Investment Priorities for maximum tax savings (USA - தமிழ்)
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- Опубликовано: 11 июл 2024
- Investment Priorities for maximum tax savings in USA - In this episode we review the investment order that we should follow to get the maximum tax savings from 401K, HSA, IRA and 529 before investing in a brokerage account.
00:00 Intro
00:30 Appu's Savings Plan
01:37 Tax advantaged savings review
02:50 401K - Match Employer Contribution
04:03 Max out HSA
06:39 Max out IRA/ROTH IRA
07:34 Max out 401K
08:19 Contribute to 529
09:26 Invest in Brokerage
09:51 Appu's Savings Summary
Calculation Sheet: docs.google.com/spreadsheets/...
Reference:
Why to max out HSA before 401K? : minimalinvestor.wordpress.com...
Mr Money Mustache Forum advice on Investment Order: forum.mrmoneymustache.com/inv...
529 plan details in your state: www.savingforcollege.com/529-...
Other Related Videos:
401K: • 401K Explained in தமிழ...
Roth 401K: • Roth 401K Vs Pretax 40...
After Tax 401K: • After Tax 401K, Mega b...
IRA/Roth IRA: • IRA, Roth IRA, Backdoo...
USA College Savings plan - 529: • USA College Savings - ...
USA College expenses: • College Expenses in US...
Building Wealth Series: • Building Wealth (Ep. 1...
LinkedIn: / vijay-mohan-sn
Twitter: / invstmntinsght
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.
#VijayMohan #InvestmentInsights #TaxSavings #401K #IRA #529 #HSA
I watched this 2 years ago and again in 2024 !! Such a good video. Thanks for your service Mr. Vijay
The more I watch this the more I get enlightened. Amazing what you have shown here
I wish I knew about this channel earlier. Thanks for all the nice explanations. They are very simple and super helpful
Thankyou so much Vijay anna for the clear and detailed guidance on investment and tax savings. This helps a lot of people 😊
Thank you for the appreciation sis. Love your channel. 👍🏼
@@InvestmentInsightsTamil thanks anna.. messaged you in LinkedIn
Thank you so much. This is the best financial advice I have seen so far
Very informative and useful video. மிக்க நன்றி
Excellent content. Many people don’t get this order of priorities in investing and get tempted to invest in taxable equity accounts
Best video I have seen on this topic.
Awesome!! thank you. I was scratching my head seeing the explanation of HDHP & HSA and searched your videos. there you go, you just gave a simple solution : max out pannu da! problem solved.
Romba Thanks Sir, You are making complicated things easier.
super sir. i learned this about an year ago, in a hard way. u made it super simple :-) awesome
Excellent sir. I wish I knew this 25 years ago. 🙏🙏🙏
Really you are an Eye opener…
Nice 👍🏻 and very informative
love your simple and detailed clear explanation.do you mind doing a video on health insurance after retirement in US?
Thank you very much, all your videos are very useful . Just like this one on Investment priorities from tax savings point, can you do one on investment withdrawal priorities during retirement to save or reduce taxes ?
Great Video..
Complete info for a middle class guy like me 👍 thanks a lot Vijay 🙏.
Mr. Vasu.. who is that middle class guy ?? 😉 என்ன ஒரு தன்னடக்கம்!!!
Vijay - Great salute for your RUclips channel 👌👌👌Recently only I have started watching your videos .All Your videos are too good and very informative . Now I became huge fan of your videos previously I used to watch Anand Srinivasan money peechu now vijay mohan video added to my list .Once again Thanks for all your efforts .
Thanks for your kind words Ganesh. Glad you like the content.
Thank you Vijay! Nice one. It would be helpful if you could do a similar kind of video for tax savings and investment in India. If you did already kindly share the link. Thank you!
Sir, thanks a lot for this video. All the 3 videos on this topic were very helpful. Can you also cover a topic on buying gold coins in usa?
Very useful and eye-opener video.. Never thought about savings and investment before :-) Thanks a lot for the great info., in simple terms to understand by everyone.
Thank you Senthil!
Sir your videos are very useful and informative. Respect from Andhra Pradesh.
Glad you liked the content.
Very useful...
nice info.
Vijay Sir. Thanks from St. louis. USA.
If your 401k plan allows, you can make it self directed and invest in anything you want
Thank you Vijay for the great insights! Loved your presentation! One question- is Connecticut a good state for 529?
