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Nurses Guide to Navigating the Labyrinth of Retirement Plans · HPK Provident Advisors: The Weekly Bull

• 0:01
  Speaker 1: Well, nurses, welcome back to the nursing your nest egg podcast.
• 0:04
  Speaker 1: I'm Colin Harper, joined by my co-host, brian, as always.
• 0:07
  Speaker 1: Hello Colin, hello Brian, hey, it's a great day.
• 0:11
  Speaker 1: We're talking about 401ks, iras and everything in between.
• 0:16
  Speaker 2: We were.
• 0:17
  Speaker 1: there's a lot in between We were prepping for this podcast and, my God, there's so many different types of retirement accounts, so many different.
• 0:24
  Speaker 1: You know contribution limits and they change every single year.
• 0:27
  Speaker 1: And now in the world, do you know what you should be contributing to, what you have access to?
• 0:31
  Speaker 1: How does it all work?
• 0:32
  Speaker 1: I just get overwhelmed just looking at all these sheets we had put together and looking at all this stuff, i got like eight tabs open on my browser and that's not good for me.
• 0:39
  Speaker 1: I'm not a tabs kind of guy.
• 0:42
  Speaker 2: Well, there's a lot of moving parts.
• 0:44
  Speaker 2: You know, I would say I would suggest to you.
• 0:47
  Speaker 2: the popular financial press portrays this as very easy.
• 0:50
  Speaker 2: It's simple Put a little money in the retirement account.
• 0:56
  Speaker 1: We're talking about simple IRAs are you?
• 0:59
  Speaker 2: No, not yet.
• 0:59
  Speaker 2: And they?
• 1:00
  Speaker 2: those are relatively simple, but there's nothing simple about all of this in general.
• 1:07
  Speaker 2: Awesome, well, it's a huge topic.
• 1:09
  Speaker 1: Oh, absolutely, it's a huge topic And this episode we're going to try to demystify as much as we can about.
• 1:14
  Speaker 1: You know what plans you've access to at work, what individual IRAs, Roth IRAs, sep, simples, 401ks, four or three B's, all that good stuff.
• 1:22
  Speaker 1: We're going to try to make those letters make sense to you.
• 1:27
  Speaker 1: So why don't we dive right in and start with probably the term most people are?
• 1:34
  Speaker 1: well, i think there's two terms that people are most familiar with.
• 1:37
  Speaker 1: One would be 401k and one would be IRA.
• 1:40
  Speaker 1: Yeah, and let's unpack those two a little bit.
• 1:42
  Speaker 2: I would say let's step back, let's do it.
• 1:44
  Speaker 2: Why save for retirement at all?
• 1:50
  Speaker 1: That's a great point.
• 1:50
  Speaker 1: I've been trying to figure out how to net out at zero at that in my life and it's pretty tough.
• 1:57
  Speaker 2: Yeah, A lot of clients come to us and say Hey, you know, if my retirement was a car, I want to go squealing sideways and I'm just out of gas and the tires are bald and the doors all fall off on my last day And that's it.
• 2:11
  Speaker 2: That's all I got.
• 2:12
  Speaker 2: That's not real.
• 2:13
  Speaker 1: Well, like we always say financial planning becomes the easiest thing ever If you tell me when you're going to die, if you know what day you're going to die.
• 2:19
  Speaker 1: this is easy.
• 2:20
  Speaker 1: Oh, it's really easy stuff.
• 2:21
  Speaker 1: Well, thankfully the government has prescribed us an expiration date.
• 2:25
  Speaker 1: They have the IRS has life expectancy tables that, when we get into the distribution side of this, come into play.
• 2:31
  Speaker 1: So we can always go off those, but not always the most accurate.
• 2:36
  Speaker 2: No one knows when our time is going to be, but why should you say you know I'm like a lot of people with the government gives me an expiration date.
• 2:44
  Speaker 2: I want to go at least one day beyond that.
• 2:46
  Speaker 1: Absolutely.
• 2:48
  Speaker 2: If nothing else, that's the goal, exactly.
• 2:50
  Speaker 2: I don't really exercise because I want to look good on the beach.
• 2:53
  Speaker 2: I exercise because I want to beat the government at their expiration date.
• 2:56
  Speaker 1: Well, that makes sense.
• 2:56
  Speaker 1: Yeah, And well, i don't exercise because I've been working on my before picture for about five years now, so maybe once I make that switch, i'll get back on the exercise training.
• 3:05
  Speaker 2: Let's talk about why we say for retirement.
• 3:07
  Speaker 1: Why do it?
• 3:08
  Speaker 1: We're supposed to.
• 3:09
  Speaker 1: That's what everybody says.
• 3:09
  Speaker 1: You're supposed to do.
• 3:10
  Speaker 2: Well, that's true.
