January 18, 2023 • 36 mins
They are the single biggest savings tool we have available to us. Are you using them effectively? That’s the question Host Josh Bretl explores on this episode of Retirement Equals Freedom, which is devoted to all things 401k:
- How they work.
- Who can contribute.
- Ways to make and monitor investments inside them.
- When it’s okay to withdraw funds from them – and how.
- Plus insights about #TaxNerd implications and an interesting loan option.
You’ll come away from this episode with a whole new depth of wisdom about 401ks and why they are such a valuable – but often misunderstood – vehicle for the kind of financial growth that adds up over time to the kind of robust retirement nest egg we all want to have.
And, on an irrelevant side note, if you doubt that there are harmonica players out there making good money as well as beautiful noise, listen to "Re: Stacks," (a Bon Iver cover), performed by legendary harmonica player Grégoire Maret. As promised by Co-Host Dave Schmidt on the show, you can find one of his favorite harmonica-featured tunes of the moment here.
Like what you’ve heard? Want to spread the word? Send your friends to this pod link resource with all the latest and greatest about Retirement Equals Freedom and one-click access to your favorite platform for listening!
It's a new year and Cometeer is back in stock at the FSR freezer! Get $25 off your first order when you click this link.
And don’t forget to join the conversation at our private Facebook group, which you’ll find here.
Click here to explore the services that FSR Wealth Strategies offers and schedule a discovery call with one of the team’s CPAs. When it comes to living your best life, it’s never too early to get started!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dave Schmidt (00:01):
401k plans.
You've definitely heard of them.
You may have had one inthe past, and if still
employed, you may still becontributing to a 401k plan.
But are you using thesereally powerful savings
tools effectively?
Josh Bretl (00:16):
401ks can be quite ... Not quite, 401ks
are the single biggest savingstool that Americans have.
Most people use them, veryfew people know how to do it
effectively, and they let alot of emotion come into play.
And they also think they don'thave a choice of what they can
or can't be doing with it asthey get closer to retirement.
Dave Schmidt (00:37):
That's Josh Bretl.
He's the owner of FSRWealth Strategies.
For the last 20 plus years,Josh's sole focus has been
to help fine folks likeyou, make your retirement
the best part of your life.
Next up in the episode, Joshtalks about employer matching
and profit sharing, two greatbenefits of these employer
(01:01):
sponsored retirement plans.
We then follow that up bytalking about the ways your
money can get into a 401kplan, and how you can get your
money out of, a 401k plan.
Josh Bretl (01:13):
Now let's talk about how money goes in.
It has to come out of yourpaycheck, you can't write
a check for it, it's got tocome out of your paycheck
as a payroll deduction.
And it can go either in pre-tax,you know traditional 401ks.
Or most 401ks now actuallyoffer Roth options too, you
can put money in post-tax.
Now, you have that choice.
(01:33):
Now how you get money outis plan dependent, but
there are also IRS rules.
One of the big IRS rulesis the 59 and a half rule.
So when you take money out, ifyou take it out prior to age
59 and a half, you are goingto pay a penalty on that money.
If it's a traditionaldistribution, it's going to
be taxed plus the penalty.
If it's a Roth distribution,the gains will be
(01:56):
taxed plus the penalty.
Dave Schmidt (01:59):
Now, there are some exceptions to those
penalties, which we do bring up.
And to end our conversationon 401ks, Josh and I talk
about the pros and the consto employers offering multiple
401k investment options.
These options have giventhe average Joe power to
make some pretty seriousinvestment choices.
(02:22):
And if you're unable to removeemotion from the equation,
you could be looking at somepretty stressful times ahead.
Josh Bretl (02:29):
Now, the market and "professional investors",
they're really good at takingemotion out of the equation.
They're not selling when it'slow and buying when it's high,
they're making good decisions,but it's not their money.
So when they created these401k plans and they gave
people the ability to putmoney away, what they also
(02:50):
did is they gave people theproblem where they had to watch
their money go up and down.
So people were making emotionaldecisions inside of 401k plans.
And I think people are startingto realize that this is
something that you can't justset it and forget it, you really
got to pay attention to it.
And at the same time, tryand take emotion out of it
as much as humanly possible.
Dave Schmidt (03:12):
We end our 401k conversation talking about
in-service distributions.
And as always, we have to havesome fun because no one's got
time to listen to a boringfinancial podcast, uh uh!
And speaking of we, who am I?
Hey, I'm Dave.
Josh's longtime friend,co-host of the podcast and
(03:32):
huge fan of the Buffalo Bills.
With that being said, let me letyou let me end my introduction
so we can dig into all thenitty gritty of 401k plans.
FSR Wealth Management is aregistered investment advisor
located in Elmhurst, Illinois.
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
(03:53):
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
Josh Bretl (04:24):
Erin and I just got back from one of our
annual conferences, Erinand Sean and I went, and it
was probably 1200 people.
600 ... Or 400 financialadvisory offices.
And it was kind of a year endrecap, get used to the new year.
And we actually got acompliment on the podcast.
Dave Schmidt (04:43):
Oh, tell me more.
Josh Bretl (04:44):
So, yeah, I was talking to one of the
guys I know there and hesays, "I try and listen to
as many podcasts as I can."
And these are allfinancial advisor podcasts.
He goes, "Yours is the only oneI actually enjoy listening to."
And he goes, "I've nevermet Dave, but I think
I'd like him a lot."
Dave Schmidt (05:03):
Did he really say that?
Josh Bretl (05:04):
He did.
Erin wasn't therefor it, though.
Dave Schmidt (05:05):
Okay.
Josh Bretl (05:06):
Oh, this was awful, Dave.
So we get there, we're out inSan Diego, it was beautiful.
Actually, that day itwas raining miserably.
But we're staying at ... I'mnot going to mention the hotel,
but we're staying at ... Andit's a top brand hotel.
And we go to check in andabout half an hour before we
got there, their internet andcomputer systems went down.
Dave Schmidt (05:26):
That could be a problem.
Josh Bretl (05:27):
It was a problem to the fact that that
was 10:30 in the morning.
We had a black tie,semi-formal event that evening.
We all had to get ready inother people's rooms and we
did not get our room until10:30-11:00 that night.
So all three of uschecked into our rooms.
So we checked in after the eventwas over with, and there was a
(05:48):
guy sitting there with an oldschool book with everything
printed out and names and hewas calling the home office to
run credit cards and everything.
And the guy who waschecking us in actually
had a smile on his face.
And I said to him, I go, " I'msure you had a rough day.
How did this compareto other days?"
He goes, "Oh, there'snothing that compares to
what we went through today."
Dave Schmidt (06:08):
wow.
How about that?
Josh Bretl (06:10):
So that was ... How you rely on internet
and all that stuff, so.
Dave Schmidt (06:13):
Oh, totally.
I was kind of having FOMO aboutnot going until you mentioned
black tie event, then I kind ofdry heaved a little and I said,
"Yeah, not a place for me."
Because I'd have torent something that's
qualified as black tie.
Josh Bretl (06:27):
Well, black suits work too.
Wait a second.
Dave Schmidt (06:30):
I don't have a black suit.
Josh Bretl (06:31):
I think the last time I wore this black suit
was to last year's event.
Dave Schmidt (06:34):
Well, sounds really fancy.
Yeah, yeah.
Josh Bretl (06:37):
David, how are you?
Dave Schmidt (06:38):
Josh, I'm not having my gallbladder removed
tomorrow, so better than you.
Josh Bretl (06:44):
Yeah.
So we're rushing in to getan episode in because I don't
know how long I'll be laid up.
They're going to suckone of my organs out of
my stomach tomorrow, so.
Dave Schmidt (06:52):
Yeah.
You know, Cometeer, I haven'tsaid hello to you in a while.
And this is the Klatch roaster,I think it's a CBC blend.
It's delicious, Josh.
It's a dark roast.
And we have not givenhim a shout-out in a
while, yet I continue todrink a delicious coffee.
Josh Bretl (07:08):
You should.
Dave Schmidt (07:09):
Yeah.
Thank you.
Josh Bretl (07:10):
For Christmas, Santa thought it would
be a good idea to get thekids a karaoke machine.
Specifically, Maggie receivedsaid karaoke machine.
You know what Maggie doeswhen she gets a microphone?
Dave Schmidt (07:27):
Yells?
Josh Bretl (07:28):
Yells.
Turns the volume to max andscreams into the microphone.
But my son, Zachary, onthe other hand, who is
a quiet boy, uses themicrophone to antagonize
his brother and sister.
And he sits outside theirbedroom door and he starts
talking really quietlyand really irritating,
(07:50):
and it's usually probablysome sort of poop joke.
Dave Schmidt (07:52):
My man.
Josh Bretl (07:53):
And the volume gets louder and louder and
louder to the point wherehe's like just going so fast.
And especially his brotherjust loses his mind at him and
... That was so me as a child.
Dave Schmidt (08:04):
And Zach and I, we're starting our
harmonica band soon, right?
Josh Bretl (08:07):
So Alex is starting to take guitar
lessons, this Thursday ishis first guitar lesson, and
Zach's mad that they won'tgive him harmonica lessons.
Dave Schmidt (08:15):
Oh, poor Zachy.
Josh, we had some ... Imean, I can't even count the
amount of DMs and responseswe had to episode 29.
It was ... If you remember,it was IRA contributions,
401ks and things of the sort.
So I was chatting with Erinover coffee one day, like we
(08:36):
do, and she suggested thatwe dive deep into 401ks.
Josh Bretl (08:42):
401ks.
Dave Schmidt (08:46):
Ba-bum.
Josh Bretl (08:47):
Boom.
Dave Schmidt (08:48):
Does that sound pretty good?
Josh Bretl (08:49):
I think 401k talk will be a fun one.
Dave Schmidt (08:51):
I agree.
