Hello Everyone.
Welcome to Investment Insights. My name is Vijay Mohan. I have been sharing my financial knowledge in my Tamil channel for the past 2 and a half years. It has been very successful. As of now, we have over 150,000 subscribers there.
Many requested me to do something similar in an English channel as well. And so, here we are. This channel is not going to make you rich overnight. But it can help you to make better financial decisions. Building wealth, Retirement planning, Personal Finance, Personal Development - everything will be covered.
If you would like, complex financial concepts to be explained like you are a 12 year old, then this channel is for you.
The content of this channel is my own opinions and is for information purposes only. It is not intended as a substitute for professional financial advice. It is only intended to provide education about investments.
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While your 401k and IRA account would likely continue to grow even after you stop contributing to it, that growth might be limited by the Market, your personal plans and also other factors. For this I see need for annuities. I still will like to know how to compound $2m and above in retirement without holding cash.
Bond and other fixed income asset if properly managed could produce the yield needed to provide solid income for retirement. The importance of a continuous wealth accumulation and ensuring financial stability is why boomers turn to advisors in retirement planning.
4:25 "pay additional 27% tax on contribution... $6,210...$490k " That $6,210 is incorrect as computation is not additional 27% on $23k but $23k is result after 27% tax has been removed: $23,000 / 0.73 = $31,506.85 pretax income needed to contribute $23k to Roth 401(k) so ($31,506.85 - $23,000 =) $8,506.85 tax $31,506.85 * 0.27 tax rate = $8,056.85 tax : $31,506.85 - $8,506.85 = $23,000 Roth 401(k) contribution $8,506.85 at 8% for 25 years = $671,653 not $490k
I have two pensions. I would much rather have had a Roth 401k throughout my working lifetime. $500/month invested from 25 - 65 at 9% is $2.3mil. I have $100k that i like to invest in a non-retirement account, Where would you invest this as of now?
I would avoid the index funds, mutual funds, or specific stocks for the time being. 5% fixed incomes are the safest bet for now. Save your cash for when the market actually shows signs of recovery.
Working with a financial advisor has been a game-changer for me. They provided invaluable insights and tailored strategies that aligned perfectly with my risk tolerance and financial objectives. With their support, I've seen significant growth in my investments and gained confidence in my financial future.
I've been looking to get one, but have been kind of relaxed about it. Could you recommend your advis0r? I'll be happy to use some help.
Angela Lynn Schilling has always been on the top of my list..She is regarded as a genius in her area and well knowledgeable about financial markets. I highly recommend her if you want excellent collaboration.
I've experimented with a few over the past years, but I've stuck with ‘’Angela Lynn Schilling” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Vijay, I have a doubt. At 04:54 you say, casually give it to your kids. I believe we cant just give to kids in USA, Any money you give to your kinds, although it is post tax money, our kids have to pay tax on that. Isn't that the case? i read somewhere that we can only give our kids $17000 per year as gift. Anything over this is taxable. Correct?
2024 $18k so parents can gift $36k to each child.
The best comparison till date on the internet. Great job. Good work
Thank you for the Excel, I am adding some key points you have missed while covering that might good for Others. This Analysis is based on Families who are planning to buy a house eventualy. 1) Interest Rate is Not same for 30 years it can come down %4 to %5 in 5 years, We can refinance at lower rate. That will will save us lot of money. 2) If we Rent LIFE LONG and Invest the Extra savings in Stocks/ETF's we get more returns that's True. You have missed the "TAX" we need to pay if we want to withdraw the Gains (If we want to Buy a House in 5 or 10 Years. I believe that would be case for most of them ) on the i.e. ~%19 (State + Federal) 3) The Amount of Capital we are losing by renting for 2 years at an avg cost of $1750/Month for 2 years is $42,000. If we brought a House it would gone to Monthly Mortgage Payments 4) The Home Appreciation values is not always %3 since you have taken the AVG Across the nation. If we consider Lowest growth for some Good Communities with greater school zones it may be more then >%5 to %10 per year source from Zillow price Change for last 10 years. 5) If you have a stable job and planning to stay in USA in a same state. My strong suggestion go for a House. 6) There is No Taxation in some states if we have a capital Gains on selling the house compared to Stocks up to $500K as of 2024 filling jointly 7) We can use the below 2 Links to calculate the Tax you will end up to pay on the investment and how much return you will get if you invested in stocks at avg %4 returns. a) Taxation: smartasset.com/investing/capital-gains-tax-calculator#2kHh5UPu5a b) Investment Returns : smartasset.com/investing/investment-calculator#ixeCSfH47d 8)people say that the average Stocks return is greater then %10,this happens only when we keep it for 10 to 20 years and we should know when to Exit i.e. at Good performing Years.
