Retire Rich The Ultimate Guide to IRAs, 401(k)s, & HSAs!

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2:46Some of you have been investing blindly and passively just through your job. And dollar cost averaging. So some of the things we talked about in our lesson today, you have been doing just by happenstance. Traditional Roth IRA, Roth IRA are some investment and retirement accounts. You have your 401k. You guys all may be familiar with that. If you have a W-2 type of job, your 403B, myself and Troy, we were former educators. And so we know about the 457. You got your health savings account. You have various IRA and retirement vehicles to invest in. Let me break down this traditional Roth IRA. OK.

3:36And the Roth IRA. these two vehicles. Okay. The not that there's a not, there's never no not to investing, but they have caps. They have limitations. They have income limits. Okay. And so if you make a certain amount over a certain threshold, then this might not be readily available to you. You might have to do a Roth conversion. Okay. You have to do something different, but But a Roth IRA is after tax dollars that you guys will be investing. So after your money has went into your work for a one K that they automatically debited out of your account into your retirement. Hopefully you got that at least seven percent or 15 percent.

4:22We got to do better with our allocation. OK, after tax dollars would then go into your Roth IRA, similar to what Rashad told you guys earlier with you need to get your own brokerage account. You got to have inside that brokerage account a Roth IRA as well so that you can put up to the limit, which this year,$7000 into that. And if you're over 50, you can put up another thousand, which would get you up to$8 ,000 on a year. And so these are other things you can do in addition to your stocks, in addition to your ETFs, in addition to trading options, in addition to your money markets. These are things you can do as well on the wealth building journey, even as a beginner.

5:15Yeah, the HSA thing is something that people don't talk about a lot either because. They don't. That's important to know. That's a game changer for me. The HSA health savings account, guys, just so you know, the acronym health savings account. So whether you're married and or single, if your insurance has a HSA health savings plan, you can use the money to take care of doctor bills, appointments, co-pays. But whatever money isn't used, the HSA invest in it, invested for you inside some of their allocations. They have mutual funds that you can pick from growth tech. Some of the things I told you guys about earlier growth tech.

5:59You can do energy. They have it all inside the HSA. Just type health. Savings account. OK, and you will see like health equity dot com will come up. You will see certain things come up. And if you invest inside that, I know being married, we can put up to seven, a little over seven thousand, maybe seventy eight hundred a year. into this. And guess what, guys? It reduces your taxable income. Okay. So that doesn't, there's another way for on that front for you guys to also be doing the right thing by your money, doing right by your money, but also reducing your taxable income. And that money, if not used for a copay simply is there growing on your behalf.

6:46And that can stoppile pretty big for those of you that stay on top of your health and wealth. You can use it, you get 65. So that's going to be a question. People are like, well, you're supposed to use it for medical expenses. If you don't use it for medical expenses, you can use it after 65 without getting penalized. It's another form of retirement. Another form of retirement. It's saving money that you have to pay, like a deductibles or like you said, out of the pocket medical expenses, but it's invested in the market. But as that's growing, if the money that you don't spend so if you're 65 years old and you have a hundred thousand dollars in your hsa now that effectively is like another ira for you because you can you can use that for your retirement without getting penalized so if you use it before that for anything other than medical expenses you get penalized but if you use it after 65 that's important for people to fully understand so um it's a way to definitely you know kind of hedge with the medical aspect of it but also it's like a double-edged sword where you save it for retirement also if you don't use it yeah chris you brought something in terms of education i was both being education um about maximizing these allocations now at 25 i'm fresh into the game i'm about to make 65 000 for the year at$70 ,000.

8:08You're not thinking, hey, I should take the largest percentage. It's like, all right, what's the lowest I can put? 3 %? I'm going to do that. Talk about the mindset and the shift because people are looking like, what can I do right now? This is something that you can go to your HR department on Monday and say, hey, I want to actually max out my 403B. Talk about the importance of that because I don't think people really understand it. There's that one guy that comes once a year to talk to you about it at lunch and you never see him and then you just forget about it. Talk about the importance. It's so important because time is our greatest asset.

8:41And so the earlier you can do these things, take advantage of all these vehicles, the bigger your pot will be, the bigger your nest egg will be when it's all said and done. So listen to this. You can't miss what you never had. You can't miss what you've never seen. If you take that allocation that they're going to by default have it at between one and three percent, if you move it to seven percent or 15 percent and you get used to living your lifestyle around what your check will then be when that comes to you every two weeks or how often you get paid, you won't miss it because you didn't see it.