Josh Bretl (08:52):
So Dave, do you know what ... Like when they
say 401k, where'd they get... What does that name mean?
Where does it come from?
Any idea?
Dave Schmidt (08:58):
I figured it'd be maybe like the area
code of some congressmanthat came up with the name.
Josh Bretl (09:05):
That's actually a legitimate guess.
But it is the subsection ofthe Internal Revenue Code
where they talk about thetax rules associated with
...Alex: Hashtag tax nerd.
These.
So they said, "Let'sjust call them 401ks."
Because that's what thetax code is called, so.
Dave Schmidt (09:20):
Not creative at all, but effective.
Josh Bretl (09:21):
No, not at all.
So 401ks are what werefer to as employer
sponsored retirement plans.
So you can't put moneyinto your 401K unless
your employer says you canput money into your 401k.
They set all the rules for it.
Now, 401K plans, theyare a savings vehicle.
(09:43):
They're designed for peopleto save for their retirement.
It was an alternative topension plans, we talked
about how pensions wentaway in the last episode.
And it's designed to givepeople freedom and they wanted
to give people tax benefitsfor saving into their 401ks.
And the only way, like I said,for you personally to put money
(10:03):
into your own 401k, is for youremployer to have one set up.
Now most employers haveone; big or small, most
employers have a 401k.
Now there's other ways thatmoney can get in there.
Your employer can also put moneyin on your behalf, you can put
money in ... There's a varietyof ways that they can do that.
But that's a good thing.
Dave Schmidt (10:23):
Like matching.
Josh Bretl (10:24):
There can be matching.
So for matching, is an exampleof ... They'll do a percentage.
So they may do a dollarfor dollar match up to 3%.
So for example, if you made$100,000, if you put 3% of your
salary in, which is $3,000,they would match $3,000.
If you put in 5,000, they'reonly going to match three.
(10:44):
So that's a matchingpercentage there.
Dave Schmidt (10:47):
Cool.
Josh Bretl (10:47):
And they have all sorts of ways they structure
that; that could be a 50% upto 6%, it could be a 100% up to
12%, there's all sorts of waysthat they can structure that.
Now the other thing theyhave is what they call
profit sharing contributions.
So profit sharing contributionsare not matching, they
will put them in whetheryou put money in or not.
(11:08):
So a profit sharingcontribution could be 3%.
So they'll say if youmake $100,000, they're
going to put $3,000 inwhether you like it or not.
Which ... That's agood problem to have.
And there's othersmall ... Safe harbor and
different things like that.
But those are the two bigones for the employer.
Now, the employer doesn'twant you to put your money
(11:28):
in and leave right away.
They want to rewardlong-term employees.
So 401K rules ... By theway, the rules are governed
by what they call ERISA.
ERISA is the specialDepartment of Labor
rules that govern 401ks.
So they say what you're allowedto do as an employer and what
you're not allowed to do.
Dave Schmidt (11:45):
Not to be mistaken with the famous
actress Alyssa Milano.
Totally different thing.
Josh Bretl (11:52):
No, this is ERISA.
Dave Schmidt (11:52):
ERISA.
Josh Bretl (11:52):
ERISA.
Dave Schmidt (11:52):
Yeah.
Mm-hmm.
Sure.
Josh Bretl (11:53):
Yeah.
It's like Madonna, one name.
Dave Schmidt (11:54):
Oh right, yeah.
Josh Bretl (11:56):
But these companies don't want you to
just kind of randomly takeyour money out, so they have
rules that are in there.
And one of the rules is theycan put a vesting schedule.
So a vesting schedule is youhave to work there so long for
this money to all be yours.
Now, some of it they callvesting immediately, and
so that would be a safeharbor contribution or
something along those lines.
(12:17):
But some could have a 2,3, 4 year vesting schedule.
So if you leave beforethat time period
...Dave Schmidt: I'm sorry.
I don't even know what you're laughing at.
Dave Schmidt (12:26):
I'm thinking of something I want to say
and it's so stupid, butit's going to be funny.
Okay.
Oh god.
Josh Bretl (12:39):
You know what it does to my self-esteem when I'm
talking about vesting schedulesand you just laugh at me?
Dave Schmidt (12:44):
I know.
Oh gosh.
Oh.
All right.
Josh Bretl (12:48):
It's not going to be nearly as funny now.
You know that, right?
Dave Schmidt (12:49):
No, I know it won't be.
I don't even know ifI'm going to say it now,
but ... Vesting schedules.
Yes.
Go ahead.
Josh Bretl (12:55):
So I have one really important thing to
add to vesting schedules.
Vesting only appliesto the employer money.
Any money that you put inis 100% invested day one,
they can't keep any of that.
Dave Schmidt (13:07):
They care what type of vest you wear?
Like sweater vests or
...?Josh Bretl: Is that really where you were going with that?
Yeah, yeah.
Josh Bretl (13:11):
Was that as funny as you had?
Was that all that giantlaugh was a sweater vest?
Dave Schmidt (13:15):
In my head, it was really funny, but
...Josh Bretl: No, they do not care.
Oh, that's nice.
Josh Bretl (13:21):
They can't ... I don't think clothing
type is a discriminatoryallowed by ERISA, one name.
Dave Schmidt (13:27):
Right.
Not Milano.
Josh Bretl (13:31):
Now let's talk about how money goes in.
It has to come out of yourpaycheck, you can't write
a check for it, it's got tocome out of your paycheck
as a payroll deduction.
And it can go either in pre-tax,which means the money is yet to
be taxed, it's a traditional,like we talked about in the
last episode, traditional IRAs,we have traditional you know
traditional Or most 401ks nowactually offer Roth options too,
(13:53):
you can put money in post-tax.
Now, you have that choice.
Your employer doesn'thave as much choices.
There is a new law thatjust went through, Secure
Act 2.0, they're tryingto ... It's changing some
of that a little bit.
We'll go into more detailson this in a future episode.
But most times employermoney is always pre-tax.
So whenever employer money comesout, it will always be taxed.
(14:16):
Employee money, youcould be traditional or
it could be Roth there.
Now let's talk abouthow you get money out.
Because the only reasonyou would put money in
is because someday youwant to take money out.
Dave Schmidt (14:31):
Not because you just want to give your
employer extra money, but
...Josh Bretl: Yeah.
And that's actually acommon misconception, and
I'm glad you said that.
You're never givingthe employer money.
The employer can'ttake this money.
The employer can't doanything with this money.
This is money set aside for yourbehalf, It's not the employer's.
But they do make the rules towhen you can get money out.
(14:53):
Is that fair?
Mm-hmm.
Fair.
Josh Bretl (14:54):
So now how you get money out is plan dependent,
but there are also IRS rules.
One of the big IRS rulesis the 59 and a half rule.
So when you take money out, ifyou take it out prior to age
59 and a half, you are goingto pay a penalty on that money.
Now if it's a traditionaldistribution, you're going
to take money, it's going tobe taxed plus the penalty.
(15:17):
If it's a Roth distribution,the gains will be
taxed plus the penalty.
Dave Schmidt (15:23):
So potentially more?
Josh Bretl (15:24):
No, just the gains, not the whole thing.
Dave Schmidt (15:26):
Okay.
Josh Bretl (15:26):
All right?
Now, there are someexceptions to the rule.
So medical expenses, disability,higher education expenses,
those are some commonexceptions that are out there.
So you can pay for ... Wella common one will often be if
you're paying for your kid'sschool or your own schooling,
you can actually take the moneyout to a certain dollar amount
(15:47):
and use that for tuition.
So without paying the 10%penalty that's out there.
Dave Schmidt (15:51):
So Carla being a government employee, 403b
is the equivalent of a 401k?
Josh Bretl (15:57):
Yeah, the rules are virtually identical.
There are small nuance-ydifferences, but it's
pretty much a ... A 403bis generally a 401k for
nonprofits, if you will.
Dave Schmidt (16:07):
Because she's been taking out 1,500 to
2,000 per month for myprivate harmonica lessons.
So I mean, we won't bepenalized for that, right?
Josh Bretl (16:16):
It depends if your private harmonica lessons
are a licensed institutionthat ... Of higher education.
Dave Schmidt (16:21):
Yeah, it's at Harvard.
Josh Bretl (16:23):
Oh, yeah.
Dave Schmidt (16:23):
It's at Harvard school of music.
Josh Bretl (16:25):
They're renowned harmonica teachers.
And it's reallytaking that long, huh?
Dave Schmidt (16:30):
Yeah.
Well I was actually enrolledat Julliard, but I don't
know, it was just a littletoo intense to manage both.
Josh Bretl (16:37):
Did you just say Julliard?
Dave Schmidt (16:38):
Yeah, I did.
Are you questioningan artsy guy on how to
pronounce and arts school?
Josh Bretl (16:44):
Yeah.
It sounded like ... Imean it sounded like a
true south side Chicagoan,like, "Is that Julliard?"
Dave Schmidt (16:48):
oh gosh.
Julliard.
Not the Jewel's, for our southside friends, but Julliard.
Josh Bretl (16:53):
I was wondering where that was coming from.
Dave Schmidt (16:54):
Cool.
So in other words, I mean,yeah, my harmonica lessons
are probably covered becauseit's higher education.
Josh Bretl (17:02):
Oh God.
So let's talk about whathappens to your money once
you get into the 401k.
So you have investment choices.
Once the money goes insideyour account and your 401k,
(17:23):
it's going to sit insidesomething and you're going
to have investment choices.
The choices of investmentsyou have are determined
by the company.
Dave Schmidt (17:31):
Your employer.
Josh Bretl (17:32):
Your employer gets to determine that.
Now, they have to give youa certain number of options,
they have to be able to covera broad enough spectrum.
Usually you'll see mutualfunds, that's the most
common investment under thesun that's inside of 401ks.
Dave Schmidt (17:45):
Is there a reason for that?