I see they got tax deductible upto 10K for a family - www.savingforcollege.com/529-plans/connecticut.
Most of the companies contribute their share towards HSA as well as 401k. My company contributes $1800 towards my HSA.
Good explanation.. sir you are not considering future unknown tax brackets for traditional 401k calculations.. please include it for better decision making and risk factors
Sir, Apdiye indian makkalukum our tax savings video podalame.. Please consider.. Waiting
Keep going sir
Respected sir to increase the taxable income in a ndia can we add the return of annuities as income in indian I T R.
Good morning sir, pl suggest India's best tax benefit index funds.
Thank you Vijay for wonderful insights. Your videos provide more ideas and insights than a paid a financial advisor - your videos are great service to entire Tamil community! I always learn something new from them.
I have a question regarding spousal IRA - esp.ly for Appu's case. Since Appu is having 401K plan at work, he's not eligible for Traditional IRA. But can he not invest $6000 in traditional IRA for his spouse though (instead of Roth IRA)? This would give them additional 17% tax advantage on that 6K? Thank you.
You are right. Trad IRA would have been a better option for that scenario.
Hi Sir, Why HSA is not good, if we plan to retire in India? Can not I use the HSA money in India??
Sir idhey same details oda indian priorities podunga
Sir
This is regarding 401K:
If an employers automatically rolls at 3%, (upto max 6%) and
he will match 100% on the first 1% you contribute and 50% on the next 2%-5%.
What should one do?
1. Leave it in auto i.e 3% +1%+1%=5%
(Sub 3%+ 100% of 1%+50% of 2%)
2.Subscribing 6% i.e 6%+1%+2%=9%
(Sub 6%+ 100% of 1%+50% of 4%)
3.In between 1 and 2?
(Note: India is great as In India 12% is deducted as EPF and employer matches it. There is a max cap on employer at 27% in EPF+ Superannuation. That is 12%EPF+15% Superannuation.
Hi, if you can, please post india tax saving plan like this kind of way. Thanks 🙏
Hello Sir. Thank you so much for this video. I have a scenario where I’m on my spouse’s health plan and none of her employers plans are HDHP HSA eligible. What are my options to open an HSA account.
If you do not have HDHP plan, then you cannot contribute to HSA. Sorry.
Saaami neenga deivam. Enna konja lateaaa kannuku terinjeenga
This is a very good informative Video, wanted to point out one mistake here, please correct me if I am wrong. In the last clip where you are talking about Appu's saving Summary, in that the Child Tax credit should be subtracted from Tax amount but not from Taxable income, If my calculation is correct 93300(Taxable income) - 25100(Standard Deduction) = 68200(Taxable income) = 8184(Federal) + 3410(State) = 11594 - 4000(Child Credit) = 7594(This is final Tax). Please correct me Sir
Requesting video for people coming as on-site opportunity from software services companies for period 2-3 years like dos and don't in order to manage earnings
Thanks Vijay for being a turning point in my life. I have a question, what changes would you suggest on top of these priorities, if both spouses are earning (like Appu and his wife both working).
Anything more should go to an Index Fund in brokerage account.
வணக்கம். உங்கள் பதிவுகள் தமிழில் வரும் மிகச்சிறந்த பொருளாதார வாழ்வியல் கையேடு. அதுவும் அமெரிக்காவில் இருந்து தமிழில் வரும் முதல் பொருளாதாரப் பதிவுகள் உங்களுடையதாகத்தான் இருக்கும். இருபது ஆண்டுகளாக நாங்கள் எல்லாம் இங்கு முட்டி மோதி ஒவ்வொரு விசயமாகத் தெரிந்து கொண்ட விவரங்களை நீங்கள் அழகாகப் பதிவு செய்து கொண்டு இருக்கிறீர்கள். புதிதாக இங்கு குடியேறும் நம் இளம் தமிழ்த் தலைமுறையினர் நன்றாக வாழ உங்கள் பதிவுகள் பேருதவி செய்யும். நன்றி உங்கள் பணிக்கு.
தங்களுடைய ஆதரவிற்கு மிக்க நன்றி.🙏🏽
Hi Vijay - Thanks for another good video, its very helpful for H1B guys. What's your view on HSA for people on H1B and may return to India? I can't get details if we can use HSA funds during retirement in India for qualified expenses. Also , for kids born in India - is it beneficial to plan for 529 or add any additional $ to Roth IRA/IRA helpful ?
