Retirement Investing is Simpler than You Think #009

can I get a tattoo? And mommy responded, when you're eighteen? Uh, but what if? Good answering, what would you want to get if you get a tattoo now? And my two and a half year old guess what she said, No clue, poop. This is pretty awesome. And she was like, that reinforces the fact that you do not have the decision making skills to get a tattoo. Oh, it's about that. That was pretty funny, man. Just let her do it. See what happens. Then the poop emoji on her arm through

the rest of her life. So all of a sudden, he got way cute in my mind, Like it's got like a little smiley face on it. Yeah, that's that's way better. This wouldn't be all that bad. Maybe I'll take her out this weekend. We'll get tatted up. People say tatted up still, I don't know, but I get tatted it up. So Joel are buddy? Tim texted you and I and said, stop whatever you're doing and listen

to your podcast at halftime. So I took my hands off the wheel and I slammed into the car in front of me, and I immediately took his followed his directions. So he said, listen to our last episode that we launched about how to get a deal on craft beer. He said, listen to it at half speed. I'll be honest when he as soon as I saw that text, I was kind of like freaking out, like, oh my gosh, what did we say accidentally that you can only hear,

you know, in slow motion. It's like one of those Disney movie things can play backwards and sink it up to like Wizard of Us or like there's falic symbols or something and the Little Mermaids and the flowers like, but we had to play this for everyone, So here goes here's what we sound like at half speed, and especially considering we were talking about getting a deal on craft beer last week, it makes it sound even funnier. So take a listen. Yeah, I am glad that we

were talking about listening. Man. Beer is a key part of what we do, so I think it's about time that we dedicate an entire episode to craft beer. I agree. So most episodes you don't have to be a craft Beernato to enjoy this podcast, and most episodes will be talking about money in some way. Former fashion and today's

note different. So I feel like we could listen to the whole thing and we probably want to go back to Honestly, I want to go back and listen to all of them at has speed now if only had the time. Yeah, I know this good stuff. So it sounds like we're drunk and uh drunk slash high. I don't know which which is worse. Like that that seventy showed the little circle that they used to do, you know, and the camera will go around the circle and film them that. It's kind of what it feels like listening

to us on half speed. Did you ever watch that, Sonny? I mean I guess you did. You watched Yeah, dude, that was one of the best comedies of all time. I think. Yeah, Kit was really into that. I never I never got into it. All right, So let's get to today's beer. We are drinking not one, but two beers tonight. So Ironmonger Brewing out of Marietta, George just they're just up the street from where we live. Um

they kindly. I stopped in there the other day on my way to my parents house, like sid heard awesome things, and my brother in law had actually, um let me have a little bit of taste of one of their I pas and it was so ridiculously delicious. So I was stopping by to get some and I ended up talking to the owner there and the super cool guy, and he said, dude, have some and drinking on the podcast. So we are featuring the Ironmonger Anville double I P

A and their Damascus single I PA tonight. Nice. Oh man. I love doing the uh like kind of a sidewy side comparison like that, you know, kind of a B A B testing, So we're gonna a B test the Ironmonger I P A s. I've had them both the four They're absolutely delicious, So I can't wait to have them again and and for you to have them for the first time. Yeah, and these are packaged by the way in crowlers, So if you don't know what a crowler is like. For a while, uh, growlers were really cool,

and I mean they're still around. You need a sixty four rounds essentially um glass bottle and fill it up with beer. Crowlers are kind of the new thing. And you can get these two of beer in one can that they fill up with fresh beer. Fill it on the spot right in front of you, and then they got their little canning machine and seals, i mean steals that litter right on there right, so this beer is fresh as a baby's bottom. So and and when you

have the giant can, it's kind of nice. It makes you feel like a little like a little kid in a ball or two. At the same time, you have a hold of this hand and it's like fills up my whole hand and pretty awesome. Actually, yeah, for you, it's probably like to size. For me, it feels a giant because I've got like tiny hands. Oh, this feels like what a twelve months can feels like to everyone else. All right, so we'll crack this. You can tell like

the crawler has a distinct distinct sound as well. You know, it doesn't havend like that light high pitched can. It sounds like you're opening a like a barrel, a barrel of beer. I will say, beautiful hoper roma just filled the freaking room. Two different IPAs, but already just distinctly different colors. But yeah, the yeah, the single i PA is definitely darker. The double i PA, which is the anvil, is lighter. So the Damascus pretty good. Yeah, it's like

creamy and smooth. It's yeah, someone's got like it's got a like a lactose Like a lot of folks are doing some like lactose sugar in there for an I PA. It's just like really rich, creamy mouth fields a legit tasty I P A Damascus from Ironmonger Brewing. Awesome beer. Uh you get to do side by side now with the anvil. But cheers, yeah, cheers on the anvil. Oh

