August 5, 2021 • 20 mins
Hello! and welcome to Everyday Finance and Economics with the Siglers! The podcast where we discuss what you need to know about personal finance and economics and give you practical advice on how to get started and be smart with your money.
This episode is an introduction to Retirement Planning. Glenn and Christina explore answers to the age old questions of how much do you need to save for retirement?, how much should you contribute to your retirement accounts?, and also what type of retirement savings accounts should you have? Next week we will deep dive into some FAQs of retirement planning.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello.
Hello and welcome to everydayfinance and economics with the
sicklers the podcast we discusswhat you need to know about
personal finance and economicsand give you practical advice on
how to get started and be smartwith your money.
We're your hosts, Glenn andChristina Sigler.
Speaker 2 (00:26):
So Christina, what's going on in the economy this
week,
Speaker 1 (00:30):
Uh, to be honest at where do we begin?
Um, there's a lot, there's a lotgoing on, uh, with vaccination
rates and such and mandates anda lot of things going on, but
the biggest economic story thisweek, and for the amount of time
it takes for this bill to pass,um, is the infrastructure bill
(00:50):
that is currently working itsway through the Senate.
It's a very, very ambitious$1trillion, 2,702 page bill that
is looking to essentially giveAmerica facelift as well as lift
up everything beneath thesurface, which is actually
Bailey what it's about.
Uh, we're talking not onlyimprovements to roads and
(01:12):
bridges, but also energy grids,water pipes, rail res broadband,
anything that like helps peoplerun things is what we're talking
about.
Uh, given the age of a lot ofour systems, especially the
water pipes.
There's some that are like stillled and a hundred years old,
which is very concerning becausewater is essential.
(01:33):
Um, this is needed very badlyand although it's not looking
like we're going to get theclimate policy that was
originally included, but as in,is also very badly needed in
this particular bill SenateDemocrats are working on a
separate bill to supplement.
This one is going to be thelargest government project in
the public works system since2009.
(01:54):
And our economic term of theweek is retirement.
Retirement is the withdrawalfrom one's position or
occupation from one's activeworking life.
A person may also send me aretire by reducing work hours or
workload.
Many people choose to retirewhen they're old or incapable of
doing their job.
All right, dad, I think it'stime we get into this week's
(02:14):
topic.
What are we talking about today?
We're
Speaker 2 (02:17):
Talking about retirement, right?
Retirement
Speaker 1 (02:22):
And retirement planning.
Right?
So retirement planning.
Um, what is that and why shouldI care about it?
Okay.
Speaker 2 (02:30):
First let's talk about retirement, right?
You mentioned it.
It's often a mythical timeperiod where people think that
they're, everything will berosy.
They'll have a vacation everyday and they won't have a Karen
world that that's not alwaystrue for everybody.
(02:51):
Um, re retirement as time when,uh, as you, as you alluded to
earlier, uh, people have ceasedcease their working life either
through their own will oroftentimes it's forced upon them
, uh, because of injuryinfirmity or, you know, because
their jobs just left them.
(03:13):
Um, and so we plan forretirement for after our work
life is over when we're, we'regoing to use our savings and our
investments to fund the laststages of our life.
And hopefully we've saved enoughthat that can be enjoyable.
(03:34):
And so yes, you have a lot oftime to, to, uh, plan for that a
lot of time to work on that.
Because for, for most people,the, the, the age that is the
time that you have consideredfor a work-life is from the ages
of 18 to 67.
Now you take time out forschool, if you're going to
(03:54):
college or grad school.
Yeah.
But that's a 40 plus yearperiod, almost 50 year period
where people can work.
And some people work beyond 67.
And, and so you have time tosave and invest to build a nest
(04:14):
egg.
Uh, so that the final years,whenever you decide to not work
or not work full time anymore,that you can do so comfortably.
Why is replant retirementplanning difficult for people?
It is hard to think and planthat far in advance.
Speaker 1 (04:33):
It's so hard to think about the nature and take it
serious
Speaker 2 (04:38):
Because you always say, I got some time, right?
I can do this later.
I can do this later more time.
But time is one of the thingsyou want to work for you, right?