Hi Satish. Looks like you would be able to use the HSA for qualified expenses outside of USA as well. myrawealth.com/insights/should-h1b-workers-use-an-hsa
Regarding 529, it does not matter where kids born. But if you are planning on sending kids to US for undergrad or masters then, you would be able use money from 529 for their education expenses.
ROTH IRA - you should definitely contribute if you are eligible. Worst case, you can withdraw all your contributions when you go back to India. You can leave the earnings to grow and withdraw after retirement.
@@InvestmentInsightsTamil Hi Vijay - thank you for your view. HSA link is very helpful.
Thanks for the priority order.
Just to take advantage of your vast knowledge, what should be ideal saving/ saving in various tools for a career starter, Indian bachelor, earning $96000 in Texas.
Watch the Building Wealth series in this channel.
@@InvestmentInsightsTamil ok
Thank you so much sir for your videos, they are truly insightful. I have few questions 1) I have maxed out 401K contribution pre-tax, Is it a good idea to contribute to 401K after tax ? 2) I switched companies and Trad 401K of that company is moved to Roll over IRA and in my current company i have another 401 K account. Am i eligible to have a Roth IRA account and contribute 6K per year. ? Thanks in advance !!
1. It is good only if you can do Mega backdoor ROTH. Check this link for more details - www.nerdwallet.com/article/investing/mega-backdoor-roths-work
2. Your existing 401K accounts have no impact to ROTH IRA contributions. Your annual income for the family is the limitation. If your family income is less than 198K for 2021, you can contribute 6K for you and another 6K for your spouse in ROTH IRA. www.investopedia.com/articles/personal-finance/081615/basics-roth-ira-contribution-rules.asp
Sir India la 401k process panra companies naraya irku . I have experiene in 401k record keeping . Is possible to get job USA ?
Vijay, Great job in spreading financial enlightenment. Have a quick question My Wife is working for a small IT solutions company in USA, where they are providing very limited 401K options whose expense-ratios also so high(around 1.5). So I have contributed very minimal to 401K (8%) and decided to invest in Vanguard index funds via brokerage. I am kind of still skeptical about of my decision, Can you pls throw light here ??
If you are not happy with the funds offered, what you are doing makes sense to me.
Hi Vijay I hear you saying not to consider if not planning to retire in US. Is it for IRA accounts or in general all of these tax benefit accounts including HSA etc.
That is just for HSA. HSA can still be used in India, if you want to. It is little more involved. That is all.
Anna, tell us more about tax saving in India....
Hello Sir, thanks for sharing excellent details.
Basic question on contributing to how many retirements accounts at 2:37 slide
For eg., if someone (single income family) is contributing to 401K (max-ed) and IRA (Max-ed), can they also open additional Roth IRA and Roth 401K and contribute too? or they already met the maximum allowed retirement contributions.
No. They cannot. The maximum amount for 401K/IRA includes both regular and ROTH amounts.
@@InvestmentInsightsTamil thanks for the clarification! Appreciate it.
Hello Sir, As per your list Education savings comes only as fifth priority, if I still have savings available, after investing in all retirement options. But the funds for kids higher education and marriage would be needed before we reach our retirement age. In case I’m not able to save enough to cover all first 4 priorities, should I invest in brokerage for my 5-10 year big spending needs as a second or third priority? As this money can be withdrawn without any early withdrawal penalties..
Sure you can. I would go with Index funds.
Sir,
U r doing great job
Plz talk about different assets inflation
Good Vijay. Similar to IRA, can individuals open Personal HSA?
Yes, we can - provided that our employer does not provide Health plan and we are taking High Deductible Health Plan outside.
20somethingfinance.com/contribute-to-hsa-outside-of-employer-payroll-deduction
"Can you Contribute to an HSA Outside of an Employer Plan?
Yes. If you are self-employed or your employer does not offer a health plan, you can contribute to an HSA. However, typical HSA eligibility rules still apply. You must have HDHP coverage in order to contribute to an HSA and meet the following eligibility requirements:
You must be covered under a HDHP, on the first day of the month.
You have no other health insurance coverage (excluding vision, dental, disability, accident, long-term care) and are not covered by another plan (i.e. spouses employer plan).
You are not enrolled in Medicare.
