155 A 401K CAN BE A GREAT WAY
SENSE FOR EVERYONE.
I TALKED TO A FINANCIAL
PROFESSIONAL ABOUT WHY YOU MAY
WANT TO SKIP THE CONTRIBUTIONS.
>> MIKE, THANK YOU FOR JOINING
US.
WE WILL HAVE OUR FIRST
QUESTION.
HOW CAN WE DETERMINE IF A 401K
IS THE RIGHT INVESTMENT FOR US?
>> JEFF, I THINK WE HAVE TO
START FROM THE FUTURE.
LIKE IN RETIREMENT AGE AND WORK
BACKWARDS TO TODAY AND LOOK AT
THE TAX IMPLICATIONS.
TRADITIONAL 401(K)S ARE
TAXABLE.
AND PEOPLE THINK YOU PAY TAXES
BUT YOU DON'T.
IF YOU MAKE $75,000 A YEAR AND
PUT A 10% CONTRIBUTION INTO
YOUR 401K YOU GET TAXED ON
67500.
WHAT TAXES YOU PAY.
THE OTHER PART OF TRADITIONAL
401K THAT IT CAN CAUSE OTHER
ISSUES.
YOU HAVE SOCIAL SECURITY WHICH
CAN CAUSE YOU TO PUSH UP INTO A
HIGHER TAX BRACKET IN
RETIREMENT AND OTHER
INVESTMENTS THAT MAY AFFECT THE
CAPITAL GAINS AT A HIGHER RATE
IN RETIREMENT.
YOU HAVE TO UNDERSTAND THAT
TRADITIONAL 401KS ARE TAXABLE
AND YOU MAY LOOK AT YOUR
EMPLOYER AS TO WHETHER THEY
HAVE A ROTH OR 401K THAT IS NOT
TAXABLE.
>>> AUSTERE TALK ABOUT THE
401KS ARE NOT JUST ABOUT
CONTRIBUTIONS BUT WE MAY NEED
WITHDRAWALS AND THERE IS
ASPECTS WITH THAT.
>> YES.
UNDERSTAND THAT NO WITHDRAWALS
BEFORE 59-AND-A-HALF UNLESS YOU
ARE WILLING TO PAY A 10% IRS
PENALTY.
NOW LAST YEAR DURING THE
C.A.R.E.S ACT THEY WAVED THAT
IF YOU HAD EFFECTS OF THE
CORONAVIRUS AFFECTING YOUR
FINANCIAL LIFESTYLE BUT THIS
YEAR THAT'S NOT IN PLACE.
SO IF YOU ARE UNDER 59-AND-A-
HALF IT IS TAXABLE INCOME PLUS
10% PENALTY.
THERE'S EXCEPTIONS IF YOUR
DISABLED AND OUTSTANDING
MEDICAL BILLS FOR A CERTAIN
LIMIT.
THE OTHER PART OF THAT YOU HAVE
TO UNDERSTAND AND I THINK A LOT
OF PEOPLE MISS THIS IS AT AGE
72, THE YEAR YOU TURN 72 YOU
HAVE UNTIL THE END OF THE YEAR
TO GET REQUIRED MINIMUM
DISTRIBUTION.
AN RMV AND PERCENTAGE OF YOUR
PREVIOUS YEAR BALANCE.
FOR EXAMPLE, YOU HAVE A HALF A
MILLION IN YOUR 401K AND YOU
ARE 72 YOU HAVE TO TAKE OUT
$20,000 AND IF YOU MISTAKE THAT
OUT IT IS AN IRS PENALTY OF
50%.
ALMOST A $10,000 PENALTY.
SOME PEOPLE CAME IN OUR OFFICE
AND WE FOUND THE ERROR THAT
THEY DID NOT TAKE THAT OUT
BECAUSE THEY WEREN'T INFORMED
ABOUT THEIR ADVISER SO
IMPORTANT TO WORK WITH SOMEBODY
THAT UNDERSTANDS THE RULES.