The early you start withretirement planning and actually
executing your retirement plan,the better off you will be, but
(04:58):
people have a hard time thinkingabout, um, the things they need
to do and putting away thatmoney for, uh, for a goal that's
so far off.
And it, a lot of people can'tthink about what they're trying
to do next week, let them know40, 50 years from now.
Right.
Speaker 1 (05:16):
And also considering the consequences of not doing it
right now.
Right, right.
That's hard to, it's hard to dothat.
It's hard
Speaker 2 (05:24):
For people to think, uh, think about, um, there's,
there's a lot of unknowns.
That's very challenging.
Uh, getting ready for retirementrequires a consistent approach
to say for most people, aconsistent approach to savings
and investing and avoiding, um,costs, you know, all along the
(05:45):
way so that your retirement fundpeople call a nest date is, um,
in good shape when you need it.
Speaker 1 (05:55):
Yeah, man.
All right.
So this seems like a lot, whereshould we, where should we
start?
Speaker 2 (06:01):
So we're going to focus on three things today
because learning aboutretirement planning can be a
lifelong effort for people thatspecialize in that there are
tons of books and othermaterials that talk about, you
know, every aspect of it, oreven just focus on one or two
(06:24):
aspects of it because, uh, youknow, mastering in one or two
aspects of it can help peopleout, but we'll focus on three
things, how much you shouldsave, what type of accounts you
should have and then what typeof assets should you have.
Speaker 1 (06:42):
Okay.
So let's start with that firstone.
How much should you save?
Speaker 2 (06:46):
So financial professional suggests that, you
know, number one, starting asearly as possible, um, you know,
if you could start at 21 orstart at 18 or start, you know
what, whenever you could start,start, right?
You should consider trying tosave at least 15% of your
(07:08):
pre-tax income, uh, towardretirement to make sure that
you're able to live acomfortable lifestyle.
And, and that 15% in many placesis, you know, sometimes you'll
have to do it by yourself, youknow, 15% all by yourself.
And that's hard to do, but somecompanies offer you a match
(07:31):
where they say, Hey, you putdown$50, we'll put down$50.
And so when you have situationslike that, where they'll match a
certain amount of the money youput away, that makes it easier.
Um, but even if you can't make15%, but what you can start with
(07:52):
to start with, you know, startwith three, and then every time
you get a raise, take a littlebit of that raise and put it in
with your retirement
Speaker 1 (08:02):
Or like a bonus.
Yeah, yeah, yeah.
Cause that's essentially likefree money.
If you want to
Speaker 3 (08:08):
Use the, if they have the match,
Speaker 2 (08:11):
The matches is what I consider, you know, instant
return on your investment.
Right.
I put down a hundred, they giveme a hundred, a double my money
right away.
But if I, if you don't putanything down, you can't get the
match.
Right, right, right.
Right.
The longer you wait to startsaving, when you finally do
(08:31):
start saving, you may have tocontribute more than 15% in
order to get to a comfortable in, in order to get to pound
interests.
Right.
So time is on your side.
Um, you've got, you know, ifyou're in your twenties, you got
a 40 year horizon, but thedifference between a 40 year
horizon and a 30 year horizoncompeting major.
(08:55):
Yeah.
Speaker 1 (08:55):
And I'll tell like the present,
Speaker 2 (08:57):
But a lot of people wait until they're in a forties
or fifties and that's whenyou've got to, you know, be
actually a lot more aggressive.
Speaker 1 (09:06):
Right.
Okay.
So what type of retirementaccounts should I have and how
much can I contribute to those?
Speaker 2 (09:15):
Okay.
And there's several types ofretirement accounts.
Uh, and in this year, uh, there,uh, you can re uh, contribute up
to 19,500.
Pre-tax in a 401k.
If you're under 50, if you'reover 50, you can add another
(09:38):
6,500 interesting.
Okay.
Okay.
So that's one type of account.
If your, if your job doesn'toffer a 401k, um, you can, uh,
start an IRA.
Um, and, uh, there are, um, uh,Roth IRAs and traditional IRAs,
(10:01):
but the limit for that is$6,000.