You cannot be claimed as a dependent on someone else’s tax return."
Sir, IUL schemes pathi konjam pesungalen. I have invested in one of the schemes from nationwide, but I didn't do much study about it. Thank You.
Better to keep investment and insurance needs separate. Just buy a term insurance for insurance needs and invest in an Index fund for investment needs.
@@InvestmentInsightsTamil thank you sir 🙏, but I already bought one and I am wondering what to do with it now. I mean I am paying towards it now.
Hi Vijay, you are rocking like our thalapathy Vijay on Investment options, I am still finding dificulty in understanding IRA, Roth IRA and the backdoor options. Can you pls suggest some financial advisors who can help me with personal guidance and financial planning with some service fees.
Reach out to samatva.us
Vijay, thanks for the informative video!! After maxing out 401K ($19500) and IRA ($6000), is it beneficial to do mega backdoor ROTH or brokerage account? TIA
Mega Backdoor ROTH - if you can do it, as it has tax free growth.
@@InvestmentInsightsTamilThanks! Keep rocking in creating investment awareness.
Vijay Anna, My 401K plan provides Target Funds based on expected year of retirement. Is it wise to invest in Target Funds?
Sure. Go for it.
Worth in gold content. Thanks Vijay guru.
If employer offers after tax 401k, that would precede brokerage account. Is that right?
Only if it can be rolled over into Roth 401K or Roth IRA. More details in After Tax 401k episode.
@@InvestmentInsightsTamilThank you 🙏
Can you please post for india also ?
Sir, should we invest in 401k or ROTH only if we plan to stay in US post retirement? Is it beneficial only for GC and USC?
Not necessarily. It is more beneficial for someone settling in US post retirement.
Hi Sir
Pl tell us about your opinion to invest NAVI US total fund of fund. Waiting for your reply.
It's a good one. You can use that in place of S&P500.
@@InvestmentInsightsTamil Thank you so much Sir.
Hi Vijay, my employer doesn't match 401k and I looked up at the limited fund options they have, that being the case I don't feel there are good reasons to invest in 401k(I dont intend to stay long in US), in this case should I skip this and just use ROTH IRA alone. Thanks once again
Many use ROTH Conversion ladder strategy to withdraw 401K funds after returning back to India: www.madfientist.com/how-to-access-retirement-funds-early/
But it does involve some prep work from our side. If you are not comfortable doing it, then yeah you can skip it - especially when the time frame is short like 3-4 years.
@@InvestmentInsightsTamil so, even if employer doesn't match 401 contribution, you advise to max out 401 contribution and we have ways to withdraw later when we move out of USA ??
Thanks a ton for your insights!
Which Brokerage is the Best?Fidelity vs. Vanguard vs. Schwab? Can we have accounts in these 3 investment banks?
What is your suggestion.... I see the investment expense ratios differs between these brokerage...
They are all good. All the funds will have same expense ratio across different brokerages. It might not be available in certain brokerages. If they are available, they all will have same expense ratio. Which fund did you notice that has different expense ratio?
Can you please explain the same thing in indian scenario sir?
I am also xpecting the same jii
Dear sir, I have one doubt. Investing In index fund vs individual stocks which is better. From 2000 to 2020 nifty 50 has given 8 times appreciation. S&p gave 2.2 times. But HDFC bank gave 76 times. Reliance gave 25 times. Hindustan uniliver gave 8.4 times. Bajaj finance gave 962 times. Why individual stocks wealth creation is exponential. Why financial experts and so called fund managers can't beat market even in the presence of such wonderful stocks. You said you have 50% portfolio worth individual stocks. Why can't it be 100%. What is the perfect portfolio blend of index fund and individual stocks. Kindly reply me sir
Hi Mohammad, you did not pick some random stocks to compare it against the Index. You have cherry picked that has done really well in the past 20 years. No one knew for sure that these stocks will do this great in 2000. Same is true now as well. By investing in an Index fund, we are removing that guesswork and analysis and settling for average growth of the market itself (Index). It is a no brainer solution for all investors. But if we are willing to take more risk and are willing to put in the extra effort of choosing and constantly monitoring an individual stock, then yeah - we could go for individual stocks. The problem is, 95% of us will not be able to choose good stocks for our portfolio. That is why it is better to try out individual stocks with a small % of our portfolio. Once we are comfortable with it, may be we can increase the exposure.