Can you explain 401 k Catch up and after tax
Can you explain 401 k Catch up and after tax
Well Explained, Thank you!
As a soon-to-be retiree, keeping my 401k on track after a bumpy 2022 is a high goal. I've read about investors generating up to $250k ROI in this present sinking market; any suggestions for increasing my ROI before retirement would be greatly appreciated.
Yes, you are right. it's been a brisk tailwind for investors in US stocks over the decades but it is still a delicate season now, so I advise you to consider the guidance of a financial advisor.
A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
@@maryHenokNftImpressive can you share more info?
*Gertrude Margaret Quinto* is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
She appears to be well-educated and well-read. I ran a Google search on her name and came across her website; thank you for sharing.
I’m thinking making investing in 401k is risky, also the economy might probably be of effect to average persons
Does anyone know the contribution limits for Roth 401(k)s?
Probably I’ll assume It's $20,500 of recent and an additional $6,500 if you're 50 or older.
@@DamianCarlos-f3zjust apply caution when considering investments, most especially during this time of inflation.
Good point. It's essential to understand the tax implications before making a move.
@@DamianCarlos-f3zhiring a CFA is a very good idea in managing risks when making investments
Thanks for the video! 👏
If I plan to retire in India, would it make any sense to contribute to Roth 401k or should I just do pre-tax?
What tax bracket is 105k married filing jointly in Texas? Internet is bit confusing. Roth or PreTax?
Blindly go for Roth. You tax will be $8,836. Use smartasset for Tax calc. You have 0% state tax. Your marginal tax bracket in 12%
For 2024: $105k - $29,200 (standard federal deduction) = $75,800 for which is $8,632 in federal tax. $75,800 is 12% Federal Tax Bracket so should favor contributing to Roth 401(k). Alternative is $23,000 to traditional 401(k) plus Spouse 1 $7,000 Roth IRA and Spouse 2 $7,000 Roth IRA. $95k - $384k is 22%/24% Federal Tax Bracket. If you don't expect to exceed $384k, favor traditional 401(k) once you reach 22% FTB.
Thanks for those intense calculations. This is insightful. However, request you to consider the physical, mental and monetary stress of moving out and in every year. This is not a big factor in India, but surely is for people in US. You may also factor in the uncertainty of finding a decent place near kids schools etc considering Apartment properties change lot of things in every new contract.
Excellent explanation sir 🤩
Great video, very helpful. I believe there is a slight correction. The 6210$ total tax savings by maxing your 401k will still be taxed when you withdraw post retirement. The best case is 10%tax on it (lowest tax margin). But some of it can be taxed at 22% or higher too, depending on which tax bracket you are during post retirement withdrawals. Also a big unknown is the tax brackets 25yrs from today. Please comment on this. Thanks.
Yes. I mentioned that as part of the first advantage. Contributed at top most marginal tax bracket, withdrawn at bottoms up effective tax rate.
The $6,210 is part of the $23,000 annual traditional 401(k) contribution. This video calculates $23k year at 10% results in $2.7M. 6:04 "Out of the $2.7M $739,000 is just from tax savings." Grand total is $2.7M not $2.7M + $739k. No correction needed.
Can you please make a video on how to convert or transfer the traditional 401K money to non taxable accounts couple of year’s before retirement and the withdrawal limits on non taxable accounts
They all will be covered as part of this US retirement series.
Is it make sense to invest in 401k if employer is not matching? And can you make video on the best etf/mutual funds in USA
The two advantages I mentioned here in this episode alone good enough to contribute to 401K.
The Roth 401k can be beneficial if you expect your tax rate to be higher in retirement than it is now. Given the uncertainty of future tax rates, it’s a good hedge against rising taxes.
I’ve read that the US economy’s fluctuations could impact future tax policies significantly. If taxes increase, having a Roth 401k might save you money in the long run since withdrawals are tax-free.
My portfolio took a hit last year, and I’m trying to stabilize it. I’m leaning towards a Roth 401k because I think tax rates are likely to go up. Do you guys have any experience with this transition?
Yes, I transitioned to a Roth 401k two years ago, and it has provided me peace of mind. I don’t have to worry about future tax hikes affecting my retirement funds. Plus, the tax-free growth is a great advantage.