Wait, really?
Yup.
Yep.
Speaker 1 (10:08):
I tried to start a Roth IRA, dad.
Um, we talked about, we talkedabout that.
I was very upset.
I can't contribute anything toit because I do not have an
employer, but you can still, Ishould still be able to yes.
But I wanted it to be, it'sfine.
But
Speaker 3 (10:26):
Only 6,000.
I was going to put it anyway.
Right.
Speaker 2 (10:29):
But that, look that again, that's tax advantage
money at the, you know, the,the, the benefits of 401ks and
IRAs, uh, the pre-tax ones arethat you don't pay any money,
putting a penny tax on the moneythat you put in.
And
Speaker 3 (10:46):
Then there's the Roth ,
Speaker 2 (10:50):
The Roth IRAs and the Roth 401ks.
Yeah.
You pay the taxes on the moneygoing in, and then they grow
tax-free after that.
And so
Speaker 4 (11:04):
For, for most,
Speaker 2 (11:05):
For most people starting out, it's actually
better to do the Roth versionsof 401ks and IRAs because your
tax burden is lower than it.
Then we think it will be lateron when you're making lots more
money.
Right.
So it's better to pay a tax rateof 15% then, you know, later on,
(11:28):
um, pay a tax rate of 35, 35, 370.9 or 39.6.
Right.
Speaker 1 (11:37):
But even if you do stay in the same tax bracket,
15% of a hundred is less than15% of a hundred thousand.
Speaker 2 (11:44):
Well, it, the percent on, on a, on a tax rate basis.
So, you know, when you take outmoney, so you take it out.
If you take out a a hundredthousand, your, your tax burden,
won't be 15%.
It'll be, if you take out ahundred thousand dollars in a
year, I was just saying
Speaker 1 (12:03):
For the, I understand.
But I was saying for theexample, I feel like it's better
to be taxed on less money than,yeah.
But
Speaker 2 (12:13):
That is not, that is not true because we look at the
tape.
So if I'm paying 15% on a, ahundred dollars, if I take out
the a hundred dollars today,next week, I can take out a
hundred dollars or I'm stillpaying 15%.
So it doesn't matter when I takeit out, I'm always paying 15
cents on a doubt.
That's fine.
Because that's how percentsworks.
(12:34):
I forgot how percents work.
Okay.
Yeah.
Learn from me.
Percents worked the same.
Speaker 5 (12:46):
Yes.
Met.
It just works.
I am.
It's time for me to go back toschool.
It's not for me to go back toschool.
Speaker 2 (12:57):
You know, the, the bigger, the bigger thing for
folks, um, you know, is thatwhen you take it out, you'll
probably have a lot more moneyand you'll need to take out a
lot more money.
So you, you know, if you're, ifyou've got a traditional IRA or
401k, you're going to pay thehigher rate of tax on the money
(13:17):
that you take out, becauseyou've got, instead of putting
in, you know, paying tax on$50,000, which is your earnings.
When you put the money in,you're now taking out what we
hope is several hundred thousanddollars, right.
And paying tax and paying tax onthat.
So you rather pay the littletasks on the front end than the
big tax on the back end.
(13:38):
Right.
Okay.
So, uh, we talked about 401ksand IRAs.
There's also solo 401ks, butthose are more for specialty,
but for most people, specialty,uh, situations.
But, um, for most people, theIRA, the 401k are, are going to
be the, the vehicles that youlook at the most, and you're
(14:02):
going to have to make a choicebetween the Roth and the
traditional version of each oneof those, another tax saving
vehicle is a health savingsaccount.
Um, and that's another type oftax, a tax advantage account.
Um, and, and in order to openone of those types of accounts,
you need to be an HSA eligible,high deductible health plan.
(14:27):
And so this is a way to put awaymoney for your health care
costs.
And you can use the money now,or you can use the money in the
future.
And so if, you know, people usethat to pay for their future
health care costs, but again,the money is not taxed.
And so you, well, when youretire, guess what, you're going
to still have to go to thedoctor.
(14:48):
So this is still a good way tosay simply more than you needed
to before, right.