Josh Bretl (17:46):
It's an easier diversification tool.
People are familiar with it.
One of the problems with 401kplans is it is allowing the
average Joe to make some prettyserious investment choices.
There was a study done in theearly 2000s that talked about
the difference between what theaverage 401k participant earned
(18:07):
and what " the market" earned.
So going into the early 2000s,and this is coinciding with when
I started my career too, so thiswas really top of mind, there
was a lot of talk about thehistorical return to the market;
the market earns 7.5%, themarket earns whatever it earns.
And there was complaints comingfrom 401k participants because
(18:29):
they weren't earning as much.
Now, the market and"professional investors",
they're really good at takingemotion out of the equation
They're not selling when it'slow and buying when it's high,
they're making good decisions,but it's not their money.
So when they created these401k plans and they gave
people the ability to putmoney away, what they also
(18:52):
did is they gave people theproblem where they had to watch
their money go up and down.
So people were making emotionaldecisions inside of 401k plans.
now mutual funds have alwaysbeen around for this because
they wanted people to diversify,they wanted people ... It's
an easier way than trying tobuild your own equity portfolio
or your own bond portfolioor things along those lines.
(19:13):
Now what they've come outwith in the last 15 years
or so is these what theycall target date funds.
So it's more time-based.
And I'm not a huge fan of them,but for some people they're an
okay thing that's out there.
So typically we havejust mutual funds.
Now in recent years, 401ks, alot of them have been opening up
the world of investment choices.
So they've been saying,"Hey, you can go out and
(19:33):
invest in whatever you want."
Which is good and bad.
It can be very dangerous.
This is real money.
So your money goes up, yourmoney really does go up.
And if that money goesdown, that's That hurts.
Deciding where your moneygoes is something that you
should be looking at on aconstant basis, something
an advisor should be lookingat a constant basis for you.
It's something that, to bequite honest, over the last
(19:54):
10 years hasn't been thathard because the market still
has been able to trade up,except for the last 12 months.
And I think people are startingto realize that this is
something that you can't justset it and forget it, you really
got to pay attention to it.
And at the same time, tryand take emotion out of it
as much as humanly possible.
Let's talk about howwe get money out.
(20:15):
All right?
That cool?
Can we do that?
Dave Schmidt (20:18):
Oh, you're asking me if I want to know how I
can get money out of my 401k?
Josh Bretl (20:23):
Yeah.
Dave Schmidt (20:23):
That's a question I often get asked.
So like yeah, I should probablyknow the answer to this.
Josh Bretl (20:32):
So you've got the money in, you've invested it,
it's grown, and now you want themoney out for whatever reason.
So there is always two timesyou can take money out.
Always.
One is when youleave the company.
When you leave the employer,they're always required to
let you take the money out.
All right?
The other is if you are dead.
Dave Schmidt (20:49):
Oh.
So then you're nottechnically personally
taking the money out, but
...Josh Bretl: No, no.
But somebody else is.
Yeah.
Josh Bretl (20:54):
Other than that, they can kind of set the rules.
So there's a few rulesthat quite often they
will allow you to do.
One is 401k loans.
So a loan is whileyou're still working.
A loan, if you takeone, is eligible to
anyone who works there.
And it's exactly what it soundslike, you are loaning money
out of your 401k to yourself.
You're allowed to do a maximumof $50,000, and there's a
(21:17):
rate that you have to payit back at, and it's usually
tied to the prime rate insome way, shape, or form.
But it is taken outof your paycheck.
Traditionally, you have topay it back within five years.
So some companies make itshorter, but the longest you
can make it is five years.
And they take it out of yourpaycheck in equal installments.
So they amortize it like anyother loan would be there.
(21:38):
Now, there's goodand bad to this.
If you're going to takethis loan out to waste the
money, it's not worth it.
But if you need this money, thiscan be a good spot to go because
of the fact that that interestgoes back to you as well.
Dave Schmidt (21:50):
Oh, it does?
Josh Bretl (21:50):
So you get the interest, you get
the repayments, those goback into your account.
Dave Schmidt (21:57):
so now if I'm paying an interest,
let's say of 8%, actuallyI'm paying myself that 8%?
Josh Bretl (22:04):
Yeah, the 8% does go back to you.
Now, there are loan fees,they charge you to take loans
out sometimes because there'sadministrative tasks that go
with it, but that's there.
Now you have to realize though,if for some reason you stop
making loan repayments likeyou get fired or you leave
or you quit for whateverreason, you have 60 days to
pay the whole thing back.
(22:25):
And if you don't pay itback, it's like you took
it out of your 401k,it's like a distribution.
So if you're under 59 and ahalf, you have to worry about
the 10% penalty and the tax.
And if you're over 59 anda half, you still have the
tax that comes due on it.
Dave Schmidt (22:38):
So would it make sense, would anybody ever take
a loan out while also stillcontributing to their 401k?
Josh Bretl (22:44):
Yeah.
Dave Schmidt (22:45):
You can do both?
Josh Bretl (22:46):
You can do both.
It does make a lot of sense.
The loan is only thereif there's a need for you
to take that money out.
If you're going to buy a newcar and that car is $30,000
and you can pay the bank 7%or you can pay yourself 7%,
I'd rather pay myself 7%.
So
...Dave Schmidt: Interesting.
Okay.
Now, if it's ... You're going to waste it on
something, it's not worth it,that doesn't make any sense.
(23:07):
Or you have credit card debt youwant to pay off and consolidate,
it's not a bad way to do that.
Dave Schmidt (23:10):
Okay.
Josh Bretl (23:14):
But let's talk about in-service distributions.
We see this a lot in our office.
And this is people who aregetting ready for retirement.
And in-service distributions,in-service just means you're
still working and distributionsare ways to take money out.
Now this is ... You can doanything you want with this.
What we generally see inour office is they will take
an in-service distributionto roll it to an IRA.
(23:36):
And your company has to allowin-service distributions,
and you have to be olderthan 59 and a half to do it.
Dave Schmidt (23:41):
To do it.
Josh Bretl (23:42):
But if your company allows it, and most
do, you can take the money out.
And when you roll it to an IRA,then you have complete control.
You can control what yourinvestment choices are, what
your Roth conversions are,you have complete control.
Unlike in the 401k, whereyou do have Your hands are
tied to what the companysays you're allowed to do.
So these in-servicedistributions can be really
(24:05):
valuable for people who aregetting ready to retire.
We use them a lot aspeople ... Like I said, as
people start coming on boardwith us and they still have
another year or two of working.
It's a way to jumpstart andget their planning going
that's necessary for them, so.
Dave Schmidt (24:19):
And you can take like chunks out, right?
You don't have to ... It'snot an all or nothing
...Josh Bretl: Correct.
Okay.
Josh Bretl (24:24):
Correct.
We'll sit down and we cansay, "Hey, let's leave
this much in your 401k.
We'll move this much to your IRAwith in-service distributions."
And then when they retire,then we'll take the final
distribution, and roll therest of that to an IRA.
And when you go froma 401k to an IRA, that
is a tax-free transfer.
So it is a relativelyeasy thing to do.
Dave Schmidt (24:45):
Hmm.
Okay.
And limits on how oftenyou can do it or how
many times you can do it?
Josh Bretl (24:52):
That's set by the company.
It's one of those rules thatthe company is allowed to set.
the US government hasa limit that you're
allowed to do that once.
Dave Schmidt (24:59):
Once?
Josh Bretl (25:00):
Just once.
Dave Schmidt (25:00):
Really?
Josh Bretl (25:01):
Mm-hmm.
Dave Schmidt (25:01):
Oh, okay.
Josh Bretl (25:02):
But certain companies will allow you to do
it over and over and over again.
401ks can be quite ... Notquite, 401ks are the
single biggest savingstool that Americans have.
Most people use them, veryfew people know how to do it
effectively and they let alot of emotion come into play.
And they also think they don'thave a choice of what they can
or can't be doing with it asthey get closer to retirement.
Dave Schmidt (25:25):
From an employer perspective, Josh, other
than being a great benefitto employees to offer a 401k
like matching plan, whatother benefit to an employer
are there to offer 401ks?
And they're not requiredto do it by law, but what
are some other perks for
...?Josh Bretl: For bigger employers, it's all
about employee benefits.
Is that what it is?
Josh Bretl (25:44):
It's all trying to make employees happy.
For smaller employers, there'ssome tax things that they can
do and some things that maybenefit the owners as well.
But again, the ERISA governsthat and wants to make sure
that the benefit is equal toeverybody, not just to the high
income earners or to the owners.
But for bigger plans, it'sall about employee benefits.
Dave Schmidt (26:07):
Right on.
So during my researchfor this episode, Josh,
I came across something.
Have you ever heardof the 401zzz?
Josh Bretl (26:16):
No.
Dave Schmidt (26:16):
You haven't?
Josh Bretl (26:17):
No, is that a tax code?
Dave Schmidt (26:18):
No.
The ZZZ stands for snooze fest,because you've been talking
about 401ks for way too long.
Josh Bretl (26:24):
Oh, man.
Dave Schmidt (26:27):
Yeah.
What?
What?
Okay.
Hey Mr.
Josh, let's take a break.
You've been talking for solong and my ears are sore.
Let's not make them snore,listening shouldn't be a chore.
So let's get to knowJosh and Dave, and
watch our ratings soar.
Josh Bretl (26:45):
Cackaw!
Dave Schmidt (26:46):
I didn't even have to ask you.
So I am awfully proud of myselffor coming up with the 401zzz,
because I thought it was clever.
I didn't get the guffaws thatI thought I would from it, but
I figured, hey, you know what?
I am so well informed on 401ks.
(27:07):
It's now time to pick a card.
Josh Bretl (27:09):
So let's pick a card, Dave.
Dave Schmidt (27:11):
Let's do it.