My brokerage investment is 100% in individual stocks. But including all my retirement accounts, it is only 50% of my whole portfolio. All my retirement accounts are invested in Index funds.
The % of individual stocks in a portfolio is purely personal choice. If you believe that you can choose good stocks for long term that can beat the Index, then you can have a bigger % of individual stocks in your portfolio.
Hello Sir, I think if we plan to maxout 401k then IRA contribution can be made but only after tax. In this case IRA can’t be a tax saving plan. IRA and 401k both are retirement accounts, both cannot be maxed out as far as I know. Sorry I’m wrong.
It depends on our family income, not on whether we have maxed out our 401K or not. For example, if the family income is less than 198K for 2021, we can contribute to ROTH IRA, 6K for each spouse, regardless of whether we have maxed out our 401K or not. With ROTH IRA, we do not get tax deduction, but the contributed money grows tax free. Watch the 401K and IRA episodes in this channel to understand better.
Can we have both Ira and Roth IRA ?
After maxing out 401k. Is it ok to push 6000$ in Ira and another 6000 in Roth IRA ?
Or it is nonsense to do so ?
We can, but the total contribution of IRA/ROTH IRA combined can have only a total of 6K per year for each person.
** this is video for usa only or india also
Only USA.
Sir
Is HSA is different than FSA?
How to open HSA account? If employer offers only FSA? (You can contribute up to $2,750 annually with a
$550 rollover allowance at the end of 2021. Any balance in excess of $550 will be forfeited.)(For family FSA, it is $5000)
HSA is not same as FSA. Check the other comments to know more on opening HSA.
If I plan to leave to India in another 5 years but I plan on sending my kids to US who are US citizens for either masters or undergrad program, then I understand that 529 will work perfectly for me. Also I see that HSA is a great investment/tax savings option and can be used abroad as well. So I will be maxing out on that as well. Since my horizon in the US is limited, should I go for ROTH IRA or rather invest them in index funds back in India? Guruji's thoughts ?? :-)
I would say, go with ROTH IRA. You can always withdraw the contributions without penalty any time. If you choose to go to India, then you can withdraw the contribution and take it with you and leave the gains grow here.
@@InvestmentInsightsTamil awesome. Thanks so much
What is the eligibility for ROTH IRA and what is back door IRA
Check the "Who is eligible for ROTH IRA" section here: www.investopedia.com/terms/r/rothira.asp
For 2021, if the family income is less than 198K, then both the spouses can contribute upto 6K each on their ROTH IRA account, even if one of the spouse is not working.
If you are not eligible for ROTH IRA, you can use Backdoor ROTH IRA process to do essentially the same thing - but a little work around. You can check out the process step by step here: www.physicianonfire.com/backdoor/
🙏🙏🙏🙏
Hi Viji.
1)Does Roth IRA contribution has any limit. Meaning, if your family income(married filing jointly) is more than 192K (total gross annual income) then you are not eligible for IRA. do we know if such restriction applies to Roth IRA as well for married filing jointly.
2) I was under the impression that earning I made on 401k is tax free after my retirement . I assume i need to pay tax on only Capital gains and pay tax based on tax bracket at the age of withdrawal. is my understanding right.
3) In the order of priority, you had asked us to use Roth IRA before maximizing 401K was there a reason, today i do other way..
Thanks again..
Hi Siva
1. Both IRA and ROTH IRA has same contribution limit 6K/yr. To qualify for tax deduction in IRA, there are some qualifications: www.investopedia.com/roth-and-traditional-ira-contribution-limits-for-2021-5085118 - scroll down to 2021 Traditional IRA deduction limit. For a married filing jointly, the income limit is 105K. If our income is over that, we can NOT take tax deduction on IRA. For ROTH IRA, the income limit is 198K to qualify for contribution. If our income is over 198K, there is a process called Backdoor ROTH IRA that we can follow to contribute the money in ROTH IRA. (More on this: www.investopedia.com/terms/b/backdoor-roth-ira.asp). Physician on Fire has shown how to do this step by step here: www.physicianonfire.com/backdoor/
2. In a regular 401K, the money is contributed tax deferred. That means, we are contributing money without paying tax on it. That money is excluded from our income during our tax filing. But when we take the money out after retirement, each and every dollar that we take out is counted as our income on the year that we take out. So lets say that we take 60K out of our regular 401K after retirement, that 60K will be considered as regular income for that year and we need to pay tax on that. It is direct opposite in ROTH 401K. We will pay the tax now and contribute the money. So after retirement, we take it out without any tax. In general, if we are in over 12% tax bracket, regular 401K comes out ahead. But most people mix both regular and ROTH in their 401K's.
