How Much Do I Contribute to My 401(k) If There’s a Match?
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- Опубликовано: 8 июн 2021
- How Much Do I Contribute to My 401(k) If There’s a Match?
Listen to how ordinary people built extraordinary wealth-and how you can too. You’ll learn how millionaires live on less than they make, avoid debt, invest, are disciplined and responsible! Featuring hosts from the Ramsey Network: Dave Ramsey, Ken Coleman, Christy Wright, Rachel Cruze, Anthony ONeal and John Delony.
I'm unsure if my 401(k) and IRA will provide a stable future. i need an approach that will align with my risk tolerance and financial goals, i set aside $1m to achieve this. Do you suggest i get into stocks or buy a rental property?
Look up dividend aristocrats. Pick six to ten from that list. Those companies have a track record of 25+ years of paying dividends. Also, its advisable you work with a financial advisor to help set up a well-structured portfolio.
I totally agree. Based on personal experience working with a financįal manager, I currently have ($2million) in a well-diversified portfolio that has experienced exponential growth from when i started. It's not only about having money to invest in stocks, but you also need to be knowledgeable, persistent, and have strong hands to back it up.
Your manager must be really good. How I can get in touch? My retirement portfolio's decline is a concern, and I could use some guidance.
I work with Sonya Lee Mitchell as my fiduciary advisor. Simply look up the name. You would discover the information you needed to schedule an appointment.
Thank you for the lead. I searched her up, and I have sent her an emaiil. I hope she gets back to me soon.
Retired Navy Senior Chief - retired at 40 twenty years ago with an "old school" military pension. With six deployments it was a challenging career, but I thank the Good Lord every month when that direct deposit hits.
God bless you sir
I got one of those from the Air Force. I like to call it breathing money. They give it to you for breathing.
I’m glad this video popped up in my feed. I was just thinking earlier today that I hadn’t seen this question asked. Of course I was thinking it, because I was trying to decide where I needed to fall into this spectrum.
I feel like a lot of stuff can happen in your life throughout the year, but if you maxed out your 401k and checked that box complete, you are winning
That's a tidy sum of money, for most people. I would have to contribute more than 25% to max out.
@@damondiehl5637 surely it is a challenge to accomplish, but if you look back when you are 60+ years old and know that you maxed it out every year since the first time you were able to, you can rest assured that you did all you needed to do
Have been maxing out my 401k and IRA contribution since i was 27 (i’m now 32). It feels good man 😊
@@duerf5826you are on your way to having millions and millions of dollars. You do not need to do anymore than that. If you would like a new challenge, try to max out that 401(k) in the early months of the year so that your dollars can spend more time in the market growing.
I always did the match, but saved the extra for the down payment on my house. Then when I got a raise, I upped my contribution to 10% and later then 15%. Started my career at 25 and retired at 55 with $1.3 M. Had hit critical mass and so kept everything in the S&P500. Now at 64, I have $3.1 million.
The pension plan of a company is NOT the company’s assets. The assets are shareholder owned, but the pension is managed by the company. If the company goes broke, creditors cannot claim the pension assets because they never belonged to the company in the first place.
The company my dad’s pension is from hasn’t existed in 30 years, but they still get a check every month.
This video is 2 years old, so something must have changed. My company match is with my ROTH 401K. They call it safe harbor or something, but is fully vested. This is also the first company I work for that offered the ROTH 401k, so I am new to it.
As of 2024, the employer match can be ROTH.
Excellent lesson
Wow. Seeing some of these low matches companies are offering makes me thankful for my companies 9.3% match 🙏 I just upped my contribution to 12%
9.3%! WOW. 6% is the most I ever heard of and that sounds generous.
The numbers can be tricky. I used to get a 50% match up to 6% of my salary. Now I get 100% up to 5% which is a bit better.
I'm in BS 4 and 6 and contributing 6% to my 401k, up to my company's match, is so lovely 😁 the rest of my 15% goes to HSA and Roth IRA
We are watching BS.
Dave being worth $200 million is not BS. What is your opinion on your wealth?
BS = Baby steps…
@@dannyrivera2 dave ramsey = Bull S
@@cameronmachado1774 Must love debt.
Keep the regular 401k and get the match, do the Roth Seperately ( fidelity my favorite)..
Which one do you recommend Fidelity?
Roth 401k will let you contribute much more than a Roth IRA
@@RomeoWhisky06 Yea that is $19K(401k) vs $6500(IRA)
You can do Roth in your company 401k Their match will be traditional but your contribution will be Roth. Then Roth IRA separate to get up to the 15%
My job only matches 1 percent 401k so i contribute 1 percent.... and put the rest of my money into a roth
People think that a pension is just free money, but it's not. The match you get from the 401K is what the employer would have contributed to the pension on your behalf. So what getting rid of pensions does is shifts the burden of managing that money to the employee. The employee in theory, would benefit more from it if they managed it correctly, but most of them don't
So, my company has a traditional 401k that has a match and they have an additional second structured Roth portfolio that can additionally be used. I think that was what he asked, if he should put 15% in the Roth portfolio and another additional 15% in the traditional 401k that has the match. Do you recommend max those out in baby step 4, or later in 6 or 7?
Step 4 is 15% of total household income into retirement, not including any matches.