• 3:11
  Speaker 2: We go to the enrollment meeting when we go to a new job and they say, yeah, yeah, I got to save.
• 3:17
  Speaker 1: They and when they're selling those plans to employers, what they say is people who are set up for a successful retirement or have a better understanding of their finances are more saved or generally happier workers.
• 3:27
  Speaker 1: So that's another sign of it.
• 3:29
  Speaker 2: Yeah, that's a big part of it, that's true.
• 3:31
  Speaker 1: That's a big part of why companies have 401 case is to, you know, increase employee engagement and performance on the job versus, you know, actually saving for their retirement.
• 3:40
  Speaker 1: So why should say for their retirement, cause nobody else is going to do it for you?
• 3:43
  Speaker 1: That's the exact.
• 3:44
  Speaker 2: I mean, that's it.
• 3:45
  Speaker 2: That's, that's why that's exactly, you know, my favorite example.
• 3:47
  Speaker 2: Along those, a lot of people will come to us and say, gee, should I save for retirement or should I save for my children to go to college?
• 3:54
  Speaker 2: Your thoughts.
• 3:59
  Speaker 1: Well, both, but I would say retirement first and foremost, because you can save for retirement while simultaneously putting your kids through school.
• 4:10
  Speaker 1: But if you sacrifice, you know.
• 4:12
  Speaker 1: I saw used to be in a previous life.
• 4:14
  Speaker 1: I was a rock climbing guide, an outdoor guide.
• 4:16
  Speaker 1: I led backpacking trips, all sorts of stuff.
• 4:19
  Speaker 1: Right.
• 4:19
  Speaker 1: There's a very simple rule when you're leading trips like that, where other people's safety relies on you as the guide, Take care of yourself first, because if you're not there right, if you're not there to take care of your participants that are going rock climbing or on your hiking trip, if something happens to you, the safety of the group is actually severely jeopardized, because there might be people on this trip that don't even know how to put up a tent and now they're alone in the forest because you did something stupid and didn't take care of yourself.
• 4:50
  Speaker 1: So I would say the same thing when we're saving for retirement versus that question, do I say for retirement versus put kids through school?
• 4:58
  Speaker 1: you have to take care of yourself first, and then all the other great things happen from there.
• 5:05
  Speaker 1: So, first and foremost, you have to take care of yourself first before you can take care of others.
• 5:10
  Speaker 2: Without a doubt, And you know if you're not on an airplane that loses cabin pressure, put your mask on first.
• 5:15
  Speaker 2: That's right.
• 5:16
  Speaker 2: Yeah, it's not selfish.
• 5:18
  Speaker 1: Listen, i think, like I think the ox, i think the studies.
• 5:20
  Speaker 1: What are the studies on that?
• 5:20
  Speaker 1: Is the oxygen levels?
• 5:21
  Speaker 1: okay, like my crying babies would live if they didn't get the oxygen, or do they need the oxygen, is it?
• 5:26
  Speaker 1: just like a temporary pass out, or is it like a long term thing?
• 5:29
  Speaker 1: Cause obviously we want to.
• 5:30
  Speaker 1: We want to take care of the long term issues, but it might be a great way to get some peace and quiet from traveling with those kids.
• 5:36
  Speaker 2: I'm just saying Well, you're so young, you let me know.
• 5:40
  Speaker 2: You let me know.
• 5:41
  Speaker 2: My kids have all their devices and they travel very well.
• 5:45
  Speaker 2: Now They got movies and podcasts.
• 5:46
  Speaker 2: I tell you another thing about saving for retirement.
• 5:49
  Speaker 2: First, college.
• 5:50
  Speaker 2: In this specific example, you know you can borrow to send your children to college when you retire.
• 5:58
  Speaker 2: You don't get to walk into the bank and get a big fat loan and say I really, i really want to live a wonderful retirement, go to Florida and have an RV, give me a loan.
• 6:06
  Speaker 2: I've retired Doesn't work as well, no go.
• 6:10
  Speaker 1: Now, now that brings up a, I'm not even, no, I'm not going to skip over what I was thinking because I was going to say I was going to say when you get into retirement, it actually makes sense, depending on what the world looks like then.
• 6:22
  Speaker 1: Some of those larger purchases you're thinking about into retirement.
• 6:25
  Speaker 1: A lot of people are I just want to pay cash for everything, right, but say you're going to go get an RV in retirement.
• 6:30
  Speaker 1: It actually makes a lot of sense to finance that in some capacity, but that's way off topic.
• 6:36
  Speaker 2: It is off topic, we're going to leave that alone And it really doesn't change.
• 6:39
  Speaker 2: My thesis is that in general, you don't get to borrow for your retirement You can borrow for things in retirement, but you can't borrow for your retirement.
• 6:45
  Speaker 2: But you cannot borrow for your retirement.
• 6:47
  Speaker 1: Absolutely.