Because they're, you know,there's no expiration date on
that.
Uh, the limits for contributingto health savings accounts, uh,
for this year for individuals3,600 for family, it's 7,200.
(15:08):
And if you're no matter
Speaker 1 (15:09):
How big the family is, wait a minute, wait a
minute.
So if you've got a family oflike five or six, it's still
7,200, oh, they may have torethink that one.
Speaker 2 (15:19):
Say the tax code was perfect now.
Yeah.
Speaker 5 (15:23):
Just U S government, if you're listening,
Speaker 2 (15:26):
It was perfect in the end.
And, you know, there are certainpoints where it's, uh, the jumps
in, uh, benefits and orexposure.
Um, aren't optimal.
And, but that's, that's whypeople go to tax planners and
you read up on this stuff sothat, you know, you know, uh,
you know, with, with the changesin your life, how to plan for
(15:48):
those things, what's going towork for you right now, again,
uh, you know, as you get older,there is additional money that
you can put in for your healthsavings account.
There's like, like there's a,catch-up for RA for 401ks and
IRAs.
There's a, catch-up for HSHS aswell.
There's an additional thousanddollars that you can put in if
(16:10):
you're over 55.
Speaker 1 (16:11):
So what types of assets should I hold in my
investments?
Speaker 2 (16:16):
So that's becoming an increasingly more, um,
interesting question,
Speaker 1 (16:22):
Right?
Especially because investmentshave become more diverse,
Speaker 2 (16:25):
Uh, traditional, uh, retirement accounts or our stock
and bond heavy, uh, bonds paid,paid a significant amount more,
uh, than they do now.
Um, and so, you know, investmentadvisors would say, Hey, pick a
good mix of, uh, stocks or stockmutual funds from for most
(16:48):
people and bond or bond mutualfunds.
But, but now the, the field's alittle bit different.
And so you've got just a widerrange of investment options, um,
that include alternativeinvestments.
Um, but you, you know, again, myinstruction on that is, or
(17:09):
guidance on that is know whatyou're investing in and, you
know, no, no, the risk andreturn of, um, whatever, if you
decide that you want to go put,have Bitcoin in an ETF in your,
uh, in your retirement portfoliocan be lucrative.
Yeah.
It could be lucrative, but itcould also be risky, make sure
(17:30):
you understand what, what you'redoing.
Um, okay.
Um, but you know, again, for,for everybody, the versification
is a great tool for investment,um, to, to diversify a way some
of the risks that you have andparticipate in the longer term
trends of growth in the marketsthat you're participating in and
(17:52):
that's, you know, uh, equitiesand, and debt markets.
Um, so again, what's the rightmix.
If you're really young, you cantake a little more risk.
And so you have more time tomake it up.
You you'll get higher, youshould get higher returns.
(18:14):
And so, you know, people are intheir twenties and thirties can
have, uh, portfolios that are80%, 90%.
Yeah.
I know some people that are ahundred percent equities, um, or
other risky or assets, um, intheir portfolios.
(18:34):
And as you, um, as you age andget other responsibilities, you
want to lessen that risk.
So then you will bring in someother things that don't have the
volatility, um, and that'straditionally where bonds come
in, but, uh, bonds or non-equityassets that just don't move as,
(18:56):
as much, um, you know, with,with the, the vagaries of
whichever market that they have.
And, and so that's where you tryto gradually taper away some of
your, uh, your equity exposureor volatility exposure, but I'm
going to say this because peopleare, are living longer, even
(19:17):
people that are enteringretirement should still have,
you know, uh, some significantportion of their, of their
portfolio in some sort of, uh,higher growth, higher potential
assets like equities, because,you know, people, you know, uh,
unlike the sixties where theaverage life expense expectancy
(19:41):
was like 65, 66, 67.
Well, now the average lifeexpectancy for some people are
80 and 90.
And so if you retire at 60, 65or 67, you could live another
20, 30 years.
Right.
And so you, you need that growthfrom equities to help you, uh,
(20:03):
keep your portfolio going thatlong.
All right.
That's our show.
Thank you so much for listeningand be sure to join us next time
when we continue our topic onretirement planning.