Once you achieve step 7 is when everything is maxed out.
Hope that helps!
I’ve been doing 15% with my TSP matching 5% for a total of 20% for about a year now, not having the answer to the very question. Dave has never answered it for as I’ve seen. So glad to have watched this. I’ve been waiting for the answer! Hah
Check out the money guy show, they closely align with Dave but go more in depth on the investing side and do a better job imo. A lot of people do a hybrid strategy; baby steps to focus on getting out of debt, FOO to build wealth.
@@classics-wz1bz I watch their show a lot actually!! Love those guys
Doing the same with my TSP. Only regret is I wish i would have done it years ago.
@@Rick-of6gxwhat is TSP
Ramsey is my main man! The advice is LIFE CHANGING! Looking forward to being a Senior Citizen Millionaire!
You need both traditional and Roth to be diversified. Maxing a traditional 401k then adding and maxing a Roth IRA makes sense for most people.
Max a Roth 401k, the employer match is pre-tax 401k, and also max your Roth IRA. Your tax bracket at retirement will be near zero, and your Medicare payments will be low, and your Social Security checks if taken before 67 will likely not be taxed. Also if retire before 65, you can claim Obamacare and likely get it for free with the tax credits. That’s why Roth’s are so awesome.
That’s not diversification. Diversification is what funds the money is invested in.
To answer this question, he MUST know this man's income. You cannot determine that Roth is better than traditional without knowing his current effective tax rate. For MOST people Roth is better, but if his effective rate is higher now than it is when he retires (which it is for MOST people), lessening tax liability now and contributing more (because its pre-tax) will benefit him more when he goes to withdraw when he retires at a lesser tax rate. He will have more money accumulated and pay a lower percentage in taxes.
This question is a little tricky because you can make the argument both ways. The counter argument is he may make too much to contribute to a Roth IRA so Roth 401k is his option to build up tax-free money. A back-door Roth contribution may not be an effective strategy if he has an IRA already (although he can roll the IRA into his 401k and eliminate that issue). The other benefit of the Roth 401k is he can roll the Roth 401k to a Roth IRA when he retires and never have to take an RMD if he doesn't need the income.
The point of this comment is, you need more information to make a recommendation in this situation.
Roth 401k isnt better all the time - traditional is actually a better option if you are a higher earner as it drops your tax bracket and then later one when you hit retirement you are most likely earning less so will be in a much lower tax bracket. sometimes I wonder about Dave's advice
I agree. He doesn’t cater to high earners. It’s a different ballgame when you’re making 5X or more the national household and plan to keep making more.
He's speaking to the masses.
What would be considered a high earner?
Thank you for saying this. It blows my mind how his advice is above surface level and generalized to the extreme. Even the way he says “Roth” as if it is an investment account and not just a tax type.
I agree with you. I put into both, but if I were to put everything into a Roth, I’d be paying significantly more taxes at the end of the year. I get Roth is better because it grows tax free, but difficult to not get some of the tax benefit early.
Government worker here. I have a pension. U.S. military pension as well. And, a 457 account that I max out every year. And IRA through Robinhood with the little 3% match of theirs.
401ks were pushed in the 1980s because private employers no longer had to obliged with this Federal requirement, now it is optional. Most city/county governments still offer pensions as well as 457 plans which are almost identical as a 401k but with a perk of withdrawing money at 55 years rather than 59 1/2 like a 401k. Some city/county governments don't match at all while others do match a portion of your overall income.
Social Security is the last social safety-net that the Federal government mandates employers to follow. And quite frankly, without social security in place, many irresponsible people would either be living on the streets and/or living with their children.
My company match 5% max.
I do 5% on traditional and
10% on Roth.
Why not all Roth?
@@DH-lm6khcuz I get 100% back on 5% match… that’s free money dude
@@DH-lm6kh Its free money...
The employer should be matching you regardless of how you invest your contribution. In the past, the employer match had to be Traditional. As of 2024, the employer match can be Roth, as well. But there was never a requirement for you to invest in a Traditional account in order to get the employer match.
Most companies match half of what you put in up to a certain percent.You're getting free money!!
Always max matching because it's free money. Even if you withdraw early, the penalty won't be more than 50%
Pensions are not assets on a companies balance sheet. they are liabilities that have to be constantly funded by assets on the balance sheet. When corporate shareholder value (stock price) is the goal, long tail liabilities like pensions aren't optimal for the company so they let you as the individual take the risk in the form of a 401k so they don't have to.
I think he means the contributions made over the years. If the company goes belly up, they keep that money.
@@offerskirksey2255 right, but those contributions are funding a liability (too pay out retirees in the future) on the BS it can only be 'counted' as an asset if the fair value of contributed assets is greater than the PV of its liabilities. to discount those liabilities requires a number of assumptions but regardless of the accuracy of them most pension funds are not well funded and why corporations moved away from them. Because it's very difficult to manage those type of long duration liabilities especially if your not a Financial institution.
@@offerskirksey2255 wrong. The pension is not owned by the company, they only manage it. If the company is liquidated due to bankruptcy, the pension plan cannot be claimed by any creditors.
@@theoneonly5368 you are wrong. Google it again and you will see that, in most cases, the pension is liquidated. Ever heard of Enron? When companies fail, those contributions are gone.