• 6:49
  Speaker 2: So you know this episode is really going to be about some of the details around it, but in general, you know, hey, what's happened is so.
• 6:56
  Speaker 2: My entire family grew up in Southwestern PA, out near where a lot of the steel mills were.
• 7:02
  Speaker 2: My grandfather and my mother's side was a steelworker.
• 7:05
  Speaker 2: And you know, when I was younger, growing up in the 70s and 80s pretty simple formula You work really hard, you get a bunch of vacation and then the day you retire they start sending you a check for the rest of your life.
• 7:18
  Speaker 2: That was called a pension And we don't see as much of that anymore.
• 7:23
  Speaker 2: Few and far between.
• 7:25
  Speaker 2: And there has been a philosophical shift from employers to government and in general, to, instead of the company taking care of you, you take care of yourself.
• 7:35
  Speaker 2: And we're going to talk about the ways that you can do that, some of the specific ways, different types of accounts and that kind of thing.
• 7:42
  Speaker 2: But I was an economic student when I was in college Adam Smith, one of the greatest economists of all time wealth of nations.
• 7:51
  Speaker 2: It was his famous book.
• 7:53
  Speaker 2: I will paraphrase, although he never actually said it in any of his works.
• 7:58
  Speaker 2: But I'll paraphrase what Adam Smith, one of the greatest economists of all time said if every individual takes care of themselves, the greater good will be taken care of.
• 8:06
  Speaker 2: So if you take care of yourself and you set yourself up for a great retirement, then those around you can be taken care of as well.
• 8:15
  Speaker 2: But that's going to require a whole bunch of short term sacrifice for long term gain.
• 8:20
  Speaker 2: Well, absolutely Got to have the vision of if I don't spend a dollar today and that's a bummer, hopefully at some point in the future that dollar grows to X dollars and I get to spend more money in the future.
• 8:33
  Speaker 1: Hopefully, Well, I hope so.
• 8:34
  Speaker 1: So we're saving for retirement, because Brian said so and that's a good enough reason for me.
• 8:40
  Speaker 1: But so let's say you've made that conscious decision that, hey, i need to save for retirement.
• 8:45
  Speaker 1: What's the best vehicle available to you to do that?
• 8:48
  Speaker 1: That's going to be very case specific, but let's talk about the popular ones, right?
• 8:54
  Speaker 1: Let's talk about one that I would argue everyone has access to in some capacity, and that's the IRA or the individual retirement account.
• 9:04
  Speaker 1: Is it the best option for your retirement?
• 9:09
  Speaker 1: That definitely depends, but I think it's one that everybody's familiar with.
• 9:13
  Speaker 1: So let's assume that somebody does not have access to a retirement plan at work and they're not self-employed.
• 9:21
  Speaker 1: The IRA really becomes one of your only retirement vehicle Of the formal IRS prescribed retirement accounts, Interestingly enough, just fun fact because, somebody will call us out on that.
• 9:37
  Speaker 2: Ira stands for Individual Retirement Arrangement, thank you.
• 9:40
  Speaker 2: According to the IRS tax code, that's true.
• 9:42
  Speaker 2: I know somebody was going to write in about that, so let's get that out of the way.
• 9:46
  Speaker 2: But everybody calls it an IRA Individual Retirement Account.
• 9:48
  Speaker 2: It's the same thing.
• 9:50
  Speaker 2: Yeah, i mean there's a lot of different ways to skin the cap, but of the formalized types of accounts, if you will that the IRS says hey, there are contribution limits.
• 10:02
  Speaker 2: Yeah, if you don't have a plan through work, any type of plan, whether it's your business or somebody else's business IRA becomes very, very important.
• 10:13
  Speaker 2: Unfortunately, for the IRA, the contribution limits aren't very high.
• 10:17
  Speaker 1: No, they're really, really not that high at all.
• 10:19
  Speaker 1: I mean, if we look at they just bumped up in 2023 to $6,500 per year with a $1,000 catch-up still.
• 10:27
  Speaker 2: Yeah, if you're 50 or older, you can add an extra 1,000.
• 10:29
  Speaker 1: So the grand scheme of things, that's not a massive number.
• 10:33
  Speaker 1: Certainly helps and certainly useful, but not a, you know, when we target saving 10% of a joint income probably not going to get you there For most, you know, dual income households probably not going to get you there with just your IRA.
• 10:52
  Speaker 1: So let's talk about a pretty common scenario.
• 10:54
  Speaker 1: We have folks with some combination between a 401k or a 403b at work and IRAs.
• 11:03
  Speaker 1: What's that interaction like and where does it make sense to pull resources towards right?
• 11:09
  Speaker 1: We talked in one of our last episodes of you know, financial planning is the efficient use of resources.
• 11:16
  Speaker 1: Really, how do we allocate those resources and time?