Speaker 1 (20:14):
Yes.
And if you have any questionsfor us, you can email
us@efespodcastsatgmail.com andfollow us on Instagram and
Facebook at S podcast.
Thank you so much for listening.
Take care, buddy.
Hello.
Hello and welcome to everydayfinance and economics with the
sicklers the podcast we discusswhat you need to know about
personal finance and economicsand give you practical advice on
how to get started and be smartwith your money.
We're your hosts, Glenn andChristina Sigler.
Speaker 2 (00:26):
So Christina, what's going on in the economy this
week,
Speaker 1 (00:30):
Uh, to be honest at where do we begin?
Um, there's a lot, there's a lotgoing on, uh, with vaccination
rates and such and mandates anda lot of things going on, but
the biggest economic story thisweek, and for the amount of time
it takes for this bill to pass,um, is the infrastructure bill
(00:50):
that is currently working itsway through the Senate.
It's a very, very ambitious$1trillion, 2,702 page bill that
is looking to essentially giveAmerica facelift as well as lift
up everything beneath thesurface, which is actually
Bailey what it's about.
Uh, we're talking not onlyimprovements to roads and
(01:12):
bridges, but also energy grids,water pipes, rail res broadband,
anything that like helps peoplerun things is what we're talking
about.
Uh, given the age of a lot ofour systems, especially the
water pipes.
There's some that are like stillled and a hundred years old,
which is very concerning becausewater is essential.
(01:33):
Um, this is needed very badlyand although it's not looking
like we're going to get theclimate policy that was
originally included, but as in,is also very badly needed in
this particular bill SenateDemocrats are working on a
separate bill to supplement.
This one is going to be thelargest government project in
the public works system since2009.
(01:54):
And our economic term of theweek is retirement.
Retirement is the withdrawalfrom one's position or
occupation from one's activeworking life.
A person may also send me aretire by reducing work hours or
workload.
Many people choose to retirewhen they're old or incapable of
doing their job.
All right, dad, I think it'stime we get into this week's
(02:14):
topic.
What are we talking about today?
We're
Speaker 2 (02:17):
Talking about retirement, right?
Retirement
Speaker 1 (02:22):
And retirement planning.
Right?
So retirement planning.
Um, what is that and why shouldI care about it?
Okay.
Speaker 2 (02:30):
First let's talk about retirement, right?
You mentioned it.
It's often a mythical timeperiod where people think that
they're, everything will berosy.
They'll have a vacation everyday and they won't have a Karen
world that that's not alwaystrue for everybody.
(02:51):
Um, re retirement as time when,uh, as you, as you alluded to
earlier, uh, people have ceasedcease their working life either
through their own will oroftentimes it's forced upon them
, uh, because of injuryinfirmity or, you know, because
their jobs just left them.
(03:13):
Um, and so we plan forretirement for after our work
life is over when we're, we'regoing to use our savings and our
investments to fund the laststages of our life.
And hopefully we've saved enoughthat that can be enjoyable.
(03:34):
And so yes, you have a lot oftime to, to, uh, plan for that a
lot of time to work on that.
Because for, for most people,the, the, the age that is the
time that you have consideredfor a work-life is from the ages
of 18 to 67.
Now you take time out forschool, if you're going to
(03:54):
college or grad school.
Yeah.
But that's a 40 plus yearperiod, almost 50 year period
where people can work.
And some people work beyond 67.
And, and so you have time tosave and invest to build a nest
(04:14):
egg.
Uh, so that the final years,whenever you decide to not work
or not work full time anymore,that you can do so comfortably.
Why is replant retirementplanning difficult for people?
It is hard to think and planthat far in advance.
Speaker 1 (04:33):
It's so hard to think about the nature and take it
serious
Speaker 2 (04:38):
Because you always say, I got some time, right?
I can do this later.
I can do this later more time.
But time is one of the thingsyou want to work for you, right?
The early you start withretirement planning and actually
executing your retirement plan,the better off you will be, but
(04:58):
people have a hard time thinkingabout, um, the things they need
to do and putting away thatmoney for, uh, for a goal that's
so far off.