Josh Bretl (27:12):
Let's pick a card.
Dave Schmidt (27:12):
Mm-hmm.
Josh Bretl (27:13):
All right.
This one
...Dave Schmidt: Wait, is Alyssa Milano going to pick it for us?
No?
No, no.
Dave Schmidt (27:17):
Oh, okay.
Josh Bretl (27:18):
I'm not going to long and ramble the
entry to this card, I'mjust going to ask it to you.
If you could make one of yourhobbies into a profession,
which one would it be?
Dave Schmidt (27:28):
Ooh, I've been talking a lot
about harmonica playing.
I don't think I'm quiteat that point yet.
Josh Bretl (27:33):
There's not many harmonica players in the
world that have actuallymade any money off of it.
Dave Schmidt (27:37):
Oh, in the show notes I'll post
...Josh Bretl: I mean there's a few.
Yeah.
I'll post some linksto some of my favorite
modern harmonica-ists.
Josh Bretl (27:46):
Oh, I'm sure our audience will be clicking
on those like crazy.
Dave Schmidt (27:49):
Yeah, of course.
All right, Josh.
So the question is,if I could turn any of
my hobbies into a paidprofession, what would it be?
Josh Bretl (27:56):
Mm-hmm.
Dave Schmidt (27:57):
I'd probably take my love and mastery
of video games and makeit into a profession.
But not just video games,I'm talking about like
80s and 90s arcades.
Like Rampage, I could setall sorts of world records
for Rampage and I betyou ... I'm on to something.
People would pay towatch me play Rampage.
Josh, I quit.
I'm going to be aprofessional Rampage-ist.
Thank you for the idea.
Josh Bretl (28:20):
We grew up in the 80s and 90s and we had video
games, but the idea of makingmoney off of them is so absurd.
And the fact that there arenow legitimate video game
athletes out there ... Youused to call yourself a video
game athlete, we used tomake fun of you all the time.
Dave Schmidt (28:34):
That's it.
Josh Bretl (28:35):
Like you'd sit down and you play John
Madden Football and be like,"We're video game athletes."
And we'd be like, "Good god,go out and shoot a hoop."
Dave Schmidt (28:41):
yeah.
These kids are makingmillions of dollars by just
a simple YouTube channel.
Josh Bretl (28:45):
Yeah, it's crazy.
Absolutely crazy.
Dave Schmidt (28:46):
Ah, I'm so jealous.
Josh Bretl (28:47):
My hobby, it would actually be reliving
your childhood dream.
I'd want to be a chef.
Dave Schmidt (28:51):
Yeah?
Josh Bretl (28:52):
Oh yeah.
Dave Schmidt (28:52):
Oh.
Josh Bretl (28:53):
Oh, I love cooking and making people happy.
Maybe ... Maybe like a privatechef, like in people's homes.
I want to see themsmile when they eat.
Dave Schmidt (29:00):
Yeah, that's cool.
I still think you and ScottSmith ... Scott, I love you man.
I think you two, you could makea killer restaurant together.
Josh Bretl (29:10):
Don't tempt Scott.
Scott wants to do that and
...Dave Schmidt: Does he still want to do a barbecue joint?
Is that still his jam?
No, now he wants to do like a specialty coffee shop.
And he wants to have a couplereally special baked items.
Like he wants to be knownfor coffee and the cinnamon
rolls, or something like that.
So, yeah.
Dave Schmidt (29:28):
Oh, cool.
Josh, I would financiallysupport your hobby of cooking.
Josh Bretl (29:34):
The problem is I think I'd financially
support it too, so it'snot really a good idea.
Dave Schmidt (29:38):
Yeah, that's so true.
I was sitting heredrinking my Cometeer and
...Dave relates to retirees.
Josh Bretl (29:44):
You know how the
...Dave Schmidt: Yeah.
Oh, I talked over the "yeah" You'd figure 30 some
episodes in I'd stop doing that.
Do you know the get to knowJosh and Dave, you sometimes
struggle to come up withan answer because you're
trying to think it through?
And you get a littlenervous as I ask it?
Dave Schmidt (29:59):
Yeah.
Josh Bretl (30:00):
I get nervous every single time when
you're about to open yourmouth for this section.
Dave Schmidt (30:06):
I am going to say you have it much worse than
I, because when you're readinga card ... I mean, yeah, I
could get creative with it, butthere's not much I could say.
However, with this segment,anything goes, man.
Josh Bretl (30:17):
So let's hear it.
What kind of relationdo you have to 401ks
and retirees, David?
Dave Schmidt (30:23):
I think it's fair to say every episode my
Dave relates to retirees is aperfect one-to-one correlation
to how a retiree feels abouta certain topic, right?
In this case, I mean
...Josh Bretl: Perfect one-to-one correlation.
Perfect one-to-one correlation.
You were teaching me earlierabout what happens to your
money inside of a 401k.
And essentially what I gatheredfrom that was employees, we
(30:45):
have options as to how toinvest that money, right?
But we're not giventoo many options.
We're given three to a dozendifferent options, right?
Josh Bretl (30:54):
Mm-hmm.
Yeah.
Dave Schmidt (30:55):
Well, retirees, soon to be retirees, I get it.
We're on the same wavelength.
When Josh, my buddy over here,takes me to a new restaurant
or a new bar, he knows that Iget overwhelmed with new menus.
Josh Bretl (31:09):
You're right, you do.
Dave Schmidt (31:10):
I do.
And Josh, I would say youhave mastered and memorized
the menu of every localeatery in this area, correct?
Josh Bretl (31:19):
Yeah.
Dave Schmidt (31:20):
Yeah.
So what I'm saying is whenI sit down with Josh, he'll
be like, "David, eitherget option A, D or F."
And he's like, "Those areonly three things you'll
like, choose one of them."
I'm like, "Oh, I have a choice,but not too much of a choice."
Just like you, dear friends,have a choice with your
401k investment, but nottoo much of a choice.
Has there never been a moreperfect one-to-one match?
(31:43):
Take it away, my man.
Josh Bretl (31:46):
Dave?
Dave Schmidt (31:47):
Yeah?
Josh Bretl (31:47):
I appreciate that one.
Dave Schmidt (31:49):
Thank you.
Josh Bretl (31:49):
I actually think you sent me ... Can I
see your paper real quick?
Dave Schmidt (31:51):
Sure.
Which one?
My notes?
Josh Bretl (31:52):
The top one.
The top one there.
And I noticed Dave has noteshere today, I've never really
noticed his notes before.
And I looked over atthe top and I was like,
"What does that mean?
DR2R?"
Oh, you've abbreviatedDave relates to retirees.
Dave Schmidt (32:09):
Yes, I have.
DR2R.
And with that, fullhouse me, baby.
Josh Bretl (32:16):
So I love helping people with their retirement.
I love to see them smileand you can see almost the
sense of relief and thesense of them feeling really
good after they come outof a good meeting with us.
You also heard in the get toknow Josh and Dave section,
of my desire to cook forpeople and make a living.
(32:38):
Well your Dave relatesto retirees kind of took
that two and combined it.
When you go to a restaurant,they give you a menu and
kind of when you ask thewaiter, sometimes you'll say,
"Hey, what do you recommend?
What's best?"
But the waiter doesn't know you.
The waiter doesn'tunderstand you.
And so they may recommendsomething, they may
say, "Hey, the scallopshere are phenomenal."
But you're like,"I hate scallops."
So they don't really knowyou and how to do that.
(33:00):
Dave, you're right.
When you and I go out to eat,I know you so well that I am
going to recommend somethingthat I think you will enjoy.
And I would say that sometimesI am like your advisor there.
I am like the one who'sguiding you as to what you
would like and not like.
Now, ultimatelyit's your decision.
(33:21):
You may choose to eat thescallops anyways, but I
know that scallops makeyour tummy feel funny
and you don't like them.
Now, I think that's alsowhat we do for clients.
They understand that theyhave lots of choices out
there and anyone could helpthem nail it down, but what
a good advisor will do for aretiree especially is get to
(33:42):
know that retiree so well sothat those recommendations
are geared just for them.
And you're not eating scallops.
Now, I love scallops.
So I mean if you lovescallops too, that's great.
But I think, Dave, you relatedto retirees better than you
have in any episode to date.
Dave Schmidt (34:00):
That makes me happy to hear.
Now, for our audience of one,I don't know about you, Erin, I
have major goosebumps right now.
That was one of the mosteloquent, most beautifully
spoken full house momentsto date, in episode 30.
Josh Bretl (34:17):
That's good, because I feel like we've
rambled a snot out of this show.
Dave Schmidt (34:20):
We tend to ramble a lot.
That's why we havethe edit tool.
So what we have not beenreally consistent with is
asking our listeners, what todo at the end of the episode,
like I have two things.
Can I share?
Josh Bretl (34:32):
Please.
Dave Schmidt (34:33):
Sure.
The first thing is I wouldrecommend go watch some
reruns of the original Charmedstarring Alyssa Milano and
just see how it relates toERISA, whoever ERISA is, that
Josh keeps talking about.
Second, I would ... Look,I would love for you, dear
listener, to refer on ofyour friends to pod.link/ref.
We mentioned this last episode
...Josh Bretl: Pod.link/ref?
(34:54):
Mm-hmm.
We don't control this webpage,but it is a really nice kind
of one pager that is curatedby some AI robot thingy, but it
gives a great overview of ourshow and all of our episodes.
And just send themthere, pod.link/ref.
(35:15):
You can also send anFSRwealth.com/podcast.
Same thing.
But send one ofyour friends there.
Josh Bretl (35:21):
And hopefully they can get the enjoyment
out of the RetirementEquals Freedom Podcast
that you do, dear listener.
Dave Schmidt (35:30):
Hey, is Alex allowed to listen to us yet?
Josh Bretl (35:31):
Nope, not yet.