My company has both a 401k match & a pension.
I’ve always been confused as to whether Company Match happens if you’re investing into a Roth 401k, or if it’s only for Traditional 401ks.
Yah you get the match it just gets divided… so when you roll it over the match will go to a traditional IRA and the Roth goes to a Roth IRA
Probably you can choose either, but the company match funds will be done as traditional.
As a soon retiree, keeping my 401k on course after a rocky 2022 was my top priority, but I have been reading of lnvestors making up to 250k ROI in the stock market, and it’s overwhelming. any recommendations to scale up my ROI before retirement will be highly appreciated.
The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
Having an lnvestment advser is the best way to go about the market right now, especially for near-retirees, I've been in touch with a coach for a year now mostly because I lack the depth knowledge and mental fortitude to deal with these recurring market conditions, I nettd over $320K in profits so far, Its clear there's more to the market that we avg joes don't know that Investment advisors know
Accurate asset allocation is crucial, and some individuals use hedging strategies or allocate part of their portfOlio to defensive assets for market downturns. Expert guidance is vital for achieving this. This approach has helped me stay finan-cially secure for over five years, yielding nearly $1 million in returns on invest-ments.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Y’all r transparent AF 😂
I have a pension with my employer and it sucks. They make me contribute 9% of my paycheck to it and I can’t even manage it. They invest that money but I’ll rather invest it myself. Pensions are not even that great anymore.
I have a generous pension and also have a matching 401k through the government. If I am maxing out my 401k at $19,500 and also have my pension is that overkill?? Most people have to rely on just a 401k but I have both and since we also pay into Social Security I have 3 income streams in retirement.
No it is not overkill if you are out of debt and have check all the boxes including living comfortably by spending some of your money. If you have a bunch of disposable income left over, enjoy some of it or even look into a ROTH IRA. The more you put aide, the more you will have in the future.
Watch out for taxes in retirement. Look into converting 401k funds into a Roth IRA earlier than your retirement. See if you can also take a lump sum pension payout. Interest rates are so low now, you’re net present value lump sum may be quite impressive. Put that in an IRA and you can leave that to your heirs, unlike a pension.
Mine is you have to do 5% to get 3% max. Do I contribute beyond that or any overage I place somewhere else.
As long as the funds are acceptable, yes, contribute as much as you can. Your 401k gives you a much larger "bucket" to put money in toward retirement than an IRA ($22,500 versus $6500). Your IRA give you more control over which funds/stocks to put in it, but most 401k plan have good choices, too. Max out your 401k and if you still have money left to invest, put it in an IRA.
My company has a 401k match, and also a roth 401k. Do I max the 6% match and then do 9% roth401k?
If you contribute to Roth 401(k), company 401(k) match goes toward your traditional 401(k) balance.
If you contribute to traditional 401(k), company goes toward your traditional 401(k) balance.
Deciding to choose contributing to Roth 401(k) or traditional 401(k) is largely dependent on your tax bracket: if in relatively high tax bracket, favor contributing to traditional 401(k); in in relatively low tax bracket, favor contributing to Roth 401(k).
Do you know your current Federal Tax Bracket and if so what is it?
@@alrocky mines 24%. I do 10 percent in traditional and 5 in Roth. I’ve always owed quite a bit at the end of the year… if I didn’t do this, I’d owe quite a bit. I get early pain for future gain, I’m just not there yet.
It is not easy to max out your 401 K, HSA, 529 plans and emergency savings. You will live humbly and not have as much as others in your daily life. The flip side is that you will have more security when you get older.
If at all possible, at least contribute enough to get full matching. Then as you get raises, slowly up your percentage. I barely had anything for five years and then the balance increased over the years. 100% in the S&P500.
There are a number of other videos on YT about how the first $100k is the hardest.
100k is 25% of the way to a million. It takes 8, 9, 10 years to get to 100K, but compounding really starts to kick in and the next 100k happens quicker and quicker. The jump from 900k to a million happens in less than two years (this assumes a rate of return of 8-10%).
3:00 See Illinois, Chicago, Detroit, Kentucky, Dallas PD, etc….
Put everything on your Roth! 15% then get your 3% match that goes in the traditional 401K. That’s what Dave says
I thought he said match is better then roth and roth is better then traditional.
if my company matches 6% should I max out to the match they offer then do the rest in my company's roth 401k they offer ?
@@sangeilli5 I would
I’m 27 and just starting up a 401k I make 17.53 an hour how much should I contribute before and taxes and how much after taxes??? I’m in Nc n need help
I recommend 10% minimum. And at least company match amount.
Say your company matches to 6% on pretax 401k...do 6% traditional, 6% Roth for a total of 12%.
You will never regret putting in extra
Get the matching and if you don’t own a house, save for that down payment first. After house, increase contributions as you get raises.
We are forced to put $73,500 per year into a pension. It sucks because the rate of return is not near what our 401Ks are.
My wife has a similar set up, they take 7% by force and pay some bonuses with common stock shares that take 3 years to vest. Its a racket
Can't wait to do my debt free scream
The loss of pensions and just doing a 401k match is smart for businesses. Not many people can afford to do a 401k so they lose and companies win
One reason I like the 401k plan more than pension plan is now I don’t have to work for the same company for 20+ years. I have the freedom to work anywhere I want and invest in my 401k which goes with me😊
It is a lot simpler for companies to hand retirement accounts off to a third party administrator.