• 11:20
  Speaker 1: What makes the most sense?
• 11:21
  Speaker 1: split between your 401k and your IRA?
• 11:24
  Speaker 1: So why don't we maybe highlight some of the differences between the two, and I'll start with.
• 11:31
  Speaker 1: I think one of the biggest differences is contribution limits.
• 11:33
  Speaker 1: Big difference, Big difference in contribution limits.
• 11:37
  Speaker 1: So with a 401k and 403b and a few other plans share these same contribution limits.
• 11:42
  Speaker 1: Let me step in on the 401k.
• 11:44
  Speaker 1: Yeah, please do 403b.
• 11:46
  Speaker 2: So what is a 401k, 403b, 457 in general Where's our generalities?
• 11:51
  Speaker 2: here, for the most part.
• 11:53
  Speaker 2: And again somebody's going to write in and say well, that wasn't perfectly detailed enough.
• 12:00
  Speaker 2: But in general 401ks are for profit companies.
• 12:04
  Speaker 2: It is a retirement plan offered to the group of employees of for profit companies.
• 12:10
  Speaker 2: A 403b historically had been for non-profit companies.
• 12:17
  Speaker 2: Now a lot of the nurses out there that if you've been a nurse for long enough, you were probably in a health system that was a not for profit and you had a 403b And then at some point in time maybe they changed the structure or you changed your role where you went to a for profit company.
• 12:37
  Speaker 2: Now you have a 401k.
• 12:38
  Speaker 2: The 457 actually is for a lot of government employees.
• 12:42
  Speaker 2: Government employees I mean you can think about people in city hall, va, va, police you know they fire that type of thing.
• 12:50
  Speaker 2: They oftentimes have 457.
• 12:52
  Speaker 2: So what are these plans?
• 12:53
  Speaker 2: These are plans unlike a pension, where a pension they calculated for you based on years of service the 401k, the 403b, the 457, you put money into it out of your paycheck.
• 13:05
  Speaker 1: It's a defined contribution is what they call it.
• 13:08
  Speaker 2: It's your contribution.
• 13:10
  Speaker 2: going in there, you define what the contribution is.
• 13:12
  Speaker 1: And as long as your employer is a little bit friendly.
• 13:14
  Speaker 1: generally we see matching on that in some capacity.
• 13:18
  Speaker 1: Not always There doesn't have to be, but generally we do see some matching on your contributions.
• 13:23
  Speaker 1: For example, they may match 50 cents on the dollar, up to 5% or 6%, something along those lines.
• 13:29
  Speaker 1: Everywhere is a bit different as far as how they handle matching.
• 13:34
  Speaker 1: You know there's.
• 13:35
  Speaker 1: let's be honest, what's the goal of a 401k plan?
• 13:39
  Speaker 1: It's so higher level management and executives can stockpile as much money as possible for themselves.
• 13:46
  Speaker 1: I don't think you're allowed to No.
• 13:48
  Speaker 1: no, i didn't say that.
• 13:51
  Speaker 2: I mean generally.
• 13:52
  Speaker 2: Are you implying that some companies are provide incentives for higher level executives to make more money?
• 14:07
  Speaker 2: Sometimes, Now we'll have to think about it.
• 14:12
  Speaker 2: Maybe that's a different episode.
• 14:13
  Speaker 1: I think that might be a different episode.
• 14:15
  Speaker 1: But you know, kind of that being aside, you know we need to make sure that plan.
• 14:19
  Speaker 2: The CDOs make kind of the same amount of money as everybody else, right?
• 14:22
  Speaker 1: Well, that's how it works.
• 14:22
  Speaker 1: Yeah, yeah, that's how it works.
• 14:26
  Speaker 1: So when we're working at defined contribution plans, we got to make sure they're kind of balanced and there's what they call top heavy tests for those plans, and so that really skews a lot of the decisions made on the 401k for 3B level There are a lot of rules There's a ton of rules that go level with the playing field Definitely Across people, different levels of an organization.
• 14:47
  Speaker 2: They're certainly we kind of laugh about that, But the reality is there are a lot of rules built into that.
• 14:53
  Speaker 2: And you know your HR department's going to be responsible for minding those rules And essentially what the rules are is.
• 15:01
  Speaker 2: you know, everybody's going to kind of have a level playing field.
• 15:04
  Speaker 2: That doesn't mean everybody can contribute the same amount, yeah, but it should be kind of fair across the board.
• 15:10
  Speaker 1: Yeah, definitely So, if we look at contribution limits up to 22,500.
• 15:16
  Speaker 1: That's for 2023.
• 15:17
  Speaker 2: That's for 2023.
• 15:19
  Speaker 1: Went up a little bit from 22.
• 15:21
  Speaker 1: And then if you're over 50, there's a 7500 catch up contribution, which is much more than the thousand on the IRA.