my goodness. M Yeah, the anvils like kind of one of those juice bombs almost pretty much juicy, Yeah, juicy are brighter, still got a little bit of that like bitter through the center and on the back end of the beer. Uh, but it also retains that juic nous, so it doesn't have finished like Brillo pad bitter or anything like that. Right. Yeah, it doesn't drink like a West Coast I PA where it just finishes really dry

and kind of dries up in your mouth. Yeah. I kind of like how consistent it is the whole way through from sip to the way it rolls off the back of your tongue. Yeah. I'm a huge fan of this Anvil double I P a from Ironmonger. I feel like they're ruining one of the best I pas in the Southeast. Uh, this one right here, And I like they're already starting to kind of kind of see that in the orders ticking up. Uh. And it's just a really popular beer and I don't know why. After drinking

a couple of them. It's just really really tasty. And this is man a Diamond and the Rough right here, just outside of of town, out of Atlanta, and man, they're crushing it, dude. I really like the spear. It's that's really small space, but real cute space. Definitely worth a visit to Ironmonger to get the speer. Yeah, is that there is the other logo I guess right there. Yeah, it's got the guy with like a like a blacksmith blacksmith hammer, right, so like lay down the law on

some iron. I guess that's like one of the roles that you can play on when you're when you're ultra nerdy board game. So that's probably true, right, Yeah. I guess in a Gurricola or something that there's gotta be an ironmonger at some point too. To put the shoes on the horse man all the choices, you gotta have somebody doing that, all right, Matt to the topic in hand,

retirement investing is simpler than you think. Ultimately, when it comes down to it, people want to make retirement investing hard and I don't think necessarily they like, oh please, let's make this arduous, but they make it harder than it should be. And so we want to give kind of an overview to help people understand that it is simpler than you think it is. So we want to kind of give people some of the tools to go out there and invest with confidence knowing that you're doing

it properly. Yeah, And the biggest thing that makes it so complicated are the tax implications, right, Like the actual investing it's not hard. You just you open it. You open an account, and then you decide what to buy and you buy it and that's it. Like that's literally boom, You've invested, right There's it really can be that easy. It's just when you start taking into account and start trying to figure out the you know, like the absolute best way to work work the tax system, like in

your favor as far as when you get a tax deduction. Um. And we'll get more into that, you know, as we as we uh get further into this episode. But that is the biggest difference between some of these different retirement accounts, which tends to make it a little more complicated. We're not gonna spend a ton of time on that because we don't want to get bogged down with all the

details of every single retirement account. But we're gonna hit the high points and hopefully yeah, I point you guys in the right direction to I mean literally get investing tomorrow right like and and it's really I think this is probably a show that's investing for the ten percent of people out there that are either uber wealthy or

just have nothing to invest right now. Um. And so those people probably won't find a lot of use out of this podcast, but for the out there, for most people in America, we think that this episode will help you kind of sort through things, because I know, sometimes just looking at what these accounts are called can feel like vegetable stew, like oh my goodness, like it was a lot of different letters, letters and numbers any and

so when you have like the letters, it can be confusing. Yeah, and four oh one K, which is literally named after the section of the lavirus tax law. Yeah, and so you you would think like we could name it something that's like just as simple as hey, this is your pretax account and this is your post tax account. Something that kind of way too easy too simplifies it for people. But because that doesn't exist, that's why we're here to

try to help it you sort through things. And I wanted to touch on the fact that there are some assumptions before you kind of open a retirement account and started investing in your retirement, which is you want to have some margin. And we touched on this before back when we talk you know, when we touched on budgets as well, right, that you want to make sure you kind of have some money set aside for like a little emergency fund because you don't want to end up

like me. Uh, twelve years ago. I think it was maybe when you know, I learned about the different retirement accounts and I was told that like, oh, you gotta do it now because every year earlier that you can do it, you know, it's just more exponential growth or more compounding growth, you know, down the road. So I was like, all right, let's do this without knowing anything. And I opened a roth Ira and started buying some stuff. And I didn't know what I was doing. Dude, were

you buying individual stocks? No? Okay, yeah, so thank goodness I wasn't. But the next worst thing, what's what's what do you think would be the next worst thing? Probably you went somewhere that had ridiculously high fees. You got it. So yeah, And I don't know if things were different, you know, it's in fifteen years ago. But the word was like, all right, it's a little bit more expensive.