Dave Schmidt (35:32):
Oh, poor Al.
Josh Bretl (35:33):
Give him some time.
He'll be back in it.
Dave Schmidt (35:35):
Yeah.
Well, Al, letbygones be bye-gones.
Josh Bretl (35:41):
Bye.
Dave Schmidt (35:43):
Oh, gallbladders.
Josh Bretl (35:46):
Or ... Dave?
Dave?
Dave Schmidt (35:47):
Yeah?
Josh Bretl (35:47):
Like my gallbladder, let's sign off.
Dave Schmidt (35:50):
Oh.
Oh my god.
Josh, I'm so proud of you.
Good one.
That's the winner,winner, chicken dinner.
Alex (35:58):
Hashtag tax nerd.
401k plans.
You've definitely heard of them.
You may have had one inthe past, and if still
employed, you may still becontributing to a 401k plan.
But are you using thesereally powerful savings
tools effectively?
Josh Bretl (00:16):
401ks can be quite ... Not quite, 401ks
are the single biggest savingstool that Americans have.
Most people use them, veryfew people know how to do it
effectively, and they let alot of emotion come into play.
And they also think they don'thave a choice of what they can
or can't be doing with it asthey get closer to retirement.
Dave Schmidt (00:37):
That's Josh Bretl.
He's the owner of FSRWealth Strategies.
For the last 20 plus years,Josh's sole focus has been
to help fine folks likeyou, make your retirement
the best part of your life.
Next up in the episode, Joshtalks about employer matching
and profit sharing, two greatbenefits of these employer
(01:01):
sponsored retirement plans.
We then follow that up bytalking about the ways your
money can get into a 401kplan, and how you can get your
money out of, a 401k plan.
Josh Bretl (01:13):
Now let's talk about how money goes in.
It has to come out of yourpaycheck, you can't write
a check for it, it's got tocome out of your paycheck
as a payroll deduction.
And it can go either in pre-tax,you know traditional 401ks.
Or most 401ks now actuallyoffer Roth options too, you
can put money in post-tax.
Now, you have that choice.
(01:33):
Now how you get money outis plan dependent, but
there are also IRS rules.
One of the big IRS rulesis the 59 and a half rule.
So when you take money out, ifyou take it out prior to age
59 and a half, you are goingto pay a penalty on that money.
If it's a traditionaldistribution, it's going to
be taxed plus the penalty.
If it's a Roth distribution,the gains will be
(01:56):
taxed plus the penalty.
Dave Schmidt (01:59):
Now, there are some exceptions to those
penalties, which we do bring up.
And to end our conversationon 401ks, Josh and I talk
about the pros and the consto employers offering multiple
401k investment options.
These options have giventhe average Joe power to
make some pretty seriousinvestment choices.
(02:22):
And if you're unable to removeemotion from the equation,
you could be looking at somepretty stressful times ahead.
Josh Bretl (02:29):
Now, the market and "professional investors",
they're really good at takingemotion out of the equation.
They're not selling when it'slow and buying when it's high,
they're making good decisions,but it's not their money.
So when they created these401k plans and they gave
people the ability to putmoney away, what they also
(02:50):
did is they gave people theproblem where they had to watch
their money go up and down.
So people were making emotionaldecisions inside of 401k plans.
And I think people are startingto realize that this is
something that you can't justset it and forget it, you really
got to pay attention to it.
And at the same time, tryand take emotion out of it
as much as humanly possible.
Dave Schmidt (03:12):
We end our 401k conversation talking about
in-service distributions.
And as always, we have to havesome fun because no one's got
time to listen to a boringfinancial podcast, uh uh!
And speaking of we, who am I?
Hey, I'm Dave.
Josh's longtime friend,co-host of the podcast and
(03:32):
huge fan of the Buffalo Bills.
With that being said, let me letyou let me end my introduction
so we can dig into all thenitty gritty of 401k plans.
FSR Wealth Management is aregistered investment advisor
located in Elmhurst, Illinois.
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
(03:53):
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
Josh Bretl (04:24):
Erin and I just got back from one of our
annual conferences, Erinand Sean and I went, and it
was probably 1200 people.
600 ... Or 400 financialadvisory offices.
And it was kind of a year endrecap, get used to the new year.
And we actually got acompliment on the podcast.
Dave Schmidt (04:43):
Oh, tell me more.
Josh Bretl (04:44):
So, yeah, I was talking to one of the
guys I know there and hesays, "I try and listen to
as many podcasts as I can."
And these are allfinancial advisor podcasts.
He goes, "Yours is the only oneI actually enjoy listening to."
And he goes, "I've nevermet Dave, but I think
I'd like him a lot."
Dave Schmidt (05:03):
Did he really say that?
Josh Bretl (05:04):
He did.
Erin wasn't therefor it, though.
Dave Schmidt (05:05):
Okay.
Josh Bretl (05:06):
Oh, this was awful, Dave.
So we get there, we're out inSan Diego, it was beautiful.
Actually, that day itwas raining miserably.
But we're staying at ... I'mnot going to mention the hotel,
but we're staying at ... Andit's a top brand hotel.
And we go to check in andabout half an hour before we
got there, their internet andcomputer systems went down.
Dave Schmidt (05:26):
That could be a problem.
Josh Bretl (05:27):
It was a problem to the fact that that
was 10:30 in the morning.
We had a black tie,semi-formal event that evening.
We all had to get ready inother people's rooms and we
did not get our room until10:30-11:00 that night.
So all three of uschecked into our rooms.
So we checked in after the eventwas over with, and there was a
(05:48):
guy sitting there with an oldschool book with everything
printed out and names and hewas calling the home office to
run credit cards and everything.
And the guy who waschecking us in actually
had a smile on his face.
And I said to him, I go, " I'msure you had a rough day.
How did this compareto other days?"
He goes, "Oh, there'snothing that compares to
what we went through today."
Dave Schmidt (06:08):
wow.
How about that?
Josh Bretl (06:10):
So that was ... How you rely on internet
and all that stuff, so.
Dave Schmidt (06:13):
Oh, totally.
I was kind of having FOMO aboutnot going until you mentioned
black tie event, then I kind ofdry heaved a little and I said,
"Yeah, not a place for me."
Because I'd have torent something that's
qualified as black tie.
Josh Bretl (06:27):
Well, black suits work too.
Wait a second.
Dave Schmidt (06:30):
I don't have a black suit.
Josh Bretl (06:31):
I think the last time I wore this black suit
was to last year's event.
Dave Schmidt (06:34):
Well, sounds really fancy.
Yeah, yeah.
Josh Bretl (06:37):
David, how are you?
Dave Schmidt (06:38):
Josh, I'm not having my gallbladder removed
tomorrow, so better than you.
Josh Bretl (06:44):
Yeah.
So we're rushing in to getan episode in because I don't
know how long I'll be laid up.
They're going to suckone of my organs out of
my stomach tomorrow, so.
Dave Schmidt (06:52):
Yeah.
You know, Cometeer, I haven'tsaid hello to you in a while.
And this is the Klatch roaster,I think it's a CBC blend.
It's delicious, Josh.
It's a dark roast.
And we have not givenhim a shout-out in a
while, yet I continue todrink a delicious coffee.
Josh Bretl (07:08):
You should.
Dave Schmidt (07:09):
Yeah.
Thank you.
Josh Bretl (07:10):
For Christmas, Santa thought it would
be a good idea to get thekids a karaoke machine.
Specifically, Maggie receivedsaid karaoke machine.
You know what Maggie doeswhen she gets a microphone?
Dave Schmidt (07:27):
Yells?
Josh Bretl (07:28):
Yells.
Turns the volume to max andscreams into the microphone.
But my son, Zachary, onthe other hand, who is
a quiet boy, uses themicrophone to antagonize
his brother and sister.
And he sits outside theirbedroom door and he starts
talking really quietlyand really irritating,
(07:50):
and it's usually probablysome sort of poop joke.
Dave Schmidt (07:52):
My man.
Josh Bretl (07:53):
And the volume gets louder and louder and
louder to the point wherehe's like just going so fast.
And especially his brotherjust loses his mind at him and
... That was so me as a child.
Dave Schmidt (08:04):
And Zach and I, we're starting our
harmonica band soon, right?
Josh Bretl (08:07):
So Alex is starting to take guitar
lessons, this Thursday ishis first guitar lesson, and
Zach's mad that they won'tgive him harmonica lessons.
Dave Schmidt (08:15):
Oh, poor Zachy.
Josh, we had some ... Imean, I can't even count the
amount of DMs and responseswe had to episode 29.
It was ... If you remember,it was IRA contributions,
401ks and things of the sort.
So I was chatting with Erinover coffee one day, like we
(08:36):
do, and she suggested thatwe dive deep into 401ks.
Josh Bretl (08:42):
401ks.
Dave Schmidt (08:46):
Ba-bum.
Josh Bretl (08:47):
Boom.
Dave Schmidt (08:48):
Does that sound pretty good?
Josh Bretl (08:49):
I think 401k talk will be a fun one.
Dave Schmidt (08:51):
I agree.
Josh Bretl (08:52):
So Dave, do you know what ... Like when they
say 401k, where'd they get... What does that name mean?
Where does it come from?
Any idea?
Dave Schmidt (08:58):
I figured it'd be maybe like the area
code of some congressmanthat came up with the name.
Josh Bretl (09:05):
That's actually a legitimate guess.
But it is the subsection ofthe Internal Revenue Code
where they talk about thetax rules associated with
...Alex: Hashtag tax nerd.
These.
So they said, "Let'sjust call them 401ks."
Because that's what thetax code is called, so.
Dave Schmidt (09:20):
Not creative at all, but effective.
Josh Bretl (09:21):
No, not at all.
So 401ks are what werefer to as employer
sponsored retirement plans.