SOME PEOPLE THOUGHT THEY TOOK
IT OUT OF THEIR ACCOUNT . IF
YOU HAVE MULTIPLE 401KS IF YOU
DOESN'T WORK THAT WAY.
THE IRS CONSIDERS YOU MISSED IT
ON THE OTHER ONES AND YOU CAN'T
CONSOLIDATE THE 401KS AND HAVE
TO BE TAKEN OUT EACH ACCOUNT.
>> IF PEOPLE KNOW THEIR MONEY
GOES INTO AN ACCOUNT WHAT
OPTION IS THAT MONEY GOING FOR.
>> THE LIMITED LIABILITY OF
THOSE INVESTMENT OPTIONS, MAYBE
10 OR UP TO 25 DIFFERENT
INVESTMENTS YOU CAN PICK FROM
AND USUALLY YOU CAN'T PICK ANY
INDIVIDUAL STOCK UNLESS YOU ARE
WITH 3M OR DELTA.
BUT YOU CAN'T BUY OTHER STOCKS
OUTSIDE OF THAT.
YOU ARE JUST LIMITED TO THOSE
MUTUAL FUNDS AND OTHER BOND
FUNDS.
A LOT OF PEOPLE HAVE BEEN STUCK
WITH THE TARGET FUNDS.
THE TARGET RETIREMENT YEARS
LIKE 2020 OR 2025.
AS YOU GET CLOSER THE FUNDS
TRANSITION TO BONDS AS YOU GET
CLOSER TO THAT RATE.
MOST THEME THAT IS MAYBE NOT
THE BEST SO INVESTIGATE EACH
ONE OF THOSE INVESTMENT
BEST FOR YOU.
>>> SPECIFICALLY WITHIN THAT
RESEARCH SOMETHING YOU WANT
MEAN TO LOOK AT IS THE FEES
WITH THE 401K.
>> MOST PEOPLE DON'T KNOW THEY
PAY A FEE.
A LOT OF PEOPLE COME IN OUR
OFFICE AND DON'T BELIEVE THEY
PAY A FEE BUT AMERICANS PAY IT
AND 37% DON'T KNOW THAT.
SOME PAY AS HIGH AS FOUR
PERCENT IN A 401K PLAN AND THE
I WOULD REQUEST YOU TO GRAB
THAT RULE FROM YOUR EMPLOYER
AND FIND OUT ABOUT THE FEES AND
SMALLER EMPLOYERS TYPICALLY YOU
PAY MORE FEES THAN THE BIGGER
PLANS AND LOOK AT THE
INVESTMENT FEES AS WELL.
>>> ONE THAT IS NOT NECESSARILY
FOR REQUIREMENT BUT A REASON
YOU NEED TO SAVE MONEY FOR WHEN
THE HEALTH EMERGENCIES COMING
UP AND AN AVENUE FOR THAT.
>> HEALTH SAVING ACCOUNT A
GREAT OPTION IF YOU QUALIFY.
YOU CAN PUT MONEY ASIDE AND IN
A HEAL SAVING ACCOUNT BUT HAVE
TO BE IN A HIGH DEDUCTIBLE
HEALTH INSURANCE PLAN WITH YOUR
EMPLOYER JUST TO QUALIFY TO PUT
MONEY INTO IT.
YOU JUST DON'T GET TO DO IT
REGARDLESS.
YOU HAVE TO HAVE THAT PLAN.
A HEAL SAVINGS ACCOUNT.
YOU DON'T HAVE TO USE IT UP
LIKE THE FLEX PLANS.
THE BALANCES CARRY OVER.
A LOT OF PEOPLE DON USE THEM
FOR FOUR OR FIVE YEARS.
THEY GET TO RETIREMENT AND THEY
HAVE A CHUNK OF H SA THEY CAN
USE SO LOOK AT THAT DEFINITELY.
>>> HOPEFULLY 2021 IS A BOUNCE
BACK YEAR AND WE CAN GET GOING
ON MAKING SURE THAT OUR
RETIREMENT IS UP TO SNUFF.
THANK YOU.
>>> I HOPE SO TOO AS WELL.