But if you've got this rock star fund manager managing that fund, the mutual fund, well, man, he might get like anywhere between two and five pc better than like what the you know, general market might might do or what just kind of a standard index fund would do, which is, you know, a fund that's just representative of

the entire market. So I say all that because I kind of learned that the hard way, which is that I got started too early, too soon, you know, and before I knew anything with what I was doing, and I was putting money into this account that I should have left alone. But because I was young and it wasn't didn't have a stable financial footing, I had to kind of dip back into that and deplete it before

it was able to do anything. So I say all that to say, this is great information once you kind of have an emergency fund set up and you're looking to basically figure out what to do next with your money, which is a great problem to have. So Matt, let's explain what some of these retirement accounts are and how people can know which one they should be choosing as they begin they're investing. Yeah, so maybe like just broadly, like what what's like how would you define just a

retirement account? Because I think people sometimes are like, well, how does a retirement is that? Like when you open up an account with like each trade, is that a retirement account? Or how would how would you define like a retirement account in general. Sure, Yeah, I would say that it is putting money in the stock market for the long haul that you will not touch until you retire.

And so I think like sometimes along the way people a lot of people want to tap their retirement accounts um and there are a lot of consequences with that too. So if you're going to best make sure that it is invested broadly in the stock market for a long, long period of time, that you're willing to not touch it. And that goes back to what you just mentioned being

financially prepared. And so if if you're not ready to put this money away for the next twenty to thirty years, I'll do it right, it should be in your savings account right now. Yeah. Yeah, if you're looking for something that's a little more liquid and you want to be able to say, you something for maybe a down payment on the house soon or for like renovation or just whatever, something that's going to cost some money, you want to

have that. Yeah, like you said, in a like a higher yield savings account or checking account in general, not in the stock market. Okay, So we we just talked about what retirement accounts are, and you want to talk about some specific accounts, then, yeah, specific retirement accounts. There are two main types of retirement accounts that you will hear about all over the place, and you have access to I will at least one of these, because everyone has access to to some of these. So the IRA

is one that you'll hear. There's a regular IRA, and there's a ROTH IRA and yeah, and the IRA and I mean that's individual retirement account I RA. Yep. So this is one that literally no matter what you are, if you're self employed, if you work for a large employer or a small employer, you have access to this on your own, outside of any sort of employer relationship. You can open up your own IRA. Uh, and we'll get into the differences between the WRATH and the regular UM.

And then the other main retirement account that you can choose is employer based and that's the four oh one K and a lot of people that's the easiest thing to get into because sometimes your employer even automatically enrolls you in your four oh one K at work, which I think is brilliant. Yeah, that's awesome. I wish I could remember the story. But yeah, basically, employers started doing that they started switching it to where you had to instead of opt in two contribute to your four O

one K, you had to opt out. Different companies were trying to find ways to pay basically incentivized their employees to save more because they're like, dang it, like why aren't they saying why are they saving money? Because you know, the future of social security isn't that great and it's up to us. You know, it's up to us as individuals.

Employers can provide can kind of dangle that carrot, but employees weren't actually signing up and they, yeah, they made that switch to where you had to opt out of saving for your form and K, and nobody did. Yeah, is that they're like enrolled saving money for you know, for the future and all because they kind of did a little flip flop there, which I think is brilliant.

It turns out money is incredibly psychological, and so whatever you can do to force yourself into savings, to trick your brain into making it less painful, and that's the way that your employer kind of tricks you into doing it. Right, But money for me even is incredibly psychological and sometimes a forced method of forgetting that I'm making income over here or over there can be really helpful. And at some point we'll do a whole episode just on the

psychology of money, because that's an interesting topic. I like how you separated the two main accounts that we're gonna talk about though, Like basically, like you said, four o one K and IRA A four ow K being employer based retirement account because it's offered through your employer or your IRA A which anybody can have, Like like you said, yeah, and so let's start with a four own K. Roughly half of Americans have access to a four oh one

K at work. So and most employers offer a match on your contributions, and your four oh one K contributions come directly out of your paycheck before you even see it. So, speaking of psychology, that's not You don't have to do a thing except for allocate the percentage. And in my mind, psychologically, there's a big difference between checking the percentage amount that's gonna come out of your paycheck and then actually taking money from your account that you've already received and putting

it somewhere. There's a huge difference. It's like, oh, I never really got it in the first plays. Let's just you know, stash this way for the future. Yeah. So I think there's a couple of reasons if you have access to a four oh one K to take advantage that is one, the company match, it's free money. The typical company match is if you contribute six percent, your company contributes so and there's all sorts. There's some employers are even more generous, and if you put in six percent,

they put in six percent. And some employers offer no match at all. If your employer offers a match, take advantage of it, and if you don't, you're leaving free money on the table. It's like a bonus they want to pay you every year that you're just saying, no, no thanks, I'm good. Just hearing that, man, like, I've never had a four o one K my entire life,