• 15:28
  Speaker 1: So if you're over, 50,.
• 15:30
  Speaker 2: Now 401k is four or three B's, and 457 used to operate very differently, had different contribution limits and all those other things.
• 15:37
  Speaker 2: Thankfully, a few years ago, the IRS changed that contribution limits are very similar across the board.
• 15:42
  Speaker 2: They function in very similar ways, and so what Colin is saying is this is money out of your paycheck.
• 15:49
  Speaker 2: The maximum you can put in 2023, if you're under 50 is 22,500.
• 15:55
  Speaker 2: That's the money that you can put out in out of your paycheck, correct?
• 15:59
  Speaker 2: And if you're over 50, you can add an extra 7500.
• 16:02
  Speaker 2: So, in reality, if you're over 50, and you have 401k, 453, 403 B or 457 plan, if you're over 50, you can move money out of your paycheck up to the tune of $30,000 a year into one of these plans, which is pretty significant.
• 16:19
  Speaker 2: And now that's that gets to be real money as you're saving towards retirement.
• 16:22
  Speaker 1: Yes, definitely, and that's you know, a big bonus there of one of the few bonuses of getting older quicker is you know, catch up contributions, you know.
• 16:33
  Speaker 1: That being said, you also have the employer contributions side of it, exactly, and so that can.
• 16:38
  Speaker 1: So you make your contributions up to a maximum of 22,500 or 30,000.
• 16:43
  Speaker 1: Yep, i can do math or 30,000 if you're over 50.
• 16:47
  Speaker 1: Right, and then your employer can come in and make additional contributions of, to get you up to 66,000, before that catch up comes in.
• 16:57
  Speaker 2: That would be the most that comes out of your paycheck, plus whatever's added from your employer.
• 17:02
  Speaker 2: Can't go over 66,000.
• 17:03
  Speaker 1: Exactly, and every plan is a bit different, so you might not be able to get there, depending on the matching scheme and things.
• 17:08
  Speaker 2: Well, as you said, they don't have to put no, exactly They don't have to put in anything on your behalf.
• 17:13
  Speaker 1: A lot of places do, though, so it often so, so that.
• 17:17
  Speaker 1: so, when we started this, the differences between 401k, four, three B, 457 and IRAs is contribution limits are way higher.
• 17:24
  Speaker 1: Yes, so what are some of the the other benefits of 401k plans and, for four, three Bs, that that defined contribution space of retirement plans.
• 17:35
  Speaker 2: Well, i would say some of the other benefits.
• 17:36
  Speaker 2: it's already set up for you, absolutely.
• 17:38
  Speaker 2: I mean, if you go to an employer and they say we have a 401k, it's already there With an IRA.
• 17:44
  Speaker 2: you got to go set it up somewhere right, you got to go online.
• 17:47
  Speaker 2: You know we can set that up for you.
• 17:49
  Speaker 1: Certainly not that difficult anymore.
• 17:50
  Speaker 1: But still it's super easy.
• 17:51
  Speaker 1: It's a bit more of a barrier to entry.
• 17:53
  Speaker 2: You've got to proactively go and set up your own IRA.
• 17:56
  Speaker 2: Not a huge deal, yeah.
• 17:58
  Speaker 2: But you go to employer, you know, you go to your enrollment meeting and say, hey, how much you want to put in your form.
• 18:03
  Speaker 1: It's already set up.
• 18:04
  Speaker 1: We pick your beneficiaries for you.
• 18:05
  Speaker 1: It's your wife and then your kids If something happens to you it is, it's ready to go.
• 18:11
  Speaker 2: Yep Comes right out of your paycheck.
• 18:13
  Speaker 2: Very helpful, Definitely, You know.
• 18:16
  Speaker 2: We often say you know how people said it was, how much of that saved, you know, towards any given goal.
• 18:21
  Speaker 2: But let's, we're talking about retirement today.
• 18:23
  Speaker 2: We often say safe till it hurts And then come down from there.
• 18:29
  Speaker 1: Yep.
• 18:31
  Speaker 2: Now, that's easy to say in theory.
• 18:33
  Speaker 2: the reality of what most people do is they say well, i'll put a little bit of money in for a while, and as I make more money I'll put more in later.
• 18:40
  Speaker 2: It doesn't happen.
• 18:41
  Speaker 2: It doesn't happen.
• 18:42
  Speaker 1: So a lot of the online systems now will allow you to increase your annual contribution every year.
• 18:49
  Speaker 1: So I've seen a number of them when we're working with our clients to help them.
• 18:52
  Speaker 1: You know.
• 18:53
  Speaker 1: Look at investment options inside of 401ks.
• 18:56
  Speaker 1: There are some plans that will let you.
• 18:57
  Speaker 1: Every year, i want, to increase my contributions by 1% or something like that, and that's a good way to do it too.