And it, a lot of people can'tthink about what they're trying
to do next week, let them know40, 50 years from now.
Right.
Speaker 1 (05:16):
And also considering the consequences of not doing it
right now.
Right, right.
That's hard to, it's hard to dothat.
It's hard
Speaker 2 (05:24):
For people to think, uh, think about, um, there's,
there's a lot of unknowns.
That's very challenging.
Uh, getting ready for retirementrequires a consistent approach
to say for most people, aconsistent approach to savings
and investing and avoiding, um,costs, you know, all along the
(05:45):
way so that your retirement fundpeople call a nest date is, um,
in good shape when you need it.
Speaker 1 (05:55):
Yeah, man.
All right.
So this seems like a lot, whereshould we, where should we
start?
Speaker 2 (06:01):
So we're going to focus on three things today
because learning aboutretirement planning can be a
lifelong effort for people thatspecialize in that there are
tons of books and othermaterials that talk about, you
know, every aspect of it, oreven just focus on one or two
(06:24):
aspects of it because, uh, youknow, mastering in one or two
aspects of it can help peopleout, but we'll focus on three
things, how much you shouldsave, what type of accounts you
should have and then what typeof assets should you have.
Speaker 1 (06:42):
Okay.
So let's start with that firstone.
How much should you save?
Speaker 2 (06:46):
So financial professional suggests that, you
know, number one, starting asearly as possible, um, you know,
if you could start at 21 orstart at 18 or start, you know
what, whenever you could start,start, right?
You should consider trying tosave at least 15% of your
(07:08):
pre-tax income, uh, towardretirement to make sure that
you're able to live acomfortable lifestyle.
And, and that 15% in many placesis, you know, sometimes you'll
have to do it by yourself, youknow, 15% all by yourself.
And that's hard to do, but somecompanies offer you a match
(07:31):
where they say, Hey, you putdown$50, we'll put down$50.
And so when you have situationslike that, where they'll match a
certain amount of the money youput away, that makes it easier.
Um, but even if you can't make15%, but what you can start with
(07:52):
to start with, you know, startwith three, and then every time
you get a raise, take a littlebit of that raise and put it in
with your retirement
Speaker 1 (08:02):
Or like a bonus.
Yeah, yeah, yeah.
Cause that's essentially likefree money.
If you want to
Speaker 3 (08:08):
Use the, if they have the match,
Speaker 2 (08:11):
The matches is what I consider, you know, instant
return on your investment.
Right.
I put down a hundred, they giveme a hundred, a double my money
right away.
But if I, if you don't putanything down, you can't get the
match.
Right, right, right.
Right.
The longer you wait to startsaving, when you finally do
(08:31):
start saving, you may have tocontribute more than 15% in
order to get to a comfortable in, in order to get to pound
interests.
Right.
So time is on your side.
Um, you've got, you know, ifyou're in your twenties, you got
a 40 year horizon, but thedifference between a 40 year
horizon and a 30 year horizoncompeting major.
(08:55):
Yeah.
Speaker 1 (08:55):
And I'll tell like the present,
Speaker 2 (08:57):
But a lot of people wait until they're in a forties
or fifties and that's whenyou've got to, you know, be
actually a lot more aggressive.
Speaker 1 (09:06):
Right.
Okay.
So what type of retirementaccounts should I have and how
much can I contribute to those?
Speaker 2 (09:15):
Okay.
And there's several types ofretirement accounts.
Uh, and in this year, uh, there,uh, you can re uh, contribute up
to 19,500.
Pre-tax in a 401k.
If you're under 50, if you'reover 50, you can add another
(09:38):
6,500 interesting.
Okay.
Okay.
So that's one type of account.
If your, if your job doesn'toffer a 401k, um, you can, uh,
start an IRA.
Um, and, uh, there are, um, uh,Roth IRAs and traditional IRAs,
(10:01):
but the limit for that is$6,000.
Wait, really?
Yup.
Yep.
Speaker 1 (10:08):
I tried to start a Roth IRA, dad.
Um, we talked about, we talkedabout that.
I was very upset.
I can't contribute anything toit because I do not have an
employer, but you can still, Ishould still be able to yes.