So you can't put moneyinto your 401K unless
your employer says you canput money into your 401k.
They set all the rules for it.
Now, 401K plans, theyare a savings vehicle.
(09:43):
They're designed for peopleto save for their retirement.
It was an alternative topension plans, we talked
about how pensions wentaway in the last episode.
And it's designed to givepeople freedom and they wanted
to give people tax benefitsfor saving into their 401ks.
And the only way, like I said,for you personally to put money
(10:03):
into your own 401k, is for youremployer to have one set up.
Now most employers haveone; big or small, most
employers have a 401k.
Now there's other ways thatmoney can get in there.
Your employer can also put moneyin on your behalf, you can put
money in ... There's a varietyof ways that they can do that.
But that's a good thing.
Dave Schmidt (10:23):
Like matching.
Josh Bretl (10:24):
There can be matching.
So for matching, is an exampleof ... They'll do a percentage.
So they may do a dollarfor dollar match up to 3%.
So for example, if you made$100,000, if you put 3% of your
salary in, which is $3,000,they would match $3,000.
If you put in 5,000, they'reonly going to match three.
(10:44):
So that's a matchingpercentage there.
Dave Schmidt (10:47):
Cool.
Josh Bretl (10:47):
And they have all sorts of ways they structure
that; that could be a 50% upto 6%, it could be a 100% up to
12%, there's all sorts of waysthat they can structure that.
Now the other thing theyhave is what they call
profit sharing contributions.
So profit sharing contributionsare not matching, they
will put them in whetheryou put money in or not.
(11:08):
So a profit sharingcontribution could be 3%.
So they'll say if youmake $100,000, they're
going to put $3,000 inwhether you like it or not.
Which ... That's agood problem to have.
And there's othersmall ... Safe harbor and
different things like that.
But those are the two bigones for the employer.
Now, the employer doesn'twant you to put your money
(11:28):
in and leave right away.
They want to rewardlong-term employees.
So 401K rules ... By theway, the rules are governed
by what they call ERISA.
ERISA is the specialDepartment of Labor
rules that govern 401ks.
So they say what you're allowedto do as an employer and what
you're not allowed to do.
Dave Schmidt (11:45):
Not to be mistaken with the famous
actress Alyssa Milano.
Totally different thing.
Josh Bretl (11:52):
No, this is ERISA.
Dave Schmidt (11:52):
ERISA.
Josh Bretl (11:52):
ERISA.
Dave Schmidt (11:52):
Yeah.
Mm-hmm.
Sure.
Josh Bretl (11:53):
Yeah.
It's like Madonna, one name.
Dave Schmidt (11:54):
Oh right, yeah.
Josh Bretl (11:56):
But these companies don't want you to
just kind of randomly takeyour money out, so they have
rules that are in there.
And one of the rules is theycan put a vesting schedule.
So a vesting schedule is youhave to work there so long for
this money to all be yours.
Now, some of it they callvesting immediately, and
so that would be a safeharbor contribution or
something along those lines.
(12:17):
But some could have a 2,3, 4 year vesting schedule.
So if you leave beforethat time period
...Dave Schmidt: I'm sorry.
I don't even know what you're laughing at.
Dave Schmidt (12:26):
I'm thinking of something I want to say
and it's so stupid, butit's going to be funny.
Okay.
Oh god.
Josh Bretl (12:39):
You know what it does to my self-esteem when I'm
talking about vesting schedulesand you just laugh at me?
Dave Schmidt (12:44):
I know.
Oh gosh.
Oh.
All right.
Josh Bretl (12:48):
It's not going to be nearly as funny now.
You know that, right?
Dave Schmidt (12:49):
No, I know it won't be.
I don't even know ifI'm going to say it now,
but ... Vesting schedules.
Yes.
Go ahead.
Josh Bretl (12:55):
So I have one really important thing to
add to vesting schedules.
Vesting only appliesto the employer money.
Any money that you put inis 100% invested day one,
they can't keep any of that.
Dave Schmidt (13:07):
They care what type of vest you wear?
Like sweater vests or
...?Josh Bretl: Is that really where you were going with that?
Yeah, yeah.
Josh Bretl (13:11):
Was that as funny as you had?
Was that all that giantlaugh was a sweater vest?
Dave Schmidt (13:15):
In my head, it was really funny, but
...Josh Bretl: No, they do not care.
Oh, that's nice.
Josh Bretl (13:21):
They can't ... I don't think clothing
type is a discriminatoryallowed by ERISA, one name.
Dave Schmidt (13:27):
Right.
Not Milano.
Josh Bretl (13:31):
Now let's talk about how money goes in.
It has to come out of yourpaycheck, you can't write
a check for it, it's got tocome out of your paycheck
as a payroll deduction.
And it can go either in pre-tax,which means the money is yet to
be taxed, it's a traditional,like we talked about in the
last episode, traditional IRAs,we have traditional you know
traditional Or most 401ks nowactually offer Roth options too,
(13:53):
you can put money in post-tax.
Now, you have that choice.
Your employer doesn'thave as much choices.
There is a new law thatjust went through, Secure
Act 2.0, they're tryingto ... It's changing some
of that a little bit.
We'll go into more detailson this in a future episode.
But most times employermoney is always pre-tax.
So whenever employer money comesout, it will always be taxed.
(14:16):
Employee money, youcould be traditional or
it could be Roth there.
Now let's talk abouthow you get money out.
Because the only reasonyou would put money in
is because someday youwant to take money out.
Dave Schmidt (14:31):
Not because you just want to give your
employer extra money, but
...Josh Bretl: Yeah.
And that's actually acommon misconception, and
I'm glad you said that.
You're never givingthe employer money.
The employer can'ttake this money.
The employer can't doanything with this money.
This is money set aside for yourbehalf, It's not the employer's.
But they do make the rules towhen you can get money out.
(14:53):
Is that fair?
Mm-hmm.
Fair.
Josh Bretl (14:54):
So now how you get money out is plan dependent,
but there are also IRS rules.
One of the big IRS rulesis the 59 and a half rule.
So when you take money out, ifyou take it out prior to age
59 and a half, you are goingto pay a penalty on that money.
Now if it's a traditionaldistribution, you're going
to take money, it's going tobe taxed plus the penalty.
(15:17):
If it's a Roth distribution,the gains will be
taxed plus the penalty.
Dave Schmidt (15:23):
So potentially more?
Josh Bretl (15:24):
No, just the gains, not the whole thing.
Dave Schmidt (15:26):
Okay.
Josh Bretl (15:26):
All right?
Now, there are someexceptions to the rule.
So medical expenses, disability,higher education expenses,
those are some commonexceptions that are out there.
So you can pay for ... Wella common one will often be if
you're paying for your kid'sschool or your own schooling,
you can actually take the moneyout to a certain dollar amount
(15:47):
and use that for tuition.
So without paying the 10%penalty that's out there.
Dave Schmidt (15:51):
So Carla being a government employee, 403b
is the equivalent of a 401k?
Josh Bretl (15:57):
Yeah, the rules are virtually identical.
There are small nuance-ydifferences, but it's
pretty much a ... A 403bis generally a 401k for
nonprofits, if you will.
Dave Schmidt (16:07):
Because she's been taking out 1,500 to
2,000 per month for myprivate harmonica lessons.
So I mean, we won't bepenalized for that, right?
Josh Bretl (16:16):
It depends if your private harmonica lessons
are a licensed institutionthat ... Of higher education.
Dave Schmidt (16:21):
Yeah, it's at Harvard.
Josh Bretl (16:23):
Oh, yeah.
Dave Schmidt (16:23):
It's at Harvard school of music.
Josh Bretl (16:25):
They're renowned harmonica teachers.
And it's reallytaking that long, huh?
Dave Schmidt (16:30):
Yeah.
Well I was actually enrolledat Julliard, but I don't
know, it was just a littletoo intense to manage both.
Josh Bretl (16:37):
Did you just say Julliard?
Dave Schmidt (16:38):
Yeah, I did.
Are you questioningan artsy guy on how to
pronounce and arts school?
Josh Bretl (16:44):
Yeah.
It sounded like ... Imean it sounded like a
true south side Chicagoan,like, "Is that Julliard?"
Dave Schmidt (16:48):
oh gosh.
Julliard.
Not the Jewel's, for our southside friends, but Julliard.
Josh Bretl (16:53):
I was wondering where that was coming from.
Dave Schmidt (16:54):
Cool.
So in other words, I mean,yeah, my harmonica lessons
are probably covered becauseit's higher education.
Josh Bretl (17:02):
Oh God.
So let's talk about whathappens to your money once
you get into the 401k.
So you have investment choices.
Once the money goes insideyour account and your 401k,
(17:23):
it's going to sit insidesomething and you're going
to have investment choices.
The choices of investmentsyou have are determined
by the company.
Dave Schmidt (17:31):
Your employer.
Josh Bretl (17:32):
Your employer gets to determine that.
Now, they have to give youa certain number of options,
they have to be able to covera broad enough spectrum.
Usually you'll see mutualfunds, that's the most
common investment under thesun that's inside of 401ks.
Dave Schmidt (17:45):
Is there a reason for that?
Josh Bretl (17:46):
It's an easier diversification tool.
People are familiar with it.
One of the problems with 401kplans is it is allowing the
average Joe to make some prettyserious investment choices.
There was a study done in theearly 2000s that talked about
the difference between what theaverage 401k participant earned
(18:07):
and what " the market" earned.
So going into the early 2000s,and this is coinciding with when
I started my career too, so thiswas really top of mind, there
was a lot of talk about thehistorical return to the market;
the market earns 7.5%, themarket earns whatever it earns.
And there was complaints comingfrom 401k participants because
(18:29):
they weren't earning as much.
Now, the market and"professional investors",
they're really good at takingemotion out of the equation
They're not selling when it'slow and buying when it's high,
they're making good decisions,but it's not their money.