and especially when that matched. And to hear you know, you and other friends that I have who you know have four one k is with a match, Oh my gosh, man, that is like you said, it's free money. It's a guaranteed return. That's the number one thing you do, right, That's the number one first thing. If you have access to a four oh one K with a match do it, take advantage of it, do it now and take advantage

of the full match. And let's say right now you're saving three percent and your employers only contributing one and a half percent because you just haven't gotten it up there. That should be your main focus. Get up to the match. Get up to a six percent UH savings rate so that you can take full advantage of that match. And when you say like six percent, what like what you're talking like six percent of your salary so that your

pay Yes, So it's yeah. And and like I said, employers do it differently, but most employers do offer usually a fifty percent match on the first six percent that you put in, So if you invest six percent of your salary, then they'll invest three percent of your salary like on top of it. And you're getting nine percent exactly right off the bat, exactly, And you're getting close to that ten percent savings right which is unreal, which is essentially I think a basic savings rate that you

should not go below. And the other great thing about the four oh one K is that it's essentially on autopilot. You put that money in every month and you get about it. It just kind of comes out you're used to get in a paycheck that's a certain amount, and you begin to live on that and you forget that you even have this money. It never enters your bank account at home, so you never even have to as being your money in your possession. It's automatically dispersed for

you for your future. Okay, Joel, So my question for you is what can you do with that money? Like within the four one k is it? Like? Do you have the same options that I have with like my account with Vanguard. Well, so it's gonna differ depending on the employer that you have. I'm really lucky and my employer gives me access to Vanguard funds. As you'll here later on, we're both pretty big fans of Vand I mean, yeah, I don't have a employer sponsored retirement account, and that's

who I've chosen as well, like on my own. So whoever set up your company's retirement account basically knew what they're doing. Yeah, and it's but essentially it's gonna depend on your company and everyone out there listening. You're going to have access to different funds than I do, and you're probably gonna be with a different company that I am. You know, maybe some of you are with Vanguard, but some of you might be with Fidelity or t row Price or there's a ton of companies out there that

you could be with. Uh and so later on in the podcast, we'll kind of talk to you about how to choose funds inside of that four oh one k. But looping back the I mean, it's still the number one thing to pay attention to though, is the match, because it doesn't matter if the you know, if it's the expense ratios are high, or if it doesn't get like that great of a rate. You can't beat at match up to a certain percentage of your salary exactly. The number one thing you can't even pay off credit

card debt. You know, your highest credit card debt is probably gonna be so even that is not going to provide quite as good of a return as exactly. Yeah, man, you've got to take advantage of that. Yeah. So iras are next. Everyone has access to an IRA because it's outside of your employer's scope. It's literally you and the investing company that you're going through. That's what I have, right,

Kate and I both have roth iras. Yeah, and so the difference for people out there that don't know what's the difference between a roth ira and a traditional ira. So the main difference then between a a traditional ira

and a roth ira is the tax treatment. You're investing into a traditional ira with pre tax dollars and so essentially all of the dollars, all the money that you put into your traditional ira, it's tax deductible, counts against your earned income basically, and the money within that ira grows tax deferred. And then you know, when when you get to the point to where you're withdrawing them, that's

when you pay your standard taxes on them. And a rath, yeah, as opposed to wrath, which is it's I mean basically take it and you flip it, so you're paying all the taxes up front, and so they're essentially post tax dollars, so it's not tax deductible. Um, you take that money and you put it in the count and nothing happens. You know, there's no deduction, there's no tax deduction, and that nothing happens except for it grows like mad in the stock market, yes, and then it grows gross tax

free when the time comes to make those withdrawals. Um at fifty nine and a half. So that's I mean, that's the biggest difference between the traditional ira and a roth ira. I think for most folks, especially for most listeners who are younger, you want to do a roth ira, Like that's it's just pretty simple right now. Oh, and especially with the with the new with the new tax laws, right. Yeah, So the new tax law changes actually made a roth

ira even better for young people and for medium income folks. Uh, you you're gonna want to choose a wrath because essentially the tax bracket for people making that sort of income went down. Middle income earners tax bracket essentially dropped. Yeah, And so if you're in that tax bracket where you're uh, your upper tax rate is twelve percent now it used to be. So paying that tax now, as in never having to pay tax again, yeah, is a great idea. I think a roth ira actually only got better and

makes more sense. That's insane now, and I think it was great before. I think was probably the option before. Yeah, So could you imagine now, like literally you take that money, you know, like money that you earn from your job, you paid twelve percent on it, and then you invest it and then you never have to pay tax on that again, it's amazing, like in regard regardless of how many how many years. And that's one of the beauties of a roth ira a is that you can hang