• 19:03
  Speaker 1: Right Is set a schedule where, every year, you're going to increase contributions by a certain percentage as well.
• 19:09
  Speaker 2: And if your career is working out well, that really shouldn't be too damaging to your cash flow, because hopefully you're getting some raises along the way.
• 19:19
  Speaker 2: Definitely You're increasing the percentage that you're contributing out of your paycheck, And so that should work out pretty well.
• 19:28
  Speaker 2: If you're able to do that, i would still suggest save until it hurts and then reduce from there.
• 19:34
  Speaker 1: Definitely And then, kind of building on that, a 401k plans and you know the defined contribution plans are some of the least expensive investment options you have as a participant, right?
• 19:48
  Speaker 1: So it generally will be less expensive than having somebody manage an IRA for you, less expensive than your, you know, general run of the mill.
• 19:57
  Speaker 1: mutual funds and ETFs you can buy as a consumer because it's, you know, lumped under the plan and there's kind of bulk pricing for a lot of those investments Volume discounting.
• 20:06
  Speaker 2: Because you got so many people.
• 20:07
  Speaker 2: Definitely It's because everybody at your work, if you have access to a 401k, everybody else does as well.
• 20:14
  Speaker 2: So there's what I would call volume discounting.
• 20:17
  Speaker 2: They've got so many participants and oftentimes these plans are huge and costs do come down.
• 20:27
  Speaker 1: Definitely.
• 20:27
  Speaker 1: I mean that's the basics of some pros.
• 20:30
  Speaker 1: Cons of 401ks is your investment options are usually pretty limited, right?
• 20:35
  Speaker 1: You may have a, depending on the plan.
• 20:38
  Speaker 1: It's a very different plan to plan.
• 20:40
  Speaker 1: You may have a.
• 20:41
  Speaker 1: You know 20 investment options in there, 30 investment options in there.
• 20:46
  Speaker 1: You may have a hundred.
• 20:46
  Speaker 1: You know it's all depending on the plan and what it looks like and what your plan administrator chose to employ there.
• 20:52
  Speaker 1: But costs are generally pretty low.
• 20:54
  Speaker 1: So that takes us to kind of benefits of the IRA.
• 20:57
  Speaker 2: One of the cons is what I would also say that in the 401k is 403b, 457, retirement, retirement plans through work.
• 21:08
  Speaker 2: You're going to get very differing levels of guidance.
• 21:12
  Speaker 2: Oh, absolutely.
• 21:13
  Speaker 2: I mean, generally there's an employee meeting.
• 21:15
  Speaker 2: Sometimes you'll do it online, sometimes you'll do it in person and somebody will come in and say you know, hey, as a very general statement, if you're this type of investor, here's an idea for you.
• 21:25
  Speaker 2: Large cap growth, large cap value.
• 21:28
  Speaker 2: So you might not get that personalized guidance.
• 21:32
  Speaker 2: Again, it's your responsibility to put money into it.
• 21:35
  Speaker 2: Yep, and it becomes your responsibility as to how that is invested.
• 21:39
  Speaker 1: A lot of folks we meet with don't even know what they're invested in in their 401k.
• 21:43
  Speaker 1: They just thought you know it got.
• 21:44
  Speaker 1: A default was chosen for them when they signed up and that's it, never changed.
• 21:49
  Speaker 2: Yeah, if you don't make a specific selection, don't make a selection for you.
• 21:53
  Speaker 1: Oftentimes, Definitely, and there's not really anybody at the plan level that is allowed to help you with that decision, because ultimately it's your decision Now.
• 22:01
  Speaker 1: So that's something to think about there too, and it's important to, if you have no idea what your investment plan is and probably a good idea to check it out maybe get some advice on that from somebody outside of your plan that's able to provide that sort of advice to you.
• 22:17
  Speaker 1: But so that's.
• 22:20
  Speaker 1: That's a general thing about 401ks, those defined contribution plans.
• 22:24
  Speaker 1: When you compare that to an IRA, the investments are usually a bit more expensive but you have a much wider universe available to you of investment choices, which is often why you see a lot of folks right, they always talk about 401k rollovers.
• 22:37
  Speaker 1: It's a big, big term.
• 22:38
  Speaker 1: You see a lot of folks in that space with 401k rollovers that you know have decided that they would like some more care and ongoing maintenance of their investment accounts.
• 22:48
  Speaker 1: They want they don't want to do it themselves, they want somebody to take that over, which is the reason for a lot of transfers out of 401ks, once you kind of separate from service there.
• 22:59
  Speaker 2: That's a huge decision.
• 23:00
  Speaker 2: There's a lot of decisions.
• 23:01
  Speaker 2: You know a lot of things you really need to factor in there.
• 23:05
  Speaker 1: We can always tell how big a decision is by how many disclosure pages have to get handed out.