From what I understand, the current economic trends suggest that taxes might increase to address the national debt and other fiscal policies. A Roth 401k could be a safer bet in such a scenario.
However, don’t forget the immediate tax benefits of a traditional 401k. If you’re in a high tax bracket now, those savings can be substantial. It really depends on your current income and expected future income.
Good analysis and explanation. But when you discuss savings on 550k on taxes you didn't consider that amount would be taxed on withdrawal
I mentioned that as part of the advantage #1.
Where were you sir. You are like a distant uncle everyone wishes to have to guide them in the world of personal finance. And I like your direct to the point approach. Thank you!!!
With the federal debt trend will the tax increase from 22% to 40%
401k withdrawal after age of 62 or 65, it is tax free correct?
NO
Today , IRS released new max out amount for HSA plan 2025. Could you pls share more insights about it
Vijay Anna your analysis is spot on!!!. Please keep sharing more such videos and enlighten us.
Great job on the detailed work, thank you so much for putting the effort! One question: isn’t 8% return an assumption as well? There should be a point (somewhere higher that 8% of average return) where the conclusion will change. Please correct/confirm - will be really appreciated!
8% return is hypothetical and reflects reasonable return for long time frame. Different tax rates a greater impact on whether traditional or Roth is better choice. No conclusion can be made about if traditional or Roth is always or generally better, just that this specific YT scenario traditional is better.
Sir there is another assumption about the returns in the investment is consistent right? Is it not an assumption? Or is it possible to do that way?
8% rate of return in this video is hypothetical and constant for sake of simplicity.
Big fan of your channel sir. Please upload videos on good balance of portfolio in retirement and brokerage accounts. S and P 500, Bonds and any growth ETFs.
Amazing clarity! Thank you. Adding to this HSA of $8,300 per year, we can almost bring taxable income below 22% bracket for a 120k joint filing.
Is there a video on annunity? If not can you explain pros and cons of annunity
Annoying accent 😢😢
Nowadays, Indians (I-140 status) are buying a home in US because of coworkers/neighbour has bought it and really creating a mental pressure….. Thank you for explaining in detail 🙏.
Very useful information Sir, How about the interest rate is 3 %
Can I withdraw the HRA amount, before retirement or loan out of it? In that case, which will be profitable, HSA or 401K?
Thank you very much Sir. Great video
Dear sir I have made a terrible mistake of buying whole life insurance for me and my wife . We are paying a yearly premium of 6K USD for a meager 175K death value. We were confused and sold about cash value etc . What options we have now ? We have paid 3 yrs out of 10 yr already .
Is it worth to cancel the contract and forgo the Sunk cost (36 K) or just stay put.
is it advisable to buy a 2nd home and let the current one on rent and move? we need to move as we feel the current home is in a community where it is more of rentals and we see people move in and out frequently and lot of nuisance to deal with. practically it will be too tight to afford this interest rate but if we don't decide now then it will be never kind of situation.
It is totally a personal choice. But if you would like to see whether it is profitable purely from financial perspective, use the calculator from this episode: Is rental home investment profitable?: kzread.info/dash/bejne/m3qYutiom8S5c6Q.html
Good info
what should be the ideal fund allocation in 401k? can we adjust it once in 6 months or a year? should we have a financial advisor to guide us? or should we select fidelity assistance?
I will cover that in this US retirement series.
can we withdraw for college expenses? is that consider as valid withdrawal?
No. Not for HSA withdrawal.
Can you recommend what funds we should select in the HSA? right now i have 27% large cap, 28% mid cap, 20% small cap, 25% international
Choose a diversified index fund like S&P500 index or Total stock market index. That is all the exposure you need.
Since LT Cap Gains are not taxed until >$94k, now I’m thinking if it is even worth doing after tax 401k (mega back door Roth conversion), because even in brokerage account the cap gains won’t be taxed until 94k, plus I’ll have the freedom to withdraw gains before 59.5yrs in brokerage acct unlike Roth account. You have really made me think. I would appreciate any inputs on this.
If you realize capital gains in the working years when your taxable income is potentially > 94k you will have to pay capital gains. 94k limit includes all incomes not just capital gain. If you are a buy and hold type of a person then you will not incurr any captial gains but for dividend.
@@cybrainx72 true, I was assuming that I’ll stop working in another ~10 years and then slowly start cashing the brokerage and Roth funds. And since my total expenditure would be less than 94k, there won’t be a reason to realise more cap gains than that. But megaback door would give me the ability to cash out my contributions/gains for a big expense like college tuition in one shot without worrying about taxes.