So when they created these401k plans and they gave
people the ability to putmoney away, what they also
(18:52):
did is they gave people theproblem where they had to watch
their money go up and down.
So people were making emotionaldecisions inside of 401k plans.
now mutual funds have alwaysbeen around for this because
they wanted people to diversify,they wanted people ... It's
an easier way than trying tobuild your own equity portfolio
or your own bond portfolioor things along those lines.
(19:13):
Now what they've come outwith in the last 15 years
or so is these what theycall target date funds.
So it's more time-based.
And I'm not a huge fan of them,but for some people they're an
okay thing that's out there.
So typically we havejust mutual funds.
Now in recent years, 401ks, alot of them have been opening up
the world of investment choices.
So they've been saying,"Hey, you can go out and
(19:33):
invest in whatever you want."
Which is good and bad.
It can be very dangerous.
This is real money.
So your money goes up, yourmoney really does go up.
And if that money goesdown, that's That hurts.
Deciding where your moneygoes is something that you
should be looking at on aconstant basis, something
an advisor should be lookingat a constant basis for you.
It's something that, to bequite honest, over the last
(19:54):
10 years hasn't been thathard because the market still
has been able to trade up,except for the last 12 months.
And I think people are startingto realize that this is
something that you can't justset it and forget it, you really
got to pay attention to it.
And at the same time, tryand take emotion out of it
as much as humanly possible.
Let's talk about howwe get money out.
(20:15):
All right?
That cool?
Can we do that?
Dave Schmidt (20:18):
Oh, you're asking me if I want to know how I
can get money out of my 401k?
Josh Bretl (20:23):
Yeah.
Dave Schmidt (20:23):
That's a question I often get asked.
So like yeah, I should probablyknow the answer to this.
Josh Bretl (20:32):
So you've got the money in, you've invested it,
it's grown, and now you want themoney out for whatever reason.
So there is always two timesyou can take money out.
Always.
One is when youleave the company.
When you leave the employer,they're always required to
let you take the money out.
All right?
The other is if you are dead.
Dave Schmidt (20:49):
Oh.
So then you're nottechnically personally
taking the money out, but
...Josh Bretl: No, no.
But somebody else is.
Yeah.
Josh Bretl (20:54):
Other than that, they can kind of set the rules.
So there's a few rulesthat quite often they
will allow you to do.
One is 401k loans.
So a loan is whileyou're still working.
A loan, if you takeone, is eligible to
anyone who works there.
And it's exactly what it soundslike, you are loaning money
out of your 401k to yourself.
You're allowed to do a maximumof $50,000, and there's a
(21:17):
rate that you have to payit back at, and it's usually
tied to the prime rate insome way, shape, or form.
But it is taken outof your paycheck.
Traditionally, you have topay it back within five years.
So some companies make itshorter, but the longest you
can make it is five years.
And they take it out of yourpaycheck in equal installments.
So they amortize it like anyother loan would be there.
(21:38):
Now, there's goodand bad to this.
If you're going to takethis loan out to waste the
money, it's not worth it.
But if you need this money, thiscan be a good spot to go because
of the fact that that interestgoes back to you as well.
Dave Schmidt (21:50):
Oh, it does?
Josh Bretl (21:50):
So you get the interest, you get
the repayments, those goback into your account.
Dave Schmidt (21:57):
so now if I'm paying an interest,
let's say of 8%, actuallyI'm paying myself that 8%?
Josh Bretl (22:04):
Yeah, the 8% does go back to you.
Now, there are loan fees,they charge you to take loans
out sometimes because there'sadministrative tasks that go
with it, but that's there.
Now you have to realize though,if for some reason you stop
making loan repayments likeyou get fired or you leave
or you quit for whateverreason, you have 60 days to
pay the whole thing back.
(22:25):
And if you don't pay itback, it's like you took
it out of your 401k,it's like a distribution.
So if you're under 59 and ahalf, you have to worry about
the 10% penalty and the tax.
And if you're over 59 anda half, you still have the
tax that comes due on it.
Dave Schmidt (22:38):
So would it make sense, would anybody ever take
a loan out while also stillcontributing to their 401k?
Josh Bretl (22:44):
Yeah.
Dave Schmidt (22:45):
You can do both?
Josh Bretl (22:46):
You can do both.
It does make a lot of sense.
The loan is only thereif there's a need for you
to take that money out.
If you're going to buy a newcar and that car is $30,000
and you can pay the bank 7%or you can pay yourself 7%,
I'd rather pay myself 7%.
So
...Dave Schmidt: Interesting.
Okay.
Now, if it's ... You're going to waste it on
something, it's not worth it,that doesn't make any sense.
(23:07):
Or you have credit card debt youwant to pay off and consolidate,
it's not a bad way to do that.
Dave Schmidt (23:10):
Okay.
Josh Bretl (23:14):
But let's talk about in-service distributions.
We see this a lot in our office.
And this is people who aregetting ready for retirement.
And in-service distributions,in-service just means you're
still working and distributionsare ways to take money out.
Now this is ... You can doanything you want with this.
What we generally see inour office is they will take
an in-service distributionto roll it to an IRA.
(23:36):
And your company has to allowin-service distributions,
and you have to be olderthan 59 and a half to do it.
Dave Schmidt (23:41):
To do it.
Josh Bretl (23:42):
But if your company allows it, and most
do, you can take the money out.
And when you roll it to an IRA,then you have complete control.
You can control what yourinvestment choices are, what
your Roth conversions are,you have complete control.
Unlike in the 401k, whereyou do have Your hands are
tied to what the companysays you're allowed to do.
So these in-servicedistributions can be really
(24:05):
valuable for people who aregetting ready to retire.
We use them a lot aspeople ... Like I said, as
people start coming on boardwith us and they still have
another year or two of working.
It's a way to jumpstart andget their planning going
that's necessary for them, so.
Dave Schmidt (24:19):
And you can take like chunks out, right?
You don't have to ... It'snot an all or nothing
...Josh Bretl: Correct.
Okay.
Josh Bretl (24:24):
Correct.
We'll sit down and we cansay, "Hey, let's leave
this much in your 401k.
We'll move this much to your IRAwith in-service distributions."
And then when they retire,then we'll take the final
distribution, and roll therest of that to an IRA.
And when you go froma 401k to an IRA, that
is a tax-free transfer.
So it is a relativelyeasy thing to do.
Dave Schmidt (24:45):
Hmm.
Okay.
And limits on how oftenyou can do it or how
many times you can do it?
Josh Bretl (24:52):
That's set by the company.
It's one of those rules thatthe company is allowed to set.
the US government hasa limit that you're
allowed to do that once.
Dave Schmidt (24:59):
Once?
Josh Bretl (25:00):
Just once.
Dave Schmidt (25:00):
Really?
Josh Bretl (25:01):
Mm-hmm.
Dave Schmidt (25:01):
Oh, okay.
Josh Bretl (25:02):
But certain companies will allow you to do
it over and over and over again.
401ks can be quite ... Notquite, 401ks are the
single biggest savingstool that Americans have.
Most people use them, veryfew people know how to do it
effectively and they let alot of emotion come into play.
And they also think they don'thave a choice of what they can
or can't be doing with it asthey get closer to retirement.
Dave Schmidt (25:25):
From an employer perspective, Josh, other
than being a great benefitto employees to offer a 401k
like matching plan, whatother benefit to an employer
are there to offer 401ks?
And they're not requiredto do it by law, but what
are some other perks for
...?Josh Bretl: For bigger employers, it's all
about employee benefits.
Is that what it is?
Josh Bretl (25:44):
It's all trying to make employees happy.
For smaller employers, there'ssome tax things that they can
do and some things that maybenefit the owners as well.
But again, the ERISA governsthat and wants to make sure
that the benefit is equal toeverybody, not just to the high
income earners or to the owners.
But for bigger plans, it'sall about employee benefits.
Dave Schmidt (26:07):
Right on.
So during my researchfor this episode, Josh,
I came across something.
Have you ever heardof the 401zzz?
Josh Bretl (26:16):
No.
Dave Schmidt (26:16):
You haven't?
Josh Bretl (26:17):
No, is that a tax code?
Dave Schmidt (26:18):
No.
The ZZZ stands for snooze fest,because you've been talking
about 401ks for way too long.
Josh Bretl (26:24):
Oh, man.
Dave Schmidt (26:27):
Yeah.
What?
What?
Okay.
Hey Mr.
Josh, let's take a break.
You've been talking for solong and my ears are sore.
Let's not make them snore,listening shouldn't be a chore.
So let's get to knowJosh and Dave, and
watch our ratings soar.
Josh Bretl (26:45):
Cackaw!
Dave Schmidt (26:46):
I didn't even have to ask you.
So I am awfully proud of myselffor coming up with the 401zzz,
because I thought it was clever.
I didn't get the guffaws thatI thought I would from it, but
I figured, hey, you know what?
I am so well informed on 401ks.
(27:07):
It's now time to pick a card.
Josh Bretl (27:09):
So let's pick a card, Dave.
Dave Schmidt (27:11):
Let's do it.
Josh Bretl (27:12):
Let's pick a card.
Dave Schmidt (27:12):
Mm-hmm.
Josh Bretl (27:13):
All right.
This one
...Dave Schmidt: Wait, is Alyssa Milano going to pick it for us?
No?
No, no.
Dave Schmidt (27:17):
Oh, okay.
Josh Bretl (27:18):
I'm not going to long and ramble the
entry to this card, I'mjust going to ask it to you.
If you could make one of yourhobbies into a profession,
which one would it be?
Dave Schmidt (27:28):
Ooh, I've been talking a lot
about harmonica playing.
I don't think I'm quiteat that point yet.
Josh Bretl (27:33):
There's not many harmonica players in the
world that have actuallymade any money off of it.
