馃攳
The TRUTH About Your 401k Investing That No One Tells You - YouTube
Channel: Jarrad Morrow
[0]
I royally screwed up with my 401k I've
[3]
literally lost thousands of dollars
[5]
because no one told me certain things
[7]
about investing you'd think your
[9]
employer or 401k servicing company will
[12]
give you a little bit of education on
[14]
what to do with your 401k instead of
[16]
just saying oh here you go good luck but
[19]
I guess as long as they stay out of the
[20]
education business the more videos that
[23]
I can make look I don't want to see you
[24]
make the same boneheaded mistakes as me
[27]
so in this video I'll go through some
[29]
things that you should know and mistakes
[30]
to avoid when investing in your 401k
[33]
some of these might be obvious to you
[35]
but I guarantee there's at least a
[37]
couple that you had no clue about to be
[39]
honest with you I'm a little embarrassed
[40]
to share some of these stories with you
[42]
but I'll do it anyways because I always
[44]
have to remind myself that you don't
[46]
know what you don't know and I shouldn't
[48]
beat myself up about it
[49]
hey I'm Jarrod with an A and on this
[51]
channel we like to talk about all things
[53]
personal finance and investing just a
[55]
disclaimer this video is for educational
[57]
and entertainment purposes only nothing
[60]
I say should be taken as financial
[62]
advice if you have a decent amount of
[63]
your 401k invested in your employer
[66]
stock then you might want to rethink
[67]
about your investing strategy it's good
[70]
that you're rooting for the company that
[71]
you work for to do well but this can
[73]
turn really bad very quickly when I
[76]
think of investing for retirement I like
[78]
to be diversified I don't want to have
[80]
too many eggs in one basket because if
[83]
something happens to that one basket
[84]
then you're in for a tough road going
[87]
forward your main source of income
[88]
already comes from the company that you
[90]
work for so your livelihood hinges on
[93]
that company doing well that's already
[95]
enough risk right there don't mess it up
[97]
by investing in their stock as well
[99]
because that's just too much money
[101]
riding on that one company this is one
[103]
of the main reasons I prefer to invest
[105]
in low-cost total stock market index
[108]
funds I read an article in The Wall
[110]
Street Journal where a guy named Gary
[111]
worked at GE for 40 years he retired
[115]
with a pension and company stock valued
[117]
at two hundred and eighty thousand
[119]
dollars a couple years later the stock
[121]
price tanked and that two hundred and
[123]
eighty thousand dollars instantly became
[125]
worth one hundred and ten thousand
[127]
dollars our buddy Gary is now forced to
[130]
find work in retirement and
[132]
by choice either this is really scary to
[135]
think about because of stories like this
[136]
I've never owned and never planned to
[138]
own any shares in the company that I
[140]
work for it is just not smart next you
[143]
need to understand what it means to be
[144]
vested if you have a 401k or your
[147]
employer offers any sort of match I
[150]
learned this the hard way let's say your
[152]
employer matches your 401k contributions
[154]
up to five percent all of that
[157]
contribution money gets invested just
[159]
like the rest of the money that you
[160]
invest but it's technically not yours
[162]
until you're fully vested to be vested
[165]
means you have full rights to some sort
[168]
of benefit in this case it's your 401k
[170]
contribution money if you leave the
[173]
company before the predetermined time
[174]
frame then you lose the rights to that
[177]
benefit so if you have to be vested for
[179]
three years to receive all of the
[181]
employer contributions and you leave the
[183]
company after we'll say two years 11
[185]
months and I don't know 22 days then
[188]
they will take back all of the money
[190]
that they've been contributing for you
[192]
and the gains on that money as well so
[195]
you are essentially investing that money
[196]
for the employer you just left
[199]
yeah you've still been investing but
[200]
that sucks that they're taking that
[201]
money from you yeah this basically
[203]
happened to me years ago because I
[204]
didn't realize that this was even a
[206]
thing I had to be invested for three
[208]
years and I left the company after about
[210]
two years and nine months when I went to
[212]
my new job I started to transfer my 401k
[215]
money from the old job and the numbers
[217]
did not add up I had thousands of
[219]
dollars missing I was like what the heck
[221]
is going on that's when I found out what
[223]
it meant to be vested if I knew about
[225]
this then I probably would have find a
[226]
way to stick it out for another couple
[228]
of months to get the fully vested amount
[230]
I felt like such an idiot after a
[233]
learning about this I greatly appreciate
[235]
it if you Hulk smashed that thumbs up
[237]
button to help support myself this
[238]
channel and my dog Molly would love you
[241]
long time for it if you know someone who
[242]
could benefit from seeing this video
[244]