on to it basically for forever. There's no mandatory withdrawals, and so you can that can continue to grow versus a traditional ira, which they require you to take some distributions at seventy and a half. Yes, so the roth's got a lot going for it. Pay your tax now, never pay tax again on it. And I don't want to get too pessimistic, but when you look at the future of taxes in America, like are you ever going

to pay less than twelve percent? It's unlikely for a lot of reasons, and so rath is truly the best way to go in all likelihood. So the one thing about a rath is it's got a contribution limit, and so if you want to contribute a lot to retirement savings, you won't be able to do that with a roth You're capped at being able to invest a year inside

of a roth ira. Yeah, that's like the biggest and I would say maybe only downside to a roth ira is that they kind of limit because it's such a sweet, you know, vehicle, that's a good way to describe it. It's just such a good vehicle for retirement savings that they're like, yeah, we're gonna have to put a cap on this. And there's also a cap. Think about it, like, why would there be a cap on it if if it wasn't just like the most sweet deal. Yeah, and uh,

the cap actually goes up a little bit. If you're fifty or over, you get to contribute a year. But then there's another cap, and it's an income cap, and so if you make over a certain income amount, you are not eligible to contribute to a WRATH at all. Yeah. So if you're a baller and you're bringing in like a lot of income, yeah, the rath Ira isn't gonna be for you. And that's one of the beauties of a regular four oh one k is that it doesn't

have any income limits. You can have a high income there. So essentially, if you're a mega earner, if you're making more than this amount that the rath caps you out at, which is a hundred and thirty five thousand dollars for single filers and a hundred and ninety nine thousand for

married couples filing jointly. If you're making more money than that, the best way to start allocating your retirement savings is in the four oh one K because you can contribute a large amount in a four oh one K, up to eighteen thousand, five hundred dollars this year, and on top of that, you can also contribute just to a traditional I RA. So use those vehicles first if you make more money than the RATH limits allow. Yeah, Juell And so that's just briefly, maybe touch on SEP SEP,

which stands for a Simplified Employee pension. Yeah, those are really cool, especially for a dude like you that works from home, what works for himself. Um, and so it's not something that anybody that has a traditional job is going to take advantage of. But for you folks that are working as a contractor getting ten work working for yourself, you're gonna really want to consider a set BI RA.

There's a little more administration, I guess involved with with kind of setting those up, and so it's you know, there's a little more work involved with it. You know, if you're self employed or a contractor like that and you're making bank and I'm talking like, if you're looking to put away like fifty dollars, you need to you need to look this up. I'm nowhere need of that. So I've never, you know, even really considered a SEP. We're perfectly fine putting away money into our my wrath

in case rath. But if you're looking at yeah, if you've got a really fat year and if you're looking to sort of shelter that money and kind of get that invested, a SEP is definitely something you want to consider. Yes, So if you're self employed, look into a SEP, contact someone from Vanguard, you know, do some research. Put a set BIRA is probably going to be one of your

best methods. If you're gonna be able to sock away a large amount of retirement savings all at once in one year, a set bi ra is an awesome way to do it. Yeah, Joe. So we've talked about some of the different retirement accounts, right, We've talked about the four one k A. We talked about the IRA, the different the two you know, two main different iras, which is the traditional IRA and then the roth ira UM

and this step. But there's a few others as well that we're not going to even really get into because they're just more detailed and sort of nuanced with Again, they're not The investing aspect of it isn't complicated. It's just the tax implications that make it slightly more or slightly less favorable. Um. The difference that it will make for you in the long run though, versus not starting

investing at all is negligible. Yes, Like, the whole reason we're talking about this is because we want to get you guys investing now. Um, don't let the tax implications keep you from getting started. And so, just to be honest, like, we're two dudes, drinking beers that care about this stuff deeply, but we're not a Wikipedia article. So if that's what

you're interested in, go do some research. But we want to give you the highlights and then give give you the information that you can then take and empower yourself to start investing for retirement on your own, because it's actually a lot easier than you think. Chedual. This conversation that we're having is the same conversation that we have with our friends to get them moving and to get them investing. We want to get folks talking about this and we want to get our friends investing. This is

something that you need to do. And don't let the potential of confusion with with tax law and all this other stuff. Don't let that keep you from getting invested. Thee oh the thing is, it's really it's baby steps. It's not that hard. If you can open up a savings account, you can either start contributing to your four oh one K or open up a roth ira online with some money from your savings account and again be

financially stable. First, make sure you've got enough money in your bank account where you don't need this money next week or next month or next year. You want this money to grow for long term. But if you're ready to make that step, it's not that hard. It's pretty simple. So take the step, make it happen. And that's like we're we want to be your kick in the pants.