A mega back door Roth is definitely better than a brokerage after retirement (No tax for any amount of withdrawal Vs No tax only for the first 94K of income). But depending on our needs, we can combine them to work in our favor. For early retirement, yes, you can use brokerage account withdrawal tax free for $94K + Standard deduction $29K. You can also line up the backdoor Roth for that purpose. When you change job, move your Roth 401K balance into Roth IRA. This moved money will be available for you to withdraw tax free and penalty free in 5 years. You can also line up your pretax 401K for this purpose as well (Roth conversion ladder strategy). www.madfientist.com/how-to-access-retirement-funds-early/ When we understand how different accounts work with its own advantages and disadvantages, we should be able to set them up to fit our situation to take the maximum benefit from them.
@@InvestmentInsightsEnglish thank you for the detailed explanation Vijay sir. That blog is very helpful. Just one more follow up, when you say move Roth 401k money to Roth IRA and then withdraw in 5 years, I still have to be 59.5 years old to withdraw the earnings right? And I assume I can withdraw only the contributions at any point without 5 year or 59.5 yr age restrictions. The blog does not clearly state that either.
Actually it is the rolled over money (contribution + earnings from Roth 401K) that can be withdrawn in 5 years. Any earnings from the rolled over money have to wait till retirement.
is the employer contribution is taxed at time of withdrawal?
Yes
I am planning to leave to india for good and for a investor like me. Is it worth to invest in any 401k and if yes, can i access the money back from india and how?
I will be covering that as part of this US retirement series.
Roth will be beneficial if one wants to withdraw whole 401k at the same time irrespective of tax slabs. So a blend of both will be a good choice, so that we can withdraw any amount of money from Roth in a given year along with the benefits of pretax 401k
That too when passed on to kids.. they have to withdraw in 10 years. Having 401k or ira will be burden.
Hello Vijay Mohan! Is this true that the withdrawals are taxed as capital gains? As far as I know (and some articles confirms it) withdrawals from the traditional IRAs and 401(k)s are taxed at ordinary income rates not treated as capital gains. Can you confirm?
Yes. The capital gains that he referred to is for the brokerage accounts, which is your after tax money contributed, and it will not be taxed again. Pre-tax 401k or IRAs are taxed during withdrawal
@@jawethakther I know. My question is around taxed as capital gain vs ordinary income. That makes a huge difference. I don’t think it is taxed as capital gain. It is taxed as ordinary income.
@@Layachu yes.
Withdrawals from pretax 401K will be taxed like regular ordinary income as I shown in the episode. Withdrawals from brokerage will be taxed for the capital gains.
@@InvestmentInsightsEnglish Thank you! I have more ROTH 401k allocation than Trad 401k. Hence asked.
Can you make it practical and give fair comparison with social security? Also is combination of pretax and Roth be advantageous?
As I said in the episode, the social security and standard deduction will cancel off each the for the most part. You will not see much of a difference from social security income. A combination of pretax and Roth can definitely be advantageous depending on your needs. I will cover that in the next episode.
Great video!! Waiting for the second part!!
Please compare term insurance vs HCVLI (high cash value life insurance)
Tax rate is currently at the lowest historically and I think it’s naive to assume that it ll stay the same in 20 yrs time. That will potentially change the math. But fantastic explanation!
But what if I’m in California and paying 10% state tax and retire in Florida with 0% state tax? That is more certain to happen than the federal tax slabs going up by 10%.
Exactly my point too, with debt growing every year the question is will the tax rate stay the same?
@@SunalMittal I wrote a python script to adjust for inflation and calculate effective tax rates in history. For around 75-150k salary now, very few years had an effective rate more than the current marginal rate and when it was higher for a few years out of the 80 calculated, it was only a few % higher. So worst case scenario you were out 2-3% but if you now include like you said, moving to a low/no income tax state, you easily beat out that few %. Roth does have other benefits, like avoiding RMD's (which may not actually be a problem for most people because you planned on taking that $ or more out anyway). It does not count towards provisional income so it will save taxes on SS income and reduce what you would pay in medicare premiums. Also when you pass away, your beneficiaries need to withdraw that $ within 10 years so chances are they will be working when they pull it out so Roth obviously has the benefit in that scenario. I like to do a mix of both, Roth IRA and Trad 401k. I recently swapped to doing full Roth 401k but that is because I started really late with the Roth IRA so I am just trying to get to essentially catch up on my Roth %, eventually I will switch back to Trad 401k.