then do us both a favor and share it
[246]
with them is that a 401k and IRA are
[248]
different but kind of the same in the
[250]
past my thought process was if I have a
[253]
401k then there's no reason to invest in
[255]
an IRA as well they're both retirement
[257]
accounts but a 401k is offered through
[259]
your employer and an IRA is
[261]
self-directed so you basically have to
[264]
go invest in your I
[265]
Raye on your own as of right now the
[267]
maximum amount that you can contribute
[268]
to your 401k starting in 2020 is
[271]
nineteen thousand five hundred dollars
[273]
and an IRA is six thousand dollars if
[276]
you were curious about investing in a
[277]
Roth IRA then I'll link up my playlist
[280]
to all of my Roth IRA videos in the
[282]
description you can also have a 401k and
[284]
an IRA at the same time and in my
[287]
opinion you should be taking advantage
[288]
of both this is one that won't make or
[290]
break you but you're still gonna want to
[292]
know about it so you're not surprised
[294]
when it comes time for you to retire and
[296]
you're wondering why some of your money
[298]
is in this bucket the money that you
[300]
receive from your employer match is
[302]
always invested in a traditional 401k
[305]
which means that this is pre-tax money
[308]
which also means that when you go to
[310]
withdraw any of your employers
[312]
contributions when you retire then that
[315]
money will be taxed for example if you
[317]
invest eighteen hundred dollars per year
[319]
into your Roth 401k and your employer
[322]
matches eighteen hundred dollars then
[324]
that eighteen hundred dollars that you
[325]
invested will grow tax-free while the
[328]
eighteen hundred hundred dollars that
[329]
they match and the investment gains on
[332]
that money will be 'text once it's grown
[334]
and you retire and you start pulling
[336]
that money out of your 401k if you leave
[339]
this job and roll it over into an IRA
[341]
then you'll have to roll it into a
[343]
traditional IRA not a Roth IRA so if
[346]
someone invests in their Roth 401k
[348]
forever and they expect not to be taxed
[351]
on any of the retirement money then
[352]
they're wrong don't feel like you're
[354]
getting screwed over here though because
[355]
this is the case for everyone who works
[357]
for a company that matches their
[359]
contributions you are not going to be
[361]
able to change if you are not investing
[363]
up to your employer's match then you're
[365]
either an idiot or you're just not aware
[367]
of how important it is to do so I'm
[369]
guessing you're probably the latter
[370]
though because I don't think you're an
[371]
idiot the simple explanation is because
[373]
it's literally free money think of a
[375]
company match like giving you free
[377]
shares of an index fund out of every
[380]
single paycheck even if the shares of
[381]
that index fund go down you still have
[384]
those shares that'll have the potential
[386]
to grow and pay you dividends every
[388]
single quarter you also have to look at
[390]
an employer match like a part of your
[392]
compensation for working there because
[394]
it is just like your health benefits and
[396]
vacation days as well let's go through a
[398]
quick exam
[399]
say your employer matches 50% of your
[401]
contributions up to 6% of your annual
[404]
salary if you make $60,000 per year then
[407]
you were eligible for them to match up
[409]
to $1,800 for the year because 6% of
[412]
60,000 is $3,600 and they're going to
[416]
match 50% of that which is $1,800 this
[419]
means that you invest $1,800 and they'll
[422]
match you with $1,800 you can consider
[424]
this an instant return because you're
[426]
guaranteed to double your money as long
[429]
as you invest up to that amount I'm a
[431]
dummy and didn't realize this when I
[432]
started my first job so I didn't bother
[434]
investing because Dave Ramsey he told me
[437]
to put all of my money towards debt then
[439]
of course I did my own research and
[441]
realized he wasn't keeping the best
[443]
advice here so I started contributing up
[445]
to at least the match even though I was
[448]
still focusing on paid off my bad debt
[451]
was this a boneheaded move on my part
[452]
then I learned to not take Dave's advice
[455]
at face value anymore I sure did but you
[458]
don't know what you don't know don't
[460]
make the same mistake as me and please
[462]
please PLEASE invest at least up to your
[465]
employer match and make sure you're
[468]
fully vested before leaving the company
[470]
don't listen to Dave Ramsey because he's
[472]
an idiot about certain things sorry not
[474]
sorry you need to be aware of the fees
[476]
involved with investing in your 401k now
[479]
there's two types of fees that you need
[481]
to look for the first is the expense
[483]
ratio of the investment offered within
[485]
your 401k this is going to be different
[487]
for each investment option that you have
[489]
one thing to know don't just base your
[491]
investment decisions on the one with the
[493]
highest return over the past two 10
[495]
years you need to understand what the
[497]
holdings are within that particular
