Roth 401(k)

He's 62.

He's married, retiring in somewhere between nine to 12 months, just about $2 million, $1.8 million in pre-tax IRAs and 401ks, 50,000 in a Roth 401k, 50,000 in an HSA, 500,000 in brokerage and 250,000 in money markets.

No debt whatsoever.

A nice little pension of $900 a month starting at 65, so in three years.

And I prioritized, I used my health savings account through Google.

I used the Roth 401k match, maxed out the Roth IRA.

And then everything else beyond that was just still plugging into the market.

And so big swings when you're entirely based in the market that it's not doing well, your wealth takes a hit, but then if it starts to accelerate, it quickly picks up.

So if you're only looking at one particular thing, and you don't have the skill set or you don't have the expertise or you don't have the resource group, people, whatever, to help explore those other things, you're obviously gonna be leaving money on the table.

Or just, like, a perfect example is, you know, somebody who says, "Oh, I heard somebody say that a Roth 401k's better than a traditional one, so I should do that." Maybe they're maxing out their 401ks.

So you got 24,000 bucks that's going into pre-tax.

All of a sudden you got two people that are doing f- you know, basically $50,000 that's into the Roth.

And I think we could add on to that and say, make sure that you're doing that in a way that grabs your employer match to the degree that you can and saves this money as tax efficiently as you possibly can.

Yeah, some kind of tax benefit, whether that is a tax deduction on the front end or the potential for tax-free growth in a Roth 401k or IRA.

And then we get to number three, which is earnings up, spending down.

I've heard that before.

We can do the Roth version too, right?

Yeah, and Roth 401k is very popular now too because people believe that maybe taxes will be higher in the future.

So Roth is no tax at all because you've paid it with after-tax money.

So the Roth 401k, you pay tax on it, but now it grows tax-free for the rest of your life.

What are some of the mistakes you see people making when it comes to 401ks?

I think, well, let's talk about the Roth 401k and the 401k.

The mistake I've seen is high income earners close to retirement doing the Roth when they should get the tax deduction on the pre-tax.

And then when they retire, lower tax bracket, maybe at that point start converting to Roth.

There's the traditional pre-tax option, which lowers your income dollar for dollar today, but you have to pay taxes down the road.

Then there's something now called the Roth 401k.

Many plans have this where you elect to pay taxes today in exchange for tax-free qualified withdrawals down the road.

So the question a lot of people is, Do I pay tax now or do I pay tax later? And not all is lost if you're behind and you're getting older.