But I wanted it to be, it'sfine.
But
Speaker 3 (10:26):
Only 6,000.
I was going to put it anyway.
Right.
Speaker 2 (10:29):
But that, look that again, that's tax advantage
money at the, you know, the,the, the benefits of 401ks and
IRAs, uh, the pre-tax ones arethat you don't pay any money,
putting a penny tax on the moneythat you put in.
And
Speaker 3 (10:46):
Then there's the Roth ,
Speaker 2 (10:50):
The Roth IRAs and the Roth 401ks.
Yeah.
You pay the taxes on the moneygoing in, and then they grow
tax-free after that.
And so
Speaker 4 (11:04):
For, for most,
Speaker 2 (11:05):
For most people starting out, it's actually
better to do the Roth versionsof 401ks and IRAs because your
tax burden is lower than it.
Then we think it will be lateron when you're making lots more
money.
Right.
So it's better to pay a tax rateof 15% then, you know, later on,
(11:28):
um, pay a tax rate of 35, 35, 370.9 or 39.6.
Right.
Speaker 1 (11:37):
But even if you do stay in the same tax bracket,
15% of a hundred is less than15% of a hundred thousand.
Speaker 2 (11:44):
Well, it, the percent on, on a, on a tax rate basis.
So, you know, when you take outmoney, so you take it out.
If you take out a a hundredthousand, your, your tax burden,
won't be 15%.
It'll be, if you take out ahundred thousand dollars in a
year, I was just saying
Speaker 1 (12:03):
For the, I understand.
But I was saying for theexample, I feel like it's better
to be taxed on less money than,yeah.
But
Speaker 2 (12:13):
That is not, that is not true because we look at the
tape.
So if I'm paying 15% on a, ahundred dollars, if I take out
the a hundred dollars today,next week, I can take out a
hundred dollars or I'm stillpaying 15%.
So it doesn't matter when I takeit out, I'm always paying 15
cents on a doubt.
That's fine.
Because that's how percentsworks.
(12:34):
I forgot how percents work.
Okay.
Yeah.
Learn from me.
Percents worked the same.
Speaker 5 (12:46):
Yes.
Met.
It just works.
I am.
It's time for me to go back toschool.
It's not for me to go back toschool.
Speaker 2 (12:57):
You know, the, the bigger, the bigger thing for
folks, um, you know, is thatwhen you take it out, you'll
probably have a lot more moneyand you'll need to take out a
lot more money.
So you, you know, if you're, ifyou've got a traditional IRA or
401k, you're going to pay thehigher rate of tax on the money
(13:17):
that you take out, becauseyou've got, instead of putting
in, you know, paying tax on$50,000, which is your earnings.
When you put the money in,you're now taking out what we
hope is several hundred thousanddollars, right.
And paying tax and paying tax onthat.
So you rather pay the littletasks on the front end than the
big tax on the back end.
(13:38):
Right.
Okay.
So, uh, we talked about 401ksand IRAs.
There's also solo 401ks, butthose are more for specialty,
but for most people, specialty,uh, situations.
But, um, for most people, theIRA, the 401k are, are going to
be the, the vehicles that youlook at the most, and you're
(14:02):
going to have to make a choicebetween the Roth and the
traditional version of each oneof those, another tax saving
vehicle is a health savingsaccount.
Um, and that's another type oftax, a tax advantage account.
Um, and, and in order to openone of those types of accounts,
you need to be an HSA eligible,high deductible health plan.
(14:27):
And so this is a way to put awaymoney for your health care
costs.
And you can use the money now,or you can use the money in the
future.
And so if, you know, people usethat to pay for their future
health care costs, but again,the money is not taxed.
And so you, well, when youretire, guess what, you're going
to still have to go to thedoctor.
(14:48):
So this is still a good way tosay simply more than you needed
to before, right.
Because they're, you know,there's no expiration date on
that.
Uh, the limits for contributingto health savings accounts, uh,
for this year for individuals3,600 for family, it's 7,200.
(15:08):
And if you're no matter
Speaker 1 (15:09):
How big the family is, wait a minute, wait a
minute.
