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IRA is in retirement accounts. What are the options? Guys? These are things Rasha alluded to this. You have some of these already. Some 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 in retirement accounts. You have your four to one K. You guys all
may be familiar with that. If you have a W two type of job, your four or three B. Myself and Troy. We are former educators, and so we know about the four fifty seven. You got your health savings account. You have various IRA and retirement vehicles to investing. Let me break down this traditional roth ira okay and the roth ira. These two vehicles, okay, not that there is
a knock. There's never no knock 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 a wroth ira is after tax dollars that you guys will be investing. So after your money has went into your work for one CA that they automatically debited out of your account into
your retirement. Hopefully you got that at least seven percent or fifteen percent. We got to do better with our allocation, okay. After tax dollars would then go into your wroth ira. Similar to what Rashard 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 is seven thousand dollars into that, and if you're over fifty, you can put up another thousand, which will get you up to eight thousand dollars 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.
Yeah, an HSA thing is something that people don't talk about a lot of either because they don't that's important.
That's the 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 a health savings plan, you can use the money to take care of doctor Bill's 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 that Shad told you guys about earlier. Growth tech. You can do energy. They have it all inside the HSA. Just type health savings account, okay, and you will see 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 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 and that can stow pile pretty big for those of you that stay on top of your health and wealth.
You can use it. You get sixty five. So if that's gonna be a question people like, well, if I don't use you're supposed to use it for medical expenses. If you don't use it for medical expenses, if you can use it after sixty five without getting penalized, yeah, it's like it's another form of retirement, right, another form of 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 sixty five years old, you have one hundred thousand dollars in HSA. Now that effectively is like another IRA for you because 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 sixty five, that's important for people
to fully understand. So 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 when you save it for retirement. Also if you don't use it.
Chris, you brought something in terms of education. I was both being in education about maximizing these allocations. Now at twenty five, I'm fresh into the game. I'm about to make sixty five thousand dollars for the year seventy doin You're not thinking, hey, I should take the largest percentage, just like, all right, what's the lowest I could put
three percent? I'm gonna do that. Talk about the mindset and the ship because people are looking like what can I do right now, Like this is something that you can go to your HR department like on Monday right and say, hey, I want to actually max out my four or three B Talk about the importance of that, because I don't think people really understand it. Is 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, and 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 miss what you never seen.
If you take that allocation that they're gonna buy default, have it at between one and three percent, If you move it to seven percent or fifteen 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. It's only when you see, oh man, my check three thousand dollars you think you got three thousand dollars to spend, Okay, but if you never seen three thousand or whatever your check may be, because it is going to something that's going to your future self is gonna thank you for. That's how you
get ahead of the game. And so the earlier, if you're twenty four 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 four to one K contribution, can you make sure my allocation is at least seven to twelve percent. Fifteen percent is on the higher end, but that would even be good if
you can make that shake. If you're still living at home and you don't have and your mom is letting you do your thing, and you not having a whole bunch of responsibility, put it at fifteen percent util you get your own place, and then scale it back down to seven. But you can't miss what you never had, okay. And so if you get that mindset early, you're off into the races. Okay. 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 a one k killing mine. I'm looking like, what am I doing? My allocation was poor, My allocation wasn't where it needed to be. I'm looking like, man, I've been I was the administrator in higher education for ten 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 in They blew that four one came out the water. That showed me the importance of man. My wife retirement was way higher than mine, simply because hers was like at twelve or fifteen, the whole teen years she was in the health field. And 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.
And then also before we leave this topic, it's impoint. People don' understand the four one came forth to be four fifty seven. Like they'll give you a bunch of different options. A lot of time people don't invest because they don't know how to go about and the intimidated. One of the easiest ways is to pick a target
date fund. So a target date fund is that it calculates your age and the age that you would be like around sixty year old postal retirement, so it might be twenty thirty, twenty forty, twenty fifty, 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. So that's a very cookie cutter, easy approach to take if you if you are like unsure of like twenty different options that you have available to you. The target date is something that is recommendable. I used to recommend it when I was in a visor. It's like that's something that is kind of does the work for you and you don't have to worry about changing in every five years and switching the allocations. And then sometimes you have a rough fur one kke component
two in your job. That's important to acts because the wrong The difference between the row and the traditional is that one takes money you save money today which is a traditional, when you save money later, which is the WROTH. 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 four one K, you you would get like six hundred
thousand 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. You don't realize that that's taxable state and federal tax. That's why a lot of people moved to Florida when they retire because there's no there's no state tax, but regardless the way you look,
you still got to pay federal tax. But if you have the raw, if you have a million dollars hypothetically and you took out all a million dollars at one time, you would get one million dollars because it's not taxable, but you didn't 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 a tax because we don't talk about taxes at all, but even like capital.
Gains short term, long term.
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 didn't even know I had to pay taxes on this, Like I kept it in my broke with account and I didn't put it in my bank account. But if you sell a stock, you pay capital gains tax on that stock. You don't pay capital gains tax on your retirement, but you do pay
federal and state tax if it's not a roth. So understanding that is important because you don't want to get like twenty years down the line and it's like, damn, I wish I had a rough because now I gotta pay hundreds of thousands of dollars because I have millions of dollars in my four to one K.
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 if it's been 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 gonna have to pay for it. If it's over a year and
a day, it's long term. And again there's a cap on that things like fifteen percent for the most part. Sometimes it does go up to twenty. But that's a big percentage, right. You know in the short times you can get up to thirty seven to thirty nine percent. So you talking about a twenty percent difference if you just hold long term. That's why we always stress it.
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