If you follow the Ramsey Baby Steps, you will more than likely find money in your budget to use for retirement investing. Creating a budget and understanding where your money is going is a huge step in the right direction. If you are leasing cars and maxxing out credit cards and buying boats because you want one, that's probably not going to turn out well.
Sooo, I have 16K worth of debt and then my job offers 401K match at 3% and a HSA. I haven't started my budget plan yet, but I'm just wondering if it would be wise/ responsible to add atleast 3% to both the 401K and the HSA if I'm still in babystep #1?
Get the 3% match and focus on paying off your debts
I left my 401k at 5% for the last 19 years and now I pumped it up to 20%. Wish I pump up my 401k long time ago, sometimes you forget. But it’s good that I just let it sit and let the money work for you with the match
I'd finish BS1, then do the match, then focus everything else on debt.
I'd do 3% and if you think you'll need to see a doctor regularly and it's not a 100% covered visit, I'd do the HSA to help with the deductible.
Dave has other videos on this subject. He recommends focusing on eliminating the debt. Throw everything you can at it and get rid of it. It should take only a few months to get rid of your debt and get your $1000 emergency fund in place. It's all about the mindset. That's why he says to attack the smallest debt first, instead of the debt with the highest interest rate.
One of the great things about a 401k over pension is the money you didn’t spend can be passed on to the next generation.
Take the pension payout as a single lump sum, and roll it to a Traditional IRA. That IRA can then be added to a will.
@@MD-pz3cnif you do that, I’m assuming the lump sum would be taxed as well as you only getting 50 cents on the dollar for the lump sum.
@@rodrigok1220where does the 50% tax come from?
@@mdeang08 I’m guessing the penalty to take the lump sum is significantly reduced. Just saying, that wouldn’t surprise me
@@rodrigok1220 I think the original comment was referring to retirement. When you retire with a pension, taking the lump sum as an option has no penalties.
Dave said matching portion cannot be Roth? What does that mean?
The company only contributes to your traditional 401k. For the roth they would have to pay taxes on the match.
Your contributions can be in a Roth account, but the employer match had to go into a Traditional account. Your 401k can consist of two subaccounts, one is Roth and the other is Traditional.
This has changed for 2024. You can specify that everything goes into the Roth side. I don't know if the employer has any say in the decision. Check with your 401k administrator.
In my experience 401k have really bad holdings all target date funds. Take control over your investments do the homework
The holdings (investment options) are the options your company lays out to simplify investing for the employees. Most people do not want to learn about how to manage their accounts so they just let their money sit in a “target date fund.” This is a passive approach which I don’t recommend as investing is not difficult. With these funds, your paying fees to hold that fund to your broker. Depending on your broker (vanguard, fidelity etc.) you can convert your 401k account to a brokerage link account allowing you full control of many investments options. I don’t believe you can buy individual stocks but indexes, ETF’s, bonds etc, you can purchase.
@@theflightsimulationexperie6894 I agree. And my company's 401k allows employees to buy single stocks.
That sucks for you. Complain to HR to get you more choices.
Tony Robbin’s new book discussing all kinds of fees we are paying in our 401ks and how those fees can affect our retirements by hundreds of thousands of dollars over the long run. I’m iffy on 401ks now. I’m trying to analyze mine to see how much in fees I’m paying.
We got penalized this year when we filed our taxes because we over contributed. Does anyone know what the penalty is for that?
I have both 401k AND Roth 401k my company matches them both, why did Dave just assumed they didn't ?
It doesn’t matter if your contribution is traditional 401k or Roth 401k, the company’s match is put in the traditional bucket and taxed in retirement.
Where do you work???
@@tehias how does that affect compound interest?
@@marcenelj no effect, the whole stack is pre tax, whatever you pull out monthly in retirement will be taxed as income.
I got a first world problem. At 15%, I’ve maxed out at the tax deductible portion at about 6 months into the year. Should I just save into a normal investment account?
Are you missing out on the company 401(k) match by contributing $23k too soon?
If you have maxxed out your 401k, you should contribute to an IRA. If you max that out and still have money to invest, it should go into whatever other investment vehicle you have (brokerage account, money market account, CDs, Treasury notes, high yield savings account, etc.).
The money your company matches in your 401k. Will that just pay for the taxes when you retire? Will i have more money when I retire in a 401 or a Roth
Little puzzled by the first question. For a normal 401k, you pay taxes on profits when you take the money out in retirement, so if you have say $1 million by then, you'll be paying hundreds of thousands in taxes off it. For a roth of any kind, you pay taxes before putting it in, so you may be paying $1-2 thousand a year in taxes assuming you max it, but when you retire with $1 million, that entire million is yours. As for if the company match pays for the tax amount, it has nothing to do with it really.
Your second question, whether you should retire in a traditional or roth, it depends on which tax situation is more beneficial. You can use a basic calculator to help (google "roth vs traditional calculator"). A great basic guideline to use is age; young people starting their careers usually aim for roths (that money invested gets HUGE by retirement, and a roth avoids the taxes). At older ages, generally the traditional is recommended.