So if you've got a family oflike five or six, it's still
7,200, oh, they may have torethink that one.
Speaker 2 (15:19):
Say the tax code was perfect now.
Yeah.
Speaker 5 (15:23):
Just U S government, if you're listening,
Speaker 2 (15:26):
It was perfect in the end.
And, you know, there are certainpoints where it's, uh, the jumps
in, uh, benefits and orexposure.
Um, aren't optimal.
And, but that's, that's whypeople go to tax planners and
you read up on this stuff sothat, you know, you know, uh,
you know, with, with the changesin your life, how to plan for
(15:48):
those things, what's going towork for you right now, again,
uh, you know, as you get older,there is additional money that
you can put in for your healthsavings account.
There's like, like there's a,catch-up for RA for 401ks and
IRAs.
There's a, catch-up for HSHS aswell.
There's an additional thousanddollars that you can put in if
(16:10):
you're over 55.
Speaker 1 (16:11):
So what types of assets should I hold in my
investments?
Speaker 2 (16:16):
So that's becoming an increasingly more, um,
interesting question,
Speaker 1 (16:22):
Right?
Especially because investmentshave become more diverse,
Speaker 2 (16:25):
Uh, traditional, uh, retirement accounts or our stock
and bond heavy, uh, bonds paid,paid a significant amount more,
uh, than they do now.
Um, and so, you know, investmentadvisors would say, Hey, pick a
good mix of, uh, stocks or stockmutual funds from for most
(16:48):
people and bond or bond mutualfunds.
But, but now the, the field's alittle bit different.
And so you've got just a widerrange of investment options, um,
that include alternativeinvestments.
Um, but you, you know, again, myinstruction on that is, or
(17:09):
guidance on that is know whatyou're investing in and, you
know, no, no, the risk andreturn of, um, whatever, if you
decide that you want to go put,have Bitcoin in an ETF in your,
uh, in your retirement portfoliocan be lucrative.
Yeah.
It could be lucrative, but itcould also be risky, make sure
(17:30):
you understand what, what you'redoing.
Um, okay.
Um, but you know, again, for,for everybody, the versification
is a great tool for investment,um, to, to diversify a way some
of the risks that you have andparticipate in the longer term
trends of growth in the marketsthat you're participating in and
(17:52):
that's, you know, uh, equitiesand, and debt markets.
Um, so again, what's the rightmix.
If you're really young, you cantake a little more risk.
And so you have more time tomake it up.
You you'll get higher, youshould get higher returns.
(18:14):
And so, you know, people are intheir twenties and thirties can
have, uh, portfolios that are80%, 90%.
Yeah.
I know some people that are ahundred percent equities, um, or
other risky or assets, um, intheir portfolios.
(18:34):
And as you, um, as you age andget other responsibilities, you
want to lessen that risk.
So then you will bring in someother things that don't have the
volatility, um, and that'straditionally where bonds come
in, but, uh, bonds or non-equityassets that just don't move as,
(18:56):
as much, um, you know, with,with the, the vagaries of
whichever market that they have.
And, and so that's where you tryto gradually taper away some of
your, uh, your equity exposureor volatility exposure, but I'm
going to say this because peopleare, are living longer, even
(19:17):
people that are enteringretirement should still have,
you know, uh, some significantportion of their, of their
portfolio in some sort of, uh,higher growth, higher potential
assets like equities, because,you know, people, you know, uh,
unlike the sixties where theaverage life expense expectancy
(19:41):
was like 65, 66, 67.
Well, now the average lifeexpectancy for some people are
80 and 90.
And so if you retire at 60, 65or 67, you could live another
20, 30 years.
Right.
And so you, you need that growthfrom equities to help you, uh,
(20:03):
keep your portfolio going thatlong.
All right.
That's our show.
Thank you so much for listeningand be sure to join us next time
when we continue our topic onretirement planning.
Speaker 1 (20:14):
Yes.
And if you have any questionsfor us, you can email
us@efespodcastsatgmail.com andfollow us on Instagram and
Facebook at S podcast.
Thank you so much for listening.
Take care, buddy.
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