IRA Investment Strategy | 401k YouTube (in 2021) - YouTube

Do you want more money? More specifically, do you want to keep more of the money that

you've already earned? Because if you do, then you're going to want to keep watching,

because I'm going to give you a few secrets on how to utilize retirement accounts to maximize

your money. Now, most of us, we work hard and then we get paid and we obviously want

to be able to keep more of that money than we usually do. And by utilizing retirement

accounts, like a Roth IRA, a Traditional IRA and a 401k, you can absolutely keep more of

your hard-earned money. And by the end of this video, you're not only going to know

what each of those are, but I'm going to share with you some simple strategies that you can

use to incorporate using those three retirement accounts, which is going to allow you to keep

a lot more of that money that you've made. So let's get started.

Hi, my name is Justin Barker here to bring you the best beginner stock investing videos. Please hit that subscribe

button and the like button. It helps the YouTube algorithm find me in a sea of millions

of videos that are out there and I very, very much appreciate it, and also be sure to hit

the bell to be notified when I post a new video every week as well. All right, so let's

first start with your 401k. Now, most people I've found, they just don't contribute to

it and by not contributing to it, you're actually stealing from yourself. You're hurting

your own future, your future self by not taking advantage of it. Just think of your 401k as

your older man or older woman money. It's your older man account your older woman

account. The idea here is that over your working years, if you throw enough money into your

401k over that time, and for most of us, we're probably going to be working 40 plus years

of our lives in some way or another. So the earlier and the more consistent that

you can throw some money into your 401k year after year after year, over your working lifetime,

the greater, the chance that it's going to grow big enough so that you can live off of

it after the age of 60, which is the more traditional retirement timeframe. Now it's

not something that you dip into until at least 60 years old at the earliest, which is when

you can start accessing it without penalties. And so that money has got to last you through

about 30 years or more of your life, at least, hopefully, uh, till the age of 90, let's say

which far surpasses the average life span of most people. And so by doing that basic

401k type investing strategy, your money is just going to keep growing and keep compounding

on top of itself tax-free for all of those 40 plus working years, this is going to more

than likely allow you to have enough retirement money in your sixties.

and beyond so that you can keep that familiar standard of living that you've grown accustomed

to. Now how much to contribute to a 401k is going to vary from person to person at a bare

minimum. If your company has a 401k match, meaning whatever percent you put into it,

your company is going to match it. Then you absolutely no matter who you are, should be

signed up for that 401k match as soon as it's available to you because it's free money,

plain and simple. From there, ideally, you're going to want to work your way up towards

maxing out your 401k if possible. But I know from personal experience that you know, that

that's just not always feasible because sometimes our expenses are pushing up against or are

even greater than our, our take home, our take home pay. And because 401k contributions

come out of your pay first, what happens is you end up with a little

less take home pay the more that you contribute to your 401k. Now the two best ways that I've

found to combat that challenge essentially is one, you just have to cut back, cut back

on your expenses every which way possible until they're actually low enough so that

you're living below your means so that you can contribute that extra to your 401k or

the other alternative is you can just focus on trying to make more money somehow without

increasing your expenses. Now that could be going for better jobs, higher paying ones, developing

new skills, or bettering your current skills so that you, you have more to offer so that

you can get paid more. And you can also do things like starting a business or, or a side

hustle and other types of things. The point is that you may not like living below your

means, which requires you to cut back a lot on your, on your expenses.

And so that's the case, then you just have to raise your means somehow. And what I've

found is that, you know, it's just best to use that drive, to find ways to make more

money. And a couple of other challenges related to 401k contributions that I've personally

run into is that, you know, I want to live now and I want to, you know, I don't, I know

the future isn't always guaranteed and I'm also ambitious and entrepreneurial enough

that I want to pursue an earlier financial independence. Well before I'm 60, if possible.

And so because of that, I want to keep more capital or cash available to pursue other

ventures that are going to have potentially higher returns for me that can get me closer

and quicker to those, those goals that I have for myself. But if I contribute all

of that cash to my 401k, which I can't even access without a penalty until I'm 60.

By putting large chunks of that cash into my 401k

first, what happens is I end up taking home less cash, which obviously doesn't go well

with that vision I have for myself and those goals that I set for myself. And so in those

cases, if you're like me, I've found it helpful for me to just skew a little bit more towards

after-tax savings and investments, instead of all of it straight into my 401k, because

when I do that, I'm able to access and withdraw that after-tax money right away when I need

it without any retirement penalties involved. But again, those are just some of the challenges

that I've encountered personally, in my personal investing journey. And I just wanted to share

with you in case you ever run into them in your own experience and, just to help

you see some alternatives and, thinking through your own strategies, but ultimately

conventional wisdom does say that you should definitely work your way up to maximizing

or maxing out your 401k as much as possible. And in this year, 2021, that maximum amount

is $19,500 for the year that you can contribute to it. All right, please take a moment and

comment anything down below in the comment section for the YouTube algorithm to find

me really it helps out a lot. And let's keep going. Now with an IRA, the max contribution

that you can give to it in 2021 is $6,000. Now that's the total max of both the Roth

IRA and the Traditional IRA combined. Now, fundamentally these two IRAs are pretty opposite

from each other. So let's first go over the Traditional IRA. Basically, the money that

you invest in your Traditional IRA, it can be written off on your taxes at the end of

the year. So that means, let's say, for example, you make $50,000 this year, and you also contribute

throughout the year, the maximum amount of $6,000 to your Traditional IRA.