• 23:08
  Speaker 1: whenever that point comes, it's going to be one of the biggest decisions you can make if we go by that, but you know there are.
• 23:19
  Speaker 2: well, let's talk about IRAs in general then.
• 23:21
  Speaker 2: that's kind of comparing contrast, perfect.
• 23:24
  Speaker 2: So IRAs you set up on your own.
• 23:26
  Speaker 2: there are contribution limits, as Colin had mentioned.
• 23:28
  Speaker 2: this year You can put $6,500 into a traditional IRA.
• 23:32
  Speaker 2: Let's start out with that.
• 23:34
  Speaker 2: 50 year older you can add an additional $1,000.
• 23:37
  Speaker 2: The way traditional plans or IRAs work is you get potentially potentially that's my caveat you get a tax deduction on the way in.
• 23:46
  Speaker 2: Those monies grow tax-affirred And if you follow all the rules when you take the money out, you can take that money out at your income tax rate.
• 23:59
  Speaker 2: If you take it out too early it could be a penalty.
• 24:02
  Speaker 2: There's incentives to leave it in there as you get closer to retirement.
• 24:06
  Speaker 2: Generally it's 59 and a half.
• 24:07
  Speaker 2: There are exceptions to that.
• 24:09
  Speaker 2: After the age of 59 and a half you can take it out without the additional 10% penalty, but you will get taxed on.
• 24:15
  Speaker 2: The question becomes can you deduct it?
• 24:20
  Speaker 1: That's a great question.
• 24:21
  Speaker 1: It's all based on that That depends a lot on.
• 24:26
  Speaker 1: So the first factor that's going to dictate whether or not you can get a deduction on an IRA is are you covered by a employer-sponsored retirement plan?
• 24:37
  Speaker 1: So does your employer offer any retirement plan?
• 24:40
  Speaker 1: If the answer is yes, then income limits apply to the deductibility of your IRA.
• 24:47
  Speaker 1: And now there are separate limits for deducting a traditional IRA and what they call the Roth phase-out, where you can make a Roth IRA contribution.
• 25:00
  Speaker 1: So when we're looking at that, first ask yourself am I covered by a plan at work?
• 25:05
  Speaker 1: And that's at any point during the year where you're covered by a plan at work.
• 25:10
  Speaker 1: So if it's, you became eligible December 15th to participate in your company plan, even if you decided not to participate in it.
• 25:20
  Speaker 1: That counts as the whole year.
• 25:21
  Speaker 1: And when we look at those limits, if you are single or head of household and your you know modified adjusted gross income is 83,000 or more, you can't take a deduction.
• 25:38
  Speaker 1: If it's between 73 and 83, you'll get a partial deduction.
• 25:44
  Speaker 1: That's kind of prorated, depending on where you fall inside that bracket.
• 25:47
  Speaker 1: And if you are married, filing jointly and these are for traditional IRAs.
• 25:54
  Speaker 2: Again, if you were, the deductibility of the traditional IRAs exactly it's 136,000 or more, there's no deduction.
• 26:01
  Speaker 1: Now, interestingly enough, you can always make a non-deductible IRA contribution, which you got that we're getting in the weeds there And that's a bit of an advanced strategy for folks who are specifically searching for something called a backdoor.
• 26:14
  Speaker 1: Roth is where we see it utilized the most And we're not.
• 26:17
  Speaker 1: That's not really in the scope of today, but know that you can always make an IRA contribution.
• 26:21
  Speaker 1: The question is whether it's deductible or not.
• 26:24
  Speaker 1: Absolutely Yeah, so you can always make an IRA contribution, traditional IRA.
• 26:27
  Speaker 2: Correct And we've got it Yeah.
• 26:29
  Speaker 1: Yeah, they get.
• 26:30
  Speaker 1: They get very angry if you make a Roth contribution and you're over the income limit.
• 26:33
  Speaker 1: So the Roth contribution limits are much higher.
• 26:39
  Speaker 1: For where you can make a Roth IRA contribution, you know you have to make less than 218,000 of modified adjusted gross income.
• 26:50
  Speaker 2: And that's married filing jointly.
• 26:51
  Speaker 1: Yeah, that's married filing jointly.
• 26:52
  Speaker 1: And then if you're going for single head of household, you know less than 138,000.
• 27:00
  Speaker 1: And those go up a little bit on those scales.
• 27:03
  Speaker 1: You can make partial Roth contributions up to 153,000 for married filing separately or head of household single, and you can make contributions up to 228,000 for married filing jointly.
• 27:15
  Speaker 1: but it kind of gets prorated between 218 and 228 for those married filing.
• 27:19
  Speaker 2: Can't do the full contribution.
• 27:20
  Speaker 2: Can't do the full contribution In those income ranges.
• 27:23
  Speaker 1: So that's so.