There is no "Roth or 401k". You have a Traditional 401k or a Roth 401k.
With a Traditional 401k, you deduct your contributions each year at ta time, but you pay tax on everything as it comes out of the account in retirement.
With a Roth 401k you fill it with after-tax dollars (no deduction at tax time), but it all comes out tax free.
If you have $100k in a Traditional 401k, you only really have about $78k. $22k will have to be paid in taxes.
If you have a Roth 401k, the entire $100k is yours. So you gave up the tax benefit as you put money in, and enjoy a tax benefit as it comes out.
As of 2024, both your contribution and the employer match can go into the Roth account.
I don’t know if this is a legal question or why I was signed into 401(k) and for the first 10 years they would not match my money I paid in because I had a two dollar pension coming from the company from years back is that legal?
What happens if the company goes broke before you fully vested in 401k
Recently retired and unsure if my 401(k) and IRA will provide a stable future. i need an approach that will align with my risk tolerance and financial goals, i set aside $1m to achieve this. Do you suggest i get into stocks or buy a rental property?
Look up dividend aristocrats. Pick six to ten from that list. Those companies have a track record of 25+ years of paying dividends. Also, its advisable you work with a financial advisor to help set up a well-structured portfolio.
I agree. Based on personal experience working with a financįal advlsor, I currently have $2 million in a well-diversified portfolìo that has experienced exponential growth from when i started. It's not only about having money to invest, but you also need to be knowledgeable, persistent, and have strong hands to back it up.
Your advisor must be really good. How I can get in touch? My retirement portfolio's decline is a concern, and I could use some guidance.
I work with Sonya Lee Mitchell as my fiduciary advisor. Simply look up the name. You would discover the information you needed to schedule an appointment.
I searched for her name on the internet, found her page, and reached out via email to schedule a conversation. Thank you.
MAX IT OUT!
How does Dave come up with 15% income money to invest?
It’s what he found allows for generating wealth while putting extra money towards Baby steps 5 and 6. So you do 15%, then you save for kids college, then you pay extra on the mortgage. If you have no kids college and the house is paid off, he has you fully max out retirement. But there is no magic metric. It’s just a simple generic formula to follow to accomplish goals.
Don’t matter to me.
I was saving/investing half my income biweekly for years.
Good question. I think it's roughly based on the amount of time you live in retirement versus working years.
So did he recommend roth 401k over the traditional 401k?
I'm confused I thought he said if the company matches do the match over the roth, and if they don't match do the roth. my company has a 6% match and they also have a roth 401k what do I do??
@@sangeilli5 Just ask them. Some let you contribute your money in the roth and they put it in the traditional. Or you have to put the 6% into the normal, and you put the rest into the roth.
Match beats roth beats traditional
@@sangeilli5 He was saying the employer match has to go into a Traditional 401k account. Your contribution can all go into a Roth 401k. It's all the same 401k, it just has two sides to it. Say you make $100k gross pay. You sign up to contribute 15%. Your employer has a 3% match.
$15,000 of your money goes into your 401k on the Roth side
$3000 of the employer's money goes into your 401k on the Traditional side.
In 2024, all of it can go into the Roth side, if you so desire.
Yes
What happens when you quit a job where u had your 401k ? Im 23 been having one since I was 18 and I recently put my two weeks to focus on school so I won’t be working for a while. Someone help me :(
Nothing happens, but you can roll it over into another retirement account.
If you follow Dave, he recommends rolling it into a Roth IRA for a younger person like yourself.
If you search Dave’s videos on this topic, you’ll find a few videos answering the same question too. Good luck!
@@Cravz69 thank you 🙏🏽
In put 15% on my traditional 401K. My earnings today are $135M per year. I will retire at 59 and my final year I will work at Target for only 1 year until filling my taxes. I will be on a way lower bracket before I take my money from my 401K
Lie
One of the companies I worked for, the old timers were upset they did away with pensions and instead went to 401ks. From what I know and understand about both, I'd rather have the 401k. The pension is set and managed by the company, little room for growth. The 401k, depending on how much I decide to put in and what I decide to invest it in, I have unlimited potential. In my mind, I make more from the 401k. Granted, I'm speaking as a younger person who still has 25-30 years to go. So I'm biased on it.
What you missed was, those old timers had both!
You know not of what you speak. Pensions were generally FAR more generous than 401k’s. Furthermore, they put all of the investment risk onto the employer rather than onto the employee, like 401k’s do. Pensions often replaced a high proportion of an employee’s income in retirement, and many/most pension plans heavily or solely weighted an employee’s latest and therefore likely highest earning years. The value of a typical pension was likely several times if not tens of times higher than that of a typical 401k. Why do you think all companies out there have been getting rid of pensions and replacing them with 401k’s? Because it’s cheaper and less risky for them and the labor market as generally been strong enough in employers’ favor to take away from employees this really expensive benefit.
Wife has pension I have 401k. I feel safer with a 401k
The value of a typical pension was and is likely several times LOWER than that of a typical 401k. FIFY.
