly invest in Roth. Right? Else backdoor Roth available.
Investing in 401k is good but there is no sight of greencard for next 150 years. Whats the point?
u can withdraw 20K (or whatever standard deduction) so that that money will be tax free.
@@JoeC5050 you dont get the point
@@SKS-a2324d u can withdraw as tax free after moving out of US, upto standard deduction (incase of visa/GC issues). Got it?
Vijay. M contributing more to the community than Actor Vijay!!!
This video is quite misleading to say “savings” on tax. By contributing to pre-tax 401k, you would defer the tax and not save.
Whether it makes sense to contribute to pretax is totally dependent on the tax bracket you are in NOW vs what you would be in retirement.
TCJA will sunset by 2025 which means the average tax rate will jump by 3%. It actually makes sense to not contribute to pretax accounts now.
Never considered taxes might go up.. you might pay more taxes
Never gave a thought that we have other options to completely pay 0 tax for your growth., almost 650k growth here could be saved, only professionals know such solutions.. free knowledge feels good but not a powerful option..
if taxes go up but we will save taxes on higher bracket now and pay less taxes beginning from 10%, 15%, 22% etc (progressive).
Annoying accent 😢😢