9:18it's only when you see, oh man, my check,$3 ,000. You think you got$3 ,000 to spend. Okay. But if you never seen 3000 or whatever your check may be, because it is going to something that's going, your future self is going to thank you for, that's how you get ahead of the game. And so the earlier, if you're 24 years old and you're seeing this, the earlier you can go into your employer, your place of employment and tell them, if I'm receiving a 401k contribution, can you make sure my allocation is at least seven to 12 percent? 15 percent is on the higher end, but that would even be good if you can make that shake.

9:57If you're still living at home and you don't have your mom is letting you do your thing, you're not having a whole bunch of responsibility, put it at 15 percent until you get your own place and then scale it back down to seven. But you can't miss what you never had. OK. And so if you get that mindset early, you're off into the races. OK, for me, it kind of clicked when I was around twenty seven. Between that twenty seven and twenty nine year range for me. You know what I'm saying? But listen to how it happened, though. My wife, I saw her for one K killing mine. I'm looking like, what am I doing?

10:35My allocation was poor. My allocation wasn't where it needed to be. I'm looking like, man, I've been I was an administrator in higher education for 10 years. I'm what am I doing my investments because of what I was controlling blew my higher education job which was good benefits it blew those and they blew that 401k out the out the water that showed me the importance of man my wife retirement was way higher than mine simply because hers was like at 12 or 15 the whole 10 years she was in the health field and so So Troy brought it up, but it's need to be said, do it as early as you can. Your future self will thank you later.

11:21And then also, before we leave this topic, it's important for people to understand. The 401k, 403b, 457, like they'll give you a bunch of different options. A lot of people don't invest because they don't know how to go about it and they're intimidated. One of the easiest ways is to pick a target date fund. So a target date fund is it calculates your age and the age that you would be like around 60 or close to retirement So it might be 2030 2040 2050 depends on how old you are and The whole theory with retirement plan is that you got to be aggressive when you're young and conservative when you get older So it automatically changes over the course of time.

11:56So That's a very cookie cutter easy approach to take if you if you are like unsure Of like 20 different options that you have available to you the target date is something that is recommendable. I used to recommend it when I was an advisor. That's something that kind of does the work for you, and you don't have to worry about changing it every five years and switching the allocations. And then sometimes you have a Roth 401k component too in your job. That's important to ask because the difference between the Roth and the traditional is that one takes money. You save money today, which is a traditional.

12:35when you save money later, which is the wrong. So it depends on your situation. But if you have, let's say a million dollars in retirement and you took out that whole million dollars at one time from your 401k, you would get like 600 ,000 net because that is fully taxable. So that's important for people to fully understand, especially when you think about your retirement, you think that you got a certain amount of money, but you don't realize that that's taxable state and federal tax. That's why a lot of people move to Florida when they retire because there's no state tax. But regardless of where you live, you still got to pay federal tax.

13:09But if you have the Roth, if you have a million dollars hypothetically, and you took out all the million dollars at one time, you would get$1 million because it's not taxable. But you didn't get a tax benefit when you put the money in today. So that's important for people to understand as far as the tax, because we didn't talk about taxes at all, but even like capital gains. Short term, long term. that that's important for people because it's like you do a lot of like trading or selling stocks and you don't realize that you you're racking up a tax bill and then at the end of the year you like damn i gotta pay taxes i i didn't even know i had to pay taxes on this like i kept it in my brokerage account i didn't put it in my bank account but if you sell a stock you pay capital gains tax on that stock yeah you don't pay capital gains tax on your retirement but you do pay federal and state tax if it's not a Roth.

14:01So understanding that is important because you don't want to get like 20 years down the line. And it's like, damn, I wish I had a Roth because now I got to pay hundreds of thousands of dollars. Cause I have millions of dollars in my 401k. Yeah. And you don't want to put the profits. If you're talking about stocks into your account and say, Oh, this is all profit. Now there's a percentage of that. That's going to be for taxes. Because if you sold it within a year and a day, that's going to be short-term capital gains. And depending on your tax threshold, that's the allocation that you're going to have to pay for it.

14:33If it's over a year and a day, it's long-term. And again, there's a cap on that. I think it's like 15 % for the most part. Sometimes it does go up to 20. But that's a big percentage, right? I know in the short terms, it can get up to 37 % to 39%. So you're talking about a 20 % difference if you just hold long-term. That's why we always stress it. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts.

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