Kick in the pants, okay, So listen to this and no, you know what, I can go into work and I can log into my employer system tomorrow and I can up my contributions to my four oh one K by three percent. Take an action from this podcast that will actually influence the rest of your life. If you up your savings rate for retirement now. If you up your savings rate for retirement now, it's going to have a huge effect, huge way down the road. And it's just

as easy to open an account. Man. I love like what you said as far as like, if you know how to open a savings account online, like with your bank, you know how to open a retirement account, say with Vanguard, uh, which is again we've mentioned them multiple times, but just go with Vanguard. It's you can't go wrong with them. And there's a couple of reasons for that that I

think we should mention really quickly. There are some great low cost advisors out there, right, Uh, there's Charles Schwab, There's Fidelity, There's some great companies, but they specifically, Yeah, but Vanguard in particular, there's a reason that we would recommend them over anybody else. And it's because Vanguard is essentially in investing what a credit union is to banking. And so when we invest in Vanguard, we own a piece of Vanguard. We are a part of the company

in that way. And so because they are essentially this co op, UH, investing in Vanguard means that they're not out to screw us or to make big profits, and there's nothing wrong with companies making a profit, but there's something really cool about putting your money in a place where that company has your best interest at heart, because you are that company to a certain extent. And that's why Vanguard is just completely different than any other investing company.

And there are other people because Vanguard has gotten so big, they've got to compete on their level. They've got to compete on cost. But Vanguards started the low cost investing revolution and they have perfected it. Yeah, yeah, man. They their expense ratios by far are the lowest out there.

I mean, again comparable it's of Fidelity and Schwab, But that's I mean, and that's what makes makes them so attractive is because when you've got a fund and you're paying a certain expense, that expense compounded over years and years and years, makes a huge difference down the road. And you know, it comes down to if you'd rather have that money in your own pocket or in the

pocket of a bank. So the average expense ratio at Vanguard is point to zero percent and the industry average is one point one two And that might sound like very little to you, right, like point too versus one point one two whatever. Those are just numbers now, man, we're talking like tens of thousands of dollars in twenty years. We're talking hundreds of thousands of dollars and not likelihood

over the years. What kind of money you got, man, it's I mean, it's amazing when you look at the studies literally, Uh, the studies the bear out of how

important fees are. Uh. Warren Buffett himself and his last shareholder letter said that fees are the most important thing that you should be concerned about when you're investing because those fees over time, just that small difference between point two and one point one two is great enough to have drastic effects on your retirement because of the magic

of compounding interest over time. That gap in fees that you'll pay by being a Vanguard instead of being with one of the bigger players that advertises more on TV will have mega effects on how well you can retire. Yeah, And so I mean, if you guys don't know Warren Buffett, I mean he's like the at this point though, I think, like the fourth richest man in the like in the world. Right, does does he have anything to do with Vanguard? Like he doesn't own it or anything, right, No, no, no no, no,

So his company is uh Berkshire Hathaway. Yeah, and and it Warren Buffett essentially is saying anomaly. He's like a he's he's this investing genius basically literally, Yeah, a guru stockpicker. And uh. And that's another thing we need to talk about really quickly is how do you pick the stocks that you're going to invest in. Because we talked about these vehicles, but inside of those vehicles are certainly you want to pick low cost funds. But am I just

investing in individual stocks? Do I buy like you know, Cola and percent Facebook or what? Yeah? So these vehicles that that we're talking about four one K that's a vehicle, a roth ira or a traditional ira or a set these are all the different vehicles. But within those vehicles you that money is in there. And then you then purchase funds, mutual funds or stock stocks or et s, exchange traded funds or bonds. And yeah, so let's let's talk about maybe what what we put in ours? Sure,

so I will tell you exactly how am I invested? Yeah, I'm about so as well, I'm ready inside of my four one K and inside of my IRA, I am fully invested in one fund that is the Vanguard vt s A X fund, which has an expense ratio of point oh four and is in vested in thirty six hundred US companies. So it has it gives me this diversity, crazy diverse. Basically, it's it's like an entire stock market funds Like basically it's meant some mirror the entire stock market. Yes,

like any company that's traded on the market. And because I don't know if most people know this, but like the Dow Jones UH, that's often quoted by CNBC or whatever. You're watching the down drop this many points today, Well, the Dow is actually only thirty stocks. I don't know if you knew that, UM, and the SNP five hundred would be a much better thing to quote because that's five of the biggest stocks on the U stock market. Uh. And then this vt s A X fund that I

invest completely in. Every single penny of my funds is in that UH is thirty six hundred U s stocks. So it's literally like you can't really get much more

diverse than that. Yeah, and actually a hundred percent of what we have or what I'm invested in with my roth Ira is the e t F of elevalent of that, which is VOO, which like v O O H. And basically I picked that because I saw an article with warm Buffett again this and this is an article from like years ago, but he recommended it, and it's a quote by him again, and he was talking specifically to somebody in his company because they're like, oh, should we

buy stocks specifically like for Berkshire Hathaway, like you know, warm Buffet's company, And he straight up was like, no,

you shouldn't do that. Instead, you should do this, which is you know, it's an index fund, and again like you know, like yours, it's it's the e t F equivalent, and so it's got an expense ratio of point zero four percent, which I don't think you can beat that, and you're gonna basically outperform anybody that's out there thinking that, oh, well, I know what stocks to pick based on the news or based on some inside or info that you have.