3. We maximize ROTH IRA before 401K, because in ROTH IRA we have complete control over our investments. You can choose to invest on anything including individual stocks. But with 401K, we are restricted to investment options provided by our employer plan.
Hope this helps.
@@InvestmentInsightsTamil Thanks much Viji very good explanation. Regarding Point 3, i did something different, which may be beneficial for others, i maxed out 401k then i asked my broker to roll over 401k to traditional IRA, roll over is possible for bonus amount and any 401k amount that you transferred from previous employer.
Thats great. Not many employers offer that rollover for bonus. Most of us have to leave the company for rollover.
Hello, Pls make a video for Indians to save tax.
I do not really have much idea on that. I have to learn on that first. It is in my To Do list.
Very insightful. I have a question, if we are in visa and would want to go back to India in 5-10 years, how the investment into and withdrawal from 401k would work and benefit? Do you have any examples to explain the pros and cons of investing vs not investing and the withdrawal vs non withdrawal at the time of going back to India? Thanks in Advance
I have a separate episode on 401K. But it does not cover all your questions. Will see if I can create one in the future.
Thanks Vijay!
@@InvestmentInsightsTamil thanks Vijay!
Sorry but one more question. If Appu is contributing $6000 into his non-working spouse's ROTH IRA account, can that be amount be counted as tax deductible ?
No. ROTH contributions are after tax. Its the growth that is tax free.
Sir, how does this relate to FIRE? If Appu has a 40% savings rate and reached 25X by the age of 40, then I am assuming he won't be able to withdraw from non ROTH accounts without penalty for living expenses from these accounts without penalty till 55-60. How to think about that?
There are work arounds for that. www.madfientist.com/how-to-access-retirement-funds-early/
@@InvestmentInsightsTamil Super 👌
does HSA can be done only until you have HSA Plan? Or can i still contribute to it even if i move out of the HSA plan.
You need to have a HDHP (High deductible health plan) to contribute to HSA.
@@InvestmentInsightsTamil thank you.
@@InvestmentInsightsTamil When I think more about it, I have more questions.
1. I am having HDHP this year and contributed 7000.
2. For next year if I opt of HDHP, I cannot contribute for HSA plan right?, But can I use the balance available in HSA for next years medical expenses ?
@@sparklefun7339 Yes you can. Not just next year, you can use it any time in the future. Many let it grow in an index fund and use it after retirement.
If Appu is in H1B and planning to return to India in 5 years, only 401k is useful. Other accounts are not beneficial. Am I right?
IRA can be useful as well if Appu is willing to manage the account while in India.
@@InvestmentInsightsTamil In that case Appu should also manage exchange rate risk.
If 1USD=100Rs when he withdraws he is lucky. If 1 USD=40Rs he will be in big trouble.
Maximizing 401k is key. If you do that for 20/25 years, you will have enough to take care of you after 60.
1) with that said, I think one needs to see if IRA are actually needed depending on your individual case. I disagree that one has to prioritize IRAs over 529s simply because 401k when done consistently will be a big bucket at 60 and social security kicks in also at 62.
2) I don’t do anything outside of 401k simply because kids education needs will come from 50-60 for most adults. Which means you need to start funding them when you are 40. This assumes you are going to help your kids with their college education needs. It can be upto 350k$/kid in private school and 200k$ in public universities. I would fund 529s over IRAs which is what I do.
3) funding for IRA also takes away money that you can/should invest in investment accounts (accounts outside of retirement accounts) to allow you to take care of you and family just in case you lose your job at 50 or around that. The need for $$ is highest from 50-60. Fund that 10 years in such a way that 10 times your yearly expenses are covered.
You are not helping yourself by overdoing retirement accounts and having 0$ in accounts that will act as a reserve to fund your needs when you are most vulnerable which is 50-60.
I am surprised to see this response from you.
Do you know that we can use IRA money for kids education? When IRA has both federal and state tax benefits, I do not really see a reason to use 529 before maximizing IRA - esply when 529 has strong restrictions on qualified expenses. It is a no brainer for me to prioritize IRA before 529.