If your savings rate is high, meaning you're actually contributing money to your 401k. It's by far the better option. The problem is too many people get caught up in the analysis of rates of return and fees, then never actually put money into the account. 8% vs 9% or .1% fee vs 1% fee doesn't mean anything if you don't actually put money into the retirement accounts.
I put in 18% and my company puts in 12%. All traditional.
Why are you parking your personal contributions into a traditional? One of the options is better than the other.
@@mr.johnson3568 As opposed to a Roth? Because my wife and I are in crazy high state and federal tax brackets right now.
@@edhcb9359 but in a Roth the growth will not be taxed, does that not make it cheaper if you avoid big payment (capital gains taxes) in the future?
@@webfreakz Assuming the tax brackets were the same for me in retirement as right now, then mathematically there is no difference in the net amount I would receive. Doing one vs the other doesn’t matter. But since the money I put into my 401k is currently avoiding 32% federal taxes and 9.3% CA state taxes I know that I will be paying less taxes by deferring them because when I pull the money out I will be living in a tax free state for retirement and pulling the money out at a slow rate that results in a lower tax bracket. Make sense?
@@edhcb9359 got it! hope it works :) all the best! cheers
I prefer the 401k over the pension. I see a pension as a promise and I've seen promises broken. The 401k is mine and yeah my responsibility.
My coworker made a million on the 401k and he told that the pension from our work sucks so he told me pump up my % in my 401k, now I invested 20% in my 401k but I let my 401k was sitting at 5% for the last 19 years, it’s good that it was at 5% but I regret not pumping it up sooner. Good thing is that I started my 401k in my early 20’s
I have a small pension through work and max out my 401 K and HSA contributions. I also put away money for both of my kids college funds. After mortgage and taxes there is not much left to live off of.
What is the constribution if there is no match and my house and cars are paid off?
Are you assuming good investment choices and low fees or terrible investment choices and high fees?
Dave would advise you to contribute 15% of your gross income toward retirement. If you can contribute more, great, but time has proven that 15% will more or less meet your needs in retirement.
Also, if there is no match, you should maybe look around for a different employer. They are not keeping up with current practices and you may be not getting your worth from them.
Im putting 4 percent as i get older i will keep putting more percent but for know thats fine
This subject has always confused me. Is it 15% for me and 15% for my wife or is it 15 from our total income.
15% of total household income
Contributing 15% of income to retirement is a 'placeholder' percentage. Contribute as much money as your income and budget allows with goal to reach the max $23k to 401(k) and $7k to Roth IRA.
I thought matching was if I invest 5k into my 401k boss puts 5k too? I’m a total rookie someone correct me
Your particular 401(k) plan may or may not offer a company match and that match may typically range from 1 to 5%.
Companies typically match a percentage. Example: a company will match 50% of your contribution up to 6%. In other words, if you contribute 6% of your salary, they will contribute another 3%. This varies from company to company.
My company will only match 50% up to 3% making their maximum contribution 1.5%. Seems rather lack luster and am having second thoughts on investing in it rather than just putting the money in a HYSA.
It's still 50% min ROI vs a much lower ROI in HYSA or any other investment vehicle
What if it’s a government job pension? A lot safer, right?
Not necessarily. There are pension funds that are terribly managed (see Kentucky) and even with pensions, you still want to contribute to your Roth IRA/457b/401k (even if they don’t offer any matching) to retire comfortably.
If I can't contribute 15% to my 401k because it will exceed the $23k limit, what's the next place to put money?
An IRA. You can contribute $7000 in 2024, $8000 if you are 50 or older. Probably a Roth IRA. If you max that out and still have money to invest, it should go into whatever other investment vehicle you have (brokerage account, money market account, CDs, Treasury notes, high yield savings account, etc.).
I make a middle class to upper middle class wage not sure how I’m just gonna up and throw 15% of my money in 401(k). It’s like I’ll have nothing left in my dang paycheck. Currently I have 6% in my 401(k).
Pay off your debt…if you’re making upper middle class income then you can put 15% into it. Stop whining.
Work through Ramsey's baby steps. It will change your life. The first time I heard his show on the radio and a couple did a debt-free scream, I was hooked.
@@damondiehl5637 well, I wouldn’t wanna do that I don’t wanna be accused of whining
@@artieartya Debt free screams are fun. No whining involved.
I think I take for granted I have no debt
What is the maximum contribution someone can put into a 401K annually?
2024 $23,000 + $7,500 if 50+
So if the company matches 6%, then put 6% into the 401k and 9% into the roth401k to make 15%? Won't that mess with the compounding of the roth401k?
Great question.. And my wife work for Walgreens. She picked the Roth 401k. Walgreens put in their match in her Roth 401k account, not the traditional.. when will she paid taxes on the match? At retirement?
@@marcenelj I didn't even know you had to pay taxes on the match since it's not even money that YOU put in. The company should pay the taxes on it since it was their money that went in.
@@luminous6969 Boy you guys are so ignorant 😂😂
@@marcenelj You should double check that: Company 401(k) match goes toward wife's traditional 401(k) balance not her Roth 401(k) balance.
You can roll it over into a Roth IRA and get it tsx free after 59 1/2.
Thank god for my pension, now that companies are 10 times richer than 80 years ago the pension just doesnt make sense...says only rich owners.