Dave Schmidt (27:37):
Oh, in the show notes I'll post
...Josh Bretl: I mean there's a few.
Yeah.
I'll post some linksto some of my favorite
modern harmonica-ists.
Josh Bretl (27:46):
Oh, I'm sure our audience will be clicking
on those like crazy.
Dave Schmidt (27:49):
Yeah, of course.
All right, Josh.
So the question is,if I could turn any of
my hobbies into a paidprofession, what would it be?
Josh Bretl (27:56):
Mm-hmm.
Dave Schmidt (27:57):
I'd probably take my love and mastery
of video games and makeit into a profession.
But not just video games,I'm talking about like
80s and 90s arcades.
Like Rampage, I could setall sorts of world records
for Rampage and I betyou ... I'm on to something.
People would pay towatch me play Rampage.
Josh, I quit.
I'm going to be aprofessional Rampage-ist.
Thank you for the idea.
Josh Bretl (28:20):
We grew up in the 80s and 90s and we had video
games, but the idea of makingmoney off of them is so absurd.
And the fact that there arenow legitimate video game
athletes out there ... Youused to call yourself a video
game athlete, we used tomake fun of you all the time.
Dave Schmidt (28:34):
That's it.
Josh Bretl (28:35):
Like you'd sit down and you play John
Madden Football and be like,"We're video game athletes."
And we'd be like, "Good god,go out and shoot a hoop."
Dave Schmidt (28:41):
yeah.
These kids are makingmillions of dollars by just
a simple YouTube channel.
Josh Bretl (28:45):
Yeah, it's crazy.
Absolutely crazy.
Dave Schmidt (28:46):
Ah, I'm so jealous.
Josh Bretl (28:47):
My hobby, it would actually be reliving
your childhood dream.
I'd want to be a chef.
Dave Schmidt (28:51):
Yeah?
Josh Bretl (28:52):
Oh yeah.
Dave Schmidt (28:52):
Oh.
Josh Bretl (28:53):
Oh, I love cooking and making people happy.
Maybe ... Maybe like a privatechef, like in people's homes.
I want to see themsmile when they eat.
Dave Schmidt (29:00):
Yeah, that's cool.
I still think you and ScottSmith ... Scott, I love you man.
I think you two, you could makea killer restaurant together.
Josh Bretl (29:10):
Don't tempt Scott.
Scott wants to do that and
...Dave Schmidt: Does he still want to do a barbecue joint?
Is that still his jam?
No, now he wants to do like a specialty coffee shop.
And he wants to have a couplereally special baked items.
Like he wants to be knownfor coffee and the cinnamon
rolls, or something like that.
So, yeah.
Dave Schmidt (29:28):
Oh, cool.
Josh, I would financiallysupport your hobby of cooking.
Josh Bretl (29:34):
The problem is I think I'd financially
support it too, so it'snot really a good idea.
Dave Schmidt (29:38):
Yeah, that's so true.
I was sitting heredrinking my Cometeer and
...Dave relates to retirees.
Josh Bretl (29:44):
You know how the
...Dave Schmidt: Yeah.
Oh, I talked over the "yeah" You'd figure 30 some
episodes in I'd stop doing that.
Do you know the get to knowJosh and Dave, you sometimes
struggle to come up withan answer because you're
trying to think it through?
And you get a littlenervous as I ask it?
Dave Schmidt (29:59):
Yeah.
Josh Bretl (30:00):
I get nervous every single time when
you're about to open yourmouth for this section.
Dave Schmidt (30:06):
I am going to say you have it much worse than
I, because when you're readinga card ... I mean, yeah, I
could get creative with it, butthere's not much I could say.
However, with this segment,anything goes, man.
Josh Bretl (30:17):
So let's hear it.
What kind of relationdo you have to 401ks
and retirees, David?
Dave Schmidt (30:23):
I think it's fair to say every episode my
Dave relates to retirees is aperfect one-to-one correlation
to how a retiree feels abouta certain topic, right?
In this case, I mean
...Josh Bretl: Perfect one-to-one correlation.
Perfect one-to-one correlation.
You were teaching me earlierabout what happens to your
money inside of a 401k.
And essentially what I gatheredfrom that was employees, we
(30:45):
have options as to how toinvest that money, right?
But we're not giventoo many options.
We're given three to a dozendifferent options, right?
Josh Bretl (30:54):
Mm-hmm.
Yeah.
Dave Schmidt (30:55):
Well, retirees, soon to be retirees, I get it.
We're on the same wavelength.
When Josh, my buddy over here,takes me to a new restaurant
or a new bar, he knows that Iget overwhelmed with new menus.
Josh Bretl (31:09):
You're right, you do.
Dave Schmidt (31:10):
I do.
And Josh, I would say youhave mastered and memorized
the menu of every localeatery in this area, correct?
Josh Bretl (31:19):
Yeah.
Dave Schmidt (31:20):
Yeah.
So what I'm saying is whenI sit down with Josh, he'll
be like, "David, eitherget option A, D or F."
And he's like, "Those areonly three things you'll
like, choose one of them."
I'm like, "Oh, I have a choice,but not too much of a choice."
Just like you, dear friends,have a choice with your
401k investment, but nottoo much of a choice.
Has there never been a moreperfect one-to-one match?
(31:43):
Take it away, my man.
Josh Bretl (31:46):
Dave?
Dave Schmidt (31:47):
Yeah?
Josh Bretl (31:47):
I appreciate that one.
Dave Schmidt (31:49):
Thank you.
Josh Bretl (31:49):
I actually think you sent me ... Can I
see your paper real quick?
Dave Schmidt (31:51):
Sure.
Which one?
My notes?
Josh Bretl (31:52):
The top one.
The top one there.
And I noticed Dave has noteshere today, I've never really
noticed his notes before.
And I looked over atthe top and I was like,
"What does that mean?
DR2R?"
Oh, you've abbreviatedDave relates to retirees.
Dave Schmidt (32:09):
Yes, I have.
DR2R.
And with that, fullhouse me, baby.
Josh Bretl (32:16):
So I love helping people with their retirement.
I love to see them smileand you can see almost the
sense of relief and thesense of them feeling really
good after they come outof a good meeting with us.
You also heard in the get toknow Josh and Dave section,
of my desire to cook forpeople and make a living.
(32:38):
Well your Dave relatesto retirees kind of took
that two and combined it.
When you go to a restaurant,they give you a menu and
kind of when you ask thewaiter, sometimes you'll say,
"Hey, what do you recommend?
What's best?"
But the waiter doesn't know you.
The waiter doesn'tunderstand you.
And so they may recommendsomething, they may
say, "Hey, the scallopshere are phenomenal."
But you're like,"I hate scallops."
So they don't really knowyou and how to do that.
(33:00):
Dave, you're right.
When you and I go out to eat,I know you so well that I am
going to recommend somethingthat I think you will enjoy.
And I would say that sometimesI am like your advisor there.
I am like the one who'sguiding you as to what you
would like and not like.
Now, ultimatelyit's your decision.
(33:21):
You may choose to eat thescallops anyways, but I
know that scallops makeyour tummy feel funny
and you don't like them.
Now, I think that's alsowhat we do for clients.
They understand that theyhave lots of choices out
there and anyone could helpthem nail it down, but what
a good advisor will do for aretiree especially is get to
(33:42):
know that retiree so well sothat those recommendations
are geared just for them.
And you're not eating scallops.
Now, I love scallops.
So I mean if you lovescallops too, that's great.
But I think, Dave, you relatedto retirees better than you
have in any episode to date.
Dave Schmidt (34:00):
That makes me happy to hear.
Now, for our audience of one,I don't know about you, Erin, I
have major goosebumps right now.
That was one of the mosteloquent, most beautifully
spoken full house momentsto date, in episode 30.
Josh Bretl (34:17):
That's good, because I feel like we've
rambled a snot out of this show.
Dave Schmidt (34:20):
We tend to ramble a lot.
That's why we havethe edit tool.
So what we have not beenreally consistent with is
asking our listeners, what todo at the end of the episode,
like I have two things.
Can I share?
Josh Bretl (34:32):
Please.
Dave Schmidt (34:33):
Sure.
The first thing is I wouldrecommend go watch some
reruns of the original Charmedstarring Alyssa Milano and
just see how it relates toERISA, whoever ERISA is, that
Josh keeps talking about.
Second, I would ... Look,I would love for you, dear
listener, to refer on ofyour friends to pod.link/ref.
We mentioned this last episode
...Josh Bretl: Pod.link/ref?
(34:54):
Mm-hmm.
We don't control this webpage,but it is a really nice kind
of one pager that is curatedby some AI robot thingy, but it
gives a great overview of ourshow and all of our episodes.
And just send themthere, pod.link/ref.
(35:15):
You can also send anFSRwealth.com/podcast.
Same thing.
But send one ofyour friends there.
Josh Bretl (35:21):
And hopefully they can get the enjoyment
out of the RetirementEquals Freedom Podcast
that you do, dear listener.
Dave Schmidt (35:30):
Hey, is Alex allowed to listen to us yet?
Josh Bretl (35:31):
Nope, not yet.
Dave Schmidt (35:32):
Oh, poor Al.
Josh Bretl (35:33):
Give him some time.
He'll be back in it.
Dave Schmidt (35:35):
Yeah.
Well, Al, letbygones be bye-gones.
Josh Bretl (35:41):
Bye.
Dave Schmidt (35:43):
Oh, gallbladders.
Josh Bretl (35:46):
Or ... Dave?
Dave?
Dave Schmidt (35:47):
Yeah?
Josh Bretl (35:47):
Like my gallbladder, let's sign off.
Dave Schmidt (35:50):
Oh.
Oh my god.
Josh, I'm so proud of you.
Good one.
That's the winner,winner, chicken dinner.
Alex (35:58):
Hashtag tax nerd.
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