Also, do you know that we can withdraw the contribution from ROTH IRA any time without any penalty or tax? If it comes to a situation like in #3, we can always tap into ROTH IRA contribution money. Again, it is a no brainer for me to prioritize IRA over brokerage account.
We should always try to maximize the tax benefit before investing in a taxable account.
@@InvestmentInsightsTamil I didn’t know one could use IRA to fund college education. I just read about it and that is good to know. Coming back to IRAs, I remember checking that RothIRA was not allowed if you are compensated higher than a certain value and hence I was not qualified for it. As to traditional IRA, yes one can contribute another 6k$/person outside of 401ks. Again, this is post tax $$ and putting it in a IRA vs 529 didn’t make any difference for me. Correct me where I am wrong?
BTW, I have heard about back door stuff and things of that kind with IRA conversion and I haven’t spent time thinking about it because it was convoluted.
I have to agree with you that it is good to do RothIRA if you qualify.
Scenario 1 - Traditional IRA contribution over income limit vs 529. In this case 529 is better as there is no tax on withdrawal for qualified expenses. Only drawback is qualified expenses - we cannot use it for any other purposes as that would result in penalty. With IRA - We have to pay tax on withdrawal. It is at disadvantage here. Which is why you did what you did.👍🏽
Scenario 2 - Traditional IRA contribution under income limit (
@@InvestmentInsightsTamil yes I don’t qualify for 2 or 3. Income limit disqualifies me. As to back door stuff, I didn’t see much fun in dealing with that convoluted process.
🤣 I understand.
For anyone who is interested in Backdoor ROTH IRA, here is the step by step process: www.physicianonfire.com/backdoor/
Sir,
My employer doesn’t provide me 401k match, should I still contribute?
Are you planning on settling in USA?
@@InvestmentInsightsTamil Currently on employment visa. 29 yr old!
For USA . Nama tamilnadu than sir
how was 93300 calculated?
Check the formula in the sheet. It is after reducing 401K matching contribution, HSA Max out, 401K max out. (125,000-5,000-7,200-14,500)
If employer does not provide HSA, can we get it outside ?
The requirement for HSA is that your insurance should be a HDHP (High deductible health plan). If your employer offers HDHP, they usually offer HSA along with that as well. Are you on HDHP plan?
@@InvestmentInsightsTamil Not HDHP and only FSA now. I am trying see if there is a option to open HSA account on my own
@@inout804 If your insurance plan is not HDHP, you will not be able to contribute HSA. Sorry.
Sir
.post videos for indian people as well sir..by the way your costume was good like a teenage boy...
90% of the videos is applicable for all. But there are few that I make for US audience as not many new immigrants know the benefits available here.
Costume - 🤣My wife and kids are the costume designers. It did go little overboard this time. 😆
@@InvestmentInsightsTamil Vijay - I hope, most of us liked your dress code in these videos. :) you should consider to change the profile picture in FB. you're looking younger than that photo. :D
@@raghuramachandranvijayaram4616 😂😂
Sir, we need Tax planning strategies in India also. ✌️
Pls Support
👇
I am not really that knowledgable when it comes to tax savings in India. Now that you have requested, I will look into that.
Thank you so much, for your concerns🙏
Dear Vijay,
Thanks for these great videos. Very informative. Can you also share some insights into whether it's better to reduce the mortgage debt or to invest? To be specific, I have a 15-year mortgage @ 1.99% interest. If I do decide to invest, should this be in regular brokerage or IRA?
Thanks again,
Shiva
If you can invest that extra money in an asset that return double the mortgage rate (4% in your case), then you should invest rather than pay off the loan. That is the logical thing to do. But we are all emotional. If paying off mortgage gives you better sleep at night, go for the paying off the mortgage.
I would always recommend to go with tax savings account first before going to brokerage.
@@InvestmentInsightsTamil Dave Ramsey wont like that. Your advise is to the point :)
@@InvestmentInsightsTamil Thanks. I was wondering if you know how to put the cash (not the yearly contribution but initial funding of the account) into a tax savings account such as Roth IRA. Thanks again!
@@sbkrish76 I am not sure if I follow your question. You can contribute the 6K to your RoTH IRA in as many chunks as you want like $500 every month.
My question was more related to initial funding (more than 6K) of RoTH IRA account through my checking account. Is that allowed or I open the account and make contributions upto 6K?