Recently the trucking company Yellow went belly up and over 1,000 employees lost their pension. Suuucks
If you are in the 30% tax range wouldn't it be more beneficial to max out a traditional 401k to reduce your taxable income?
Probably not based on a bunch of test calculations I ran. You save money on your contributed amount, but you lose on the interest earned amount which is probably a whole lot higher.
In 2008 my 401k lost 30 percent.
It should have rebounded, unless you panicked and took it out
@Eddy Edwards he's talking about the 2008 crash, your talking about last year.
That’s why is recommend to have 2-3 years worth of expenses in cash reserves while on the retirement phase so that people won’t panic when the markets go down drastically since historically they will always come back up.
I take all the match and put everything else in my privately managed portfolio.
It sounds like you are giving away the opportunity to have a lot of money in retirement that cannot be taxed. You can contribute up to $23,000 per year in your ROTH 401k. You can only contribute $7000 in an IRA. That's an extra $15,000 more, every year until retirement.
@@damondiehl5637 a Roth 401k isn’t available and everything goes to the same type of stuff, except for bonds. I haven’t really bought bonds with extra money.
Putting money in something you can’t touch for 20 maybe 30 years isn’t something I’m interested in at all.
It honestly blows my mind the stupid stuff people will do to avoid paying taxes. That’s the only incentive, not paying tax.
Always match your 401k at the minimum.
As of January 2018, the Federal Government stopped pensions for DOD personnel, claiming that it was too expensive going forwards and giving military personnel the option to take something with them if they choose to leave before 20 years of service. I would say that the rate of companies not offering pensions is way higher than 78%, probably closer to 95%.
No matter.
I never depended on my pension or social security when planning my retirement and was never concerned.
Pension was cut and frozen from over $5k/mo. to $2400/mo..
No issue and retired last year at 50.
Have pension,401k,Roth IRA,savings,tax free annuity,investments,passive income, homes paid off,zero debt,etc..
But Roth is capped at like 6k. So I’m confused. Traditional is like 23k so that makes more sense
Roth 401k has the higher limit. It is different than a Roth IRA.
@@JiisTube thank you !!
2024 contribution limit for 401k is $23k ($30.5 k if you are over 50)
2024 contribution limit for IRA is $7k ($8k if you are over 50)
Those are the limits for each type, regardless of being Roth or Traditional. You can have it all in Roth, all in Traditional, or a mix.
NO! Max out contributions or get the best match! Just pick the index funds that correlate with sp 500 In 10 years you will be glad you did it but only pull out when at all time highs don’t pull the money when market is down and fake news scares you to pull out. I started matching in September 2022 (Market Bottom) and I am up 24%! When you are close to retirement then think about changing the product to something less volatile
should've been roth three years ago, now those millions about to be over the top TAXED
Roth IRA and Roth 401(k) have been around more than three years.
@@alrocky not talking about when roth was invented. i'm saying the caller should've used it three years ago
@@BrianErwin fair enough however caller didn't provide enough information [his salary/tax bracket] to determine if traditional 401(k) contributions or Roth 401(k) contributions would be better suited for him
The reason they stopped doing pensions is greed plain and simple.
If people don't pay into their 401k, they don't have to match.
I didn't invest anything in 401ks or IRSs. I made a fast fortune. I went into Art dealing with Hunter Biden. We sell $ 500,000 original Hunter Biden Art pieces to anonymous buyers. We have made a fortune by giving buyers access to " The Big Guy".
should be pre-tax into 401k not roth post-tax. This way you lower your income to be tax less. Yes, you will be tax later once you retire but you will be in lower tax bracket by then so not much tax on your 401k. Not sure why Dave recommend roth at all. Plus company would only match traditional 401k anyways. My thing is max out 401k, then traditional IRA, then put more into FSA/HSA to lower your current income to be taxed! Then by then roth for post tax!
How likely is it that you will actually be in a lower tax bracket? You will probably be in the 22% bracket, either way. I would rather have all the growth be tax free in retirement than lose almost a quarter of it when I need it in retirement.
Only getting a match if it is a Traditional 401k is not true. The employer match has to be classified as a Traditional contribution, you your contribution can all be Roth. That is how I do it.
Greed is why they did away with pensions
Far less of a hassle to hire an administrator. Greed depends on whose shoes you are standing in. If you owned a business, you would do it, too.
😇😇😇😇😇😇😇😇😇😇😇
Thumbs down because Dave cut the guy off.
lol if it’s match - you get that money from your employer. That’s the best thing you can do. It’s not about “dependence” it’s about employment perks.
So dumb
Odds are you will have a much lower income in retirement due to hopefully having no mortgage or car payments. Most retirees pay no federal income taxes. Use a traditional 401k NOT a Roth to take the tax break now and pay little to no taxes in retirement. For 90% of the population Roth is the absolute wrong answer
No it isn’t lol.
@@AxcelGamer97 multiple people told me the same answer. But most recommend Roth.
@@BrooklynCapo The Roth is a better option for multiple reasons. One of the biggest is that it simplifies tax planning in retirement by a huge margin. That ends up making it cheaper for the retiree.
@@AxcelGamer97 the Roth is the wrong answer for multiple reasons including the fact that the vast majority of people that are retired live on a fraction of what they were making while working. Most retirees pay 0 in federal taxes after retirement
@@TheTurdballs420 how about state income tax? I'm in California, don't plan on retiring in California but I will be working in California until near retirement.
😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂
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I work in count government and have a great pension. Companies just want more profit and don't want to give you anything anymore. County goes broke, they still owe our pension. Don't give bad info dude
The vast majority of 401k administrators offer mutual funds, usually target date funds, which start out investing aggressively and become more and more conservative as you get close to retirement. If one company in the fund goes out of business, it is no big deal. The pool of county employees compared to regular business employees is tiny. Chill.
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My company match is Roth
Why is he blaming unions for mismanaging pensions? They don’t control pensions.
The old union vs non-union. It does not hold water. By that logic a Chevy Malibu should cost 50K and a Honda Accord should cost 15K. But magically they are really close in price.
Because most people don't know that and it serves his anti-union narrative.
😄
@@justinacase2623 Yeah, and which one is more reliable?
@@justinacase2623 which would you rather have in your driveway at 150k miles?
What a dumb question.
This guy is fountain of misinformation. Roth is better than traditional? Yikes.
how isnt roth better than traditional? u probs have a traditional and trying to self justify your loss. Yikes
@@m1a1abrams3 yup you’re right, I make 500k a year so I’d rather pay 35% payroll tax now using roth rather than 0% at retirement via traditional. I’m so trying to justify my bad plan lol.
And people like you with zero critical thinking skills is what’s dumbing down society,
I guess it makes you good at following orders. You be you.
@@Omikoshi78 didnt know a majority of people in america make over 500k a year. also, can you predict the future? can you look up how taxes back then and the current debt can influence taxes in the future? are you smarter than dave ramsey and warren buffet? cute 500k a year when people richer than you who say roth is better than traditional. theres a reason i take financing classes and say roth is better than traditional. yikes.
but hey warren buffet, arguably the smartest investor, is wrong right? people like you who cant think critically are whats dumbing down society. sit down
@@m1a1abrams3 I wouldn’t put Ramsey and Buffet in the same category. Buffet is orders or magnitude smarter.
If the country desperately needs additional money in the future they may just tax Roth withdrawals and/or cut pensions. Then what are you gonna do? It goes both ways. What’s certain today is I can pay 35% tax today or 0% tax later. There’s no use planning around what if’s.
Besides I have both covered as a hedge. 3M in traditional and 4M in Roth. The only reason roth is larger is because of contribution limits and how mega backdoor works.
People like you rather die poor than adapt. Keep parroting nonsense because that’s all you seem to do. My dog has more original thoughts than you.
And this is why im a democratic socialist. In which universe does a country go backwards in terms of safety nets for it's workers. Dave knows it's crazy. That's why he went on a mini rant after demonizing unions and pensions and talking about "you control your destiny." Anyways....
Venezuela would be the ideal country for you to live in.
@@susiegee76 or North Korea....
@@susiegee76 Canada, Norway, Finland, Netherlands…all great countries.
@@insideoutsideupsidedown2218 North Korea is not socialist.
@@susiegee76 no thanks. My Nigerian-American Muslim behind will remain here in America where I will have many children and raise them in the tradition of great Americans who fought for the liberation and dignity of the working class. It's American to have different ideas and beliefs. If YOU don't like it go to China or Saudi Arabia where their citizens' thoughts and beliefs are micromanaged by their governments. Bye 👋🏾
when the company goes broke, chances are your matched contributions are in company stock, so yes that money goes away
I have worked at exactly one company that had an ESOP.
Instructions unclear, just went all in on crypto
They did away with pensions because it benefits the wealthy company owners and makes employees less of an expense. Don't kid yourselves people. Losing pensions is not a benefit to workers. Think about that for 2 seconds lol how stupid has everyone become.
This is why you dont take financial advisor type advice from this guy. You CAN split Roth and traditional contributions to the 401k. Stop listening to Dave on these things and get an advisor!
Why invest in a 401k when you can just buy Bitcoin? You’ll be your own bank and have asymmetric upside in the market.
401k’s are the most heavily taxed and riskiest investment you can put your money in. I’ll never forgot how my uncle retired in 2009 and lost over 40% of his 401k value plus taxes..... that doesn’t sound to wise to me. 401ks are a boomer generation investment not a millennial one.
Cause Bitcoin doesn’t have history since the late 1800s with history of nonstop growth lol (Dow Jones)😂👍
The 401k itself is not the investment...also they are taxed at long term capital gains, same as any other investment other than a Roth IRA. Sorry to hear about your family getting wrecked in the financial collapse, but as long as your aren't liquidating the whole thing and just taking what you need during a downturn, it will eventually even out and probably be at a higher balance depending on your drawdown rate.
@@Justin11897 True understood. It’s definitely a personal preference. I just feel like when you invest in a 401k you’re just kissing your money good bye and trusting Wall Street to take care of your money. Once that happens good luck ever getting your money out before retirement without being hit with astronomical fees. Don’t even get on yearly management fees.
@@Wahchicawah Regardless it is still the most heavily taxed investment. The worse part is you give up you’re entire control of your money to Wall Street and wrap it up taxes and regulations.
What do you do with bitcoin once it has gained in value?
Republican greed is why no more pensions