[499]
investment what the goal is of that fund
[502]
and how it aligns with your goals and
[504]
you need to pay attention to the cost to
[507]
own that fund
[508]
I made the mistake early on in my
[509]
investing career where I would just pick
[512]
the one with the highest return and I
[514]
didn't even bother looking at the
[515]
expense ratio or what was even in that
[517]
fund if you've got one fund that has a
[519]
ten-year return of 16.5% and an expense
[523]
ratio of point eight zero percent and a
[525]
low-cost index fund that has a ten-year
[528]
return of 16 percent but an expense
[531]
ratio of point zero
[532]
3% then you may want to stop to think
[535]
before you automatically choose the one
[537]
with the highest return a because you
[539]
don't actually know the goal of that
[540]
fund with the 16.5% return and be you
[544]
should be trying to limit your fees as
[545]
much as possible just to be clear you
[547]
shouldn't only choose investment options
[549]
because it has a low expense ratio you
[551]
need to understand what the goal of that
[553]
fund actually is I touched a little bit
[555]
on understanding investment options in
[557]
one of the Roth IRA videos that I made
[559]
I'll link it up in the description for
[561]
you to check out after this video if you
[562]
need some help making sure you're not
[564]
paying too much in fees then check out
[566]
bloom it's a free 401k analyzer tool
[569]
that'll look through your portfolio to
[571]
make sure that you are not overpaying in
[573]
fees and will check to see if there's
[575]
any hidden fees you're being charged I
[577]
tried them out and was extremely
[578]
impressed with the results
[580]
it felt good letting someone else take a
[582]
quick look at my 401k portfolio link to
[585]
run the free analyzer on your 401k is in
[588]
the description
[589]
the next expense that you need to be
[590]
aware of with in your 401k is how much
[593]
they're charging you to manage your 401k
[596]
now I'm fortunate enough to where I get
[598]
charged a flat five-dollar fee every
[601]
single quarter no matter how large my
[603]
401k balance is but I've heard about
[605]
some people's 401ks who are getting
[607]
charged a lot more than that or even an
[610]
ongoing percentage of their 401k
[612]
portfolio these expenses are the same
[614]
for everyone across the company now you
[617]
may not think that you have the power to
[618]
get your company to do something about
[620]
it but you probably do if you notice
[623]
that the management fees of your 401k
[624]
are really high then reach out to your
[627]
HR department and make them aware of
[629]
what you're actually see a lot of the
[631]
times the higher-ups within your company
[632]
are clueless they were probably just
[634]
pitched by a sales rep from one of these
[637]
investment management companies and
[638]
didn't pay attention to how much their
[641]
employees would actually be paid if you
[643]
were able to articulate how much these
[645]
fees are costing all of their employees
[647]
then you may be surprised and how
[648]
willing they are to change companies or
[651]
try to get the fees lowered for you all
[653]
this mistake is easy to forget about if
[655]
you are not increasing your
[656]
contributions on a regular basis then
[658]
the future you is going to want to punch
[660]
the you of today directly in the throat
[663]
you've done your research you've
[664]
educated yourself you know
[666]
what to invest in so you adjust the
[668]
settings in your 401k to invest 20% of
[671]
your income and forget about it
[673]
I find a nice little picture from
[674]
fidelity that shows you how much you are
[676]
leaving on the table if you don't
[678]
increase your contributions on a regular
[680]
basis the difference between increasing
[682]
it by one percent every year versus only
[685]
increasing it by one percent is an extra
[688]
$1,700 per month you're screwing your
[691]
future self out of yes we're talking
[693]
about a measly 1% this is something that
[695]
I do every single year no matter what
[698]
whenever my income increases I
[700]
automatically increase my contributions
[702]
by the exact same amount I don't ever
[705]
see that raise on a day-to-day basis my
[707]
overall wealth gets that raised we
[709]
should all be very aware of what our
[711]
actions today are going to do for the US
[714]
in 20 or 30 years that future person is
[718]
just as if not more important than we
[720]
are right now it is our obligation to
[723]
set him or her up for the future so they
[726]
don't have to work until the day that
[727]
they die don't forget to Hulk smash that
[729]
thumbs up button check out these videos
[730]
to my left the top one I'll show you
[732]
exactly how I invest in my Roth IRA or
[734]
you can watch the one below it where I
[736]
show you exactly how I save it invest 70
[739]
percent of my income check out the
[740]
description for different playlists and
[742]
resources to help you out with all of
[743]
your personal finance and investing
[745]
needs I'll see you in the next one
[747]
friends a Dios
Most Recent Videos:
You can go back to the homepage right here: Homepage