You're not going to be able to beat those index funds. Ye. So essentially, Matt, the things that you and I are both invested in their incredibly similar, almost no difference at all. And the two major factors that make what we're invested in the best are the low expense ratio factor and the broadly diversified factor. So, uh, if you can pick things that are invested in a wide swath of stocks um and you also pick something that has an extremely

low expense ratio, you're gonna do well over time. Those are literally the two most important factors when you're choosing the specific fund or e T f UH to be invested in inside of those vehicles that we talked about. Yeah, So if you're lucky enough to have a four O n K that allows you to to have access and to purchase Vanguard funds, man, good for you. You like Joel are in a great spot, especially if you have

a match. But otherwise, if you're like me and you've got to sit up your own account, which is totally easy, but go to the site like Vanguard and open your account there and so you know, you'll open your account and then your account sitting there, and then you can fund that account, and if you're scared and you don't what to do, your money will just sit there as cash. And so I'm just trying to explain basically the system.

But like your money is still within that vehicle. It's just sitting there as cash, which isn't great, but like that's better than nothing. What what we want you to do to then do is to take that, you know, take the cash and that account and then purchase some funds, uh, like what Joel has, which is the vt S A X fund, or mine, which is the v O O fund. Yeah, back to warm Buffet real quick. He made a bet.

The man's a genius, he's a genius, and he made a bet against these New York this New York hedge fund, and they each put up a million dollars and it was going to go to charity, right whoever wins. And the hedge fund was like, we'll kick your butt. We can invest way better than you, and nobody can invest

better than Warmbufett. But warm Buffett said, you know what, I'm gonna put all my money in the Vanguard smp E t F and so exactly what you're invested in, Matt, and so uh, warm Buffett puts some money in that, the hedge fund puts their money and all sorts of crazy things at stocks and with high fees. Yeah, all the all the stuff and for about it. For about like nine months to a year, the hedge fund was

doing okay, they were doing all right. Then it was like I think it was like an eight or tenure bet. But for the next like eight or nine years tenure Like yeah, Warren Buffett proceeds to crush completely crushed the competition. And it just goes to show you that these incredibly high paid hedge fund managers couldn't even come close to competing with this amazing, low cost, broadly diversified e t

F that just mirrors the stock market. There's so many good reasons for investing, specifically in something low cost and well diversified. We could do a whole show just on that, and we probably will say, will yeah. And something else that he'll say too, is that you want a dollar cost average when you buy right, which is like that means not taking all your money and just dumping it all at once and then not touching it again for another ten years, Like you do that if you're going

to bet a million bucks with some hedge fund managers. Uh. But what you and I do, uh is that every month, basically you have a set amount that you are buying into that fund. So if it goes up some well, you know, you buy a little you got to buy a little bit less because it costs more. But then like the next month, when it dips down, your money goes a lot further. And so basically what happens is

your your prices average out. Yeah, and I think there's uh some good reason for dollar cost averaging, but I also think there's good wisdom to the sooner you get in the better um. And so if you have a lump sum to put it in all at one time, let's say it's five grand or ten grand or something that I don't think that's a huge deal. I think it's okay to go all in all that ontesh when you're talking thirty years years, I mean it'll be your

You'll be fine. Yeah, who cares. But overall that works best for most people anyway, because let's say you know you're getting paid every two weeks, you know, put in a small chunk every two weeks, and so that's kind of the way that most people are set up in their four oh one k or you know, just a The great thing about Vanguard is you know, in your roth Ira, you can say, you know what, take this amount out and and buy this particular et for mutual fund on this day of the month. And so it's

pretty sweet. You can set it up and it's super simple and it just kind of comes out like any one of your other bills, except for that's not a bill that's going towards your future. So, Matt, how does this differ from like stock trading, And like, you know, day trading was really popular for a few years back then in the nineties, late nineties, right before they get

a dot com, and there's still people doing it. There's actually a lot more people doing it now with Yeah, with bitcoin, people are like Oliver with bitcoin and just like a whole another podcast, Man, I don't want to get into it. Yeah, just the general rise of the stock market. You know, Oh the stock market is super hot. Let me start borrowing money. So yeah, we invest in the stock market like we do with real estate, which is we very much take a buy and hold long

term approach to it. You can try to take advantages and time the market in the system. Uh you know what you with what you see are these like short term swings and sure you might make a buck here and there, but you also it's crazy high risk, and when we're talking about our retirement, we are not in the business to take risks. We're just looking for a long, long, steady growth where you know where the tortoise wins every time. Yeah, and uh again, our mentality is set it and forget it.