Now, what happens is when you go to do your taxes at the end of the year, you're only

going to have to pay taxes on $44,000 of income instead of that full 50,000, because you get

to sub, you get to subtract that $6,000 that you contributed to the traditional IRA throughout

the year. And it's not only another way for you to lower your tax bill, but those contributions

that go into it are also going to grow tax free as well for many years, while it's invested

until again, you're ready to use it in your sixties and beyond. And at that point you

would finally pay taxes on your withdrawals, withdrawals. I don't, it's hard for me to

say for some reason. So essentially the Traditional IRA has the same tax structure as your 401k,

except that with your 401k, your employer pretty much handles most of that for you,

but with a Traditional IRA, you generally just do it yourself with a personal retirement

account that you set up at your brokerage. Now, a Roth IRA is the opposite of both of those

other two, because when you invest in a Roth IRA, you're using your take home pay. And,

basically there's no write-offs or no deductions on your taxes or anything

like that at the end of the year with a Roth IRA. But that Roth IRA money does grow until

you're ready to use it in your sixties and beyond as well. But the other main difference

from the other two is that when it comes to a Roth IRA, and it's time to make those

withdrawals, you don't have to pay any taxes on those withdrawals, like the other, the

other ones, because the taxes were already paid before. I know sometimes it can be a

little confusing trying to figure them all out. So it's maybe watch this video again

if that helps, or I thought it helpful to make a quick visual diagram just could sort

of figure out your strategy of how you want to work these into your investment plan.

Now, as for some strategies here, traditional or traditionally, I guess conventional wisdom

says that, you know, you should just maximize all of your retirement accounts, but with

an IRA, because there's two options, the Traditional and the Roth, you can only put 6,000 in total

into one or both, or are those in some combination, you know, what do you do? So here's my personal

take on how I approach it. Again, this is from my personal investing journey and my philosophy

that I found worked best for me. I personally just don't put a lot of emphasis on a Roth

IRA. I know it's important and I do have one, but I just don't contribute to it every year.

And the reason why is because basically I'm the type of person who is more inclined towards

pursuing more income sources or other income sources and other wealth producing ventures,

like building a business and pursuing an earlier financial independence, as I mentioned.

And so, you know, I don't want to wait until I'm 60 to get there. I know it's riskier,

but I believe in myself and I believe in my pursuit of my goals and my ability to achieve

them. And so to me that after-tax paycheck, money is often limited, and so I've just chosen

to usually put that extra cash into, into those other ventures and other pursuits that

I've committed myself to. Because again, I believe they're going to give me better returns

and a better chance at accomplishing my goals than just putting that extra cash into a Roth

IRA, which again, I won't be able to even fully access without any penalties until I'm

at least 60 years old. And so with that being said, if you're not inclined towards

those types of goals, or if you're just going to spend that after-tax money wastefully

in some way then, or maybe, maybe just make enough to max out all of these vehicles already,

and you still have enough left over to live the life you want, then definitely max out

all of those retirement accounts as much as you can.

But for me, I only contribute to a Roth IRA in years when I have good capital accumulated

or, or lots of extra cash available for those, those other ventures that I mentioned. And

it's also a low income year for me as well, because if it's a high earning year for me,

where I'm making good income that year, then, then I know I'm going to have to pay more

taxes because of it. And so in that case, I would just rather contribute more to a 401k

and a Traditional IRA in those years, which is going to lower my taxable income in that

year. And the Roth IRA is, the Roth IRA is just not going to do that, but in a low-income

earning year, as long as I have that extra cash for my other projects that I've mentioned,

then I will put some into a Roth IRA because in those years, the Traditional IRA, even

the 401k, they just become less valuable to me because I just don't need to lower my taxes

in an already low earning year. Another way to look at it, or I look at it

as, as, and what I did was when I was younger, when you're younger, you, when you're just

starting out in the workforce and your income is probably going to be lower than it

it's going to be later. And in those, those early years, I actually contributed more to

a Roth IRA then, but as I gained more experience and I got better paying jobs, I, I, you know,

I started making more income, which led to me having to pay higher taxes. And so at that

point, it became more tax efficient for me to just put more into a Traditional IRA and

a 401k in those years in order to lower my tax bill so that I could keep more of that

earned money. All right. If you'd like more tips for me or more support for me, then definitely

join the Stock Market, Living Facebook group. I started it a couple of weeks ago as a way

to just support each other in our investing journey and in the achievement of our goals

there, we can share more with each other and we can even do some trainings in there. So

if you're someone who's aspiring to be an investor or entrepreneur, or you have some

big financial dreams, then definitely consider joining the Stock Market Living Facebook

group, I'll put the link down below in the description and in the comments so that you

can join, and hopefully I will see you in there. And if you liked this video, please

hit that subscribe button. Be sure to hit the like button as well and share it with

your friends. Thank you for watching. I will see you in the next

video.