So keep putting in, keep doing it, keep miying. And you know what I think, John Bogel said this, who is the founder of Vanguard, A brilliant man who has changed life for America as we know it, like for real. I don't think that's an overstatement. He said. Essentially, contribute to your four O one K for forty years, just keep doing it and never check your balance, and then when you retire, open up that envelope to see what

your balance is and you will be flabbergasted. You'll be shocked. Um, and he's right, that's the best way to do it. Don't look at it, don't tinker with it, don't toy with it, just invest in it. And then after forty years or thirty years, hopefully you'll be retiring sooner than forty. But after doing that, you're gonna be a rich person. And uh, you're gonna be well off if you continue. You to run the race. Continue to put the money in,

you're gonna be well off. And like I said, Matt, the fund that I'm particularly invested in is invested in over stocks, trading individual stocks, buying Coca Cola or Apple or Facebook. Uh. Yeah, that's like the hot one right now. Man. You know what looked good to buy thirty years ago was Xerox. There's so many of those stocks that you're like, man, that this company can never fail. Uh, that this company

is good to go for a long time. But things change, and nobody knew that Google or Facebook or Apple was going to do what they've done. But that's why you don't make one stock bets. And so you put your money across the broad market spectrum and if somebody loses, you barely lose. And if somebody wins, you share in that win. Do not start betting your retirement on individual companies. That's when you're bound to fail. Excellent, nice man. Yeah, So back to the beer, because we're drinking two beers

from Ironmonger Brewing Company today. I'm mostly just drinking one. Yeah, the Nvil double I p A. I'm at the very bottom of that over here, and then I've got uh, I've got a little bit left of the Damascus, which is also also very good. Yeah, the Damascus is great. The anvil is perfect for eight point six percent. Man, Like you really don't taste that and you could. I mean, I think we drank both drank our piets. Mind's gone uh really quickly. It was so DearS maybe more than

mine for once, for once. Man, their beers are great. I love getting a crowler And thanks to Time Margaret for providing the beers tonight. All right, man, so let's do a quick recap then on what we talked about today. All right, there's a couple of vehicles that you need to know about when you're considering investing. Uh. And by the way, investing is simpler than you think it is. Uh, And that's why we did this podcast. So the vehicles, the four oh one K, that is the main vehicle.

If you work at a job and your employer says we're gonna offer you a retirement account, it's a four oh one K, and most employers will offer you a match in addition. So if you put in a certain percentage of your pay, they will put in a certain percentage in addition. Yeah, so if they are offering that match. Take it every single time. That is the number one thing you need to do is get that match. You will not find a better return on your money anywhere. Yeah.

So after the four one K or say your company doesn't provide a four one K or you might be self employed, the next thing you want to look at our I r A s whether that be a traditional ira or a roth ira. For most folks, especially with our current tax law that's passed, you need to look at a roth ira. Yeah, a roth ira is awesome. It means you are getting taxed on your income now, but you never ever ever pay tax on that money

ever again, even the growth of those funds. Yeah, it does have a contribution limit of so you might hit that maximum that cap pretty soon, but definitely do that first, and then you can start looking at a traditional ira. And those are the vehicles, but let's quickly talk about the passengers in that vehicle. Those are low cost, well diversified funds. I personally am invested in Vanguard vt S

a X funds. You can look that up on Google on Vanguard site, almost no cost to it at all, and invested in thirty six hundred U S stocks it's incredible. You can't get much better than that. Yeah. The e t F, which is an exchange traded fund, which is basically just think of it as an equivalent to to a Joel mentioned I'm invested in vou v o O pretty much the exact same thing, except that there's a lower bar of entry there. Yeah. So the best thing

to do invest today, Get started, guys, don't wait. And that's the biggest mistake people make is waiting. Yeah, I'll get to that next week, tomorrow, whatever, uh, and it never comes. So start investing now. It's not gonna get easier, nope, and make sure you're financially prepared for it, because you don't want to touch this money when you put it away for at least twenty years. Right, So this is

long term money we're talking about. But there's nothing better that you can do to start saving for your future than investing in low cost mutual funds or et s through a company like Vanguard today. Yeah, thanks so much everyone for listening. Our home on the web is how to money dot com. Check it out. We'll have some show notes up there for you. I don't forget to review and subscribe on iTunes or wherever you get your podcasts, and until next time, Joel, best friends out, best friends Out,