• 27:24
  Speaker 1: the question is well, where do you put your money?
• 27:26
  Speaker 2: Right, i have access, say well, we heard on the IRAs, most people say how will I know?
• 27:31
  Speaker 2: I mean, you know I've got to wait till December 31st, till all my income comes in.
• 27:37
  Speaker 1: Where am I at?
• 27:38
  Speaker 2: on that range.
• 27:39
  Speaker 1: And that's a great question.
• 27:40
  Speaker 1: Most people wait until they do their taxes because you have until the tax deadline to make a prior year contribution, and that's one of the reasons they did it right, because you wouldn't know what your AGI number is until you do your taxes.
• 27:52
  Speaker 2: So, yeah, then you can know what you are, what you can contribute Absolutely.
• 27:59
  Speaker 1: So, if we take this just quick overview, you know those 401k, four or three B's IRAs, how they all work together.
• 28:09
  Speaker 1: Well, one.
• 28:09
  Speaker 1: It's going to be different for everybody because not everybody has access to all of them.
• 28:12
  Speaker 1: But say, i have access to a 401k as my primary means of retirement savings.
• 28:20
  Speaker 1: In my opinion and Brian, let me know if you agree with this, but in my opinion that's kind of the lowest bar of entry, right, it's the easiest thing to do, it's the most.
• 28:33
  Speaker 1: Set it and forget it.
• 28:34
  Speaker 1: It's hard to argue, especially if there's a match.
• 28:38
  Speaker 1: Exactly, i mean, if there's a match, it's an absolute no brainer, that's free money.
• 28:42
  Speaker 1: If, like, somebody comes to me and they're not contributing, at least up to the match, we need to have like a little come to Jesus meeting and really have a talk about And.
• 28:50
  Speaker 1: That's only the beginning.
• 28:51
  Speaker 1: And that's only the beginning And that's you know.
• 28:54
  Speaker 2: Because the match is I mean, it's free money It's free money.
• 28:57
  Speaker 2: They're contributing on your behalf based on your salary and the percentage that they're going to kick in for you.
• 29:03
  Speaker 2: How many times have we had somebody come to us and they say, oh, i put the maximum into my 401K.
• 29:08
  Speaker 2: Here's more percent.
• 29:09
  Speaker 2: What they're talking about there is what the match is Exactly.
• 29:14
  Speaker 2: That's what the maximum, the maximum, are all those numbers that we had talked about.
• 29:18
  Speaker 2: That's how much they get matched.
• 29:20
  Speaker 2: That's not the maximum.
• 29:21
  Speaker 1: No, no, not the maximum.
• 29:23
  Speaker 2: But you were going down a path that I agree with completely.
• 29:25
  Speaker 2: We talk about the efficient allocation of limited resources, money being limited.
• 29:30
  Speaker 2: If somebody says, hey, i can only figure out how to save $10,000 from my household into for retirement this year again everything's case dependent, but as a general rule it's going to the company plan.
• 29:47
  Speaker 1: Yeah, why not?
• 29:48
  Speaker 1: It's already set up.
• 29:48
  Speaker 1: It's easy.
• 29:49
  Speaker 1: Make a couple adjustments there, online, usually, to make any changes there.
• 29:53
  Speaker 1: I would say that.
• 29:55
  Speaker 1: Now one caveat I'd like to throw in there and to money up the waters even more a lot of plans, a lot of 401k plans, now have Roth options inside of them.
• 30:05
  Speaker 1: Should folks listening, should the nurses listening here?
• 30:09
  Speaker 1: should they consider a Roth option in 401k plans, now that a lot of them are getting offered?
• 30:15
  Speaker 1: And interestingly, they just changed this?
• 30:17
  Speaker 1: But employer contributions can now be Roth contributions, which until this year was not the case.
• 30:23
  Speaker 2: Now employer contributions had to go on the traditional side, but now employer contributions can all go to Roth.
• 30:29
  Speaker 2: Yeah, so you got your contributions out of your paycheck plus what your employer, if they do have a match, all Roth.
• 30:37
  Speaker 1: Yeah, definitely.
• 30:38
  Speaker 1: I mean, in my opinion, i'd rather bite the bullet, pay the taxes on the money now, which is what a Roth is.
• 30:43
  Speaker 1: You've already paid the money on, you've already paid taxes on the money going into the Roth portion, but then it grows tax-free and it comes out tax-free later And there's some caveats there.
• 30:52
  Speaker 1: The growth has to be in there at least five years for it to qualify for that.
• 30:56
  Speaker 1: Yeah, yeah, yeah, a couple other things, but that's my opinion.
• 30:59
  Speaker 1: 59 and 1 half, and I would say for a lot of folks that decision makes sense, but certainly something to at least look into and see whether or not your plan offers a Roth 401k.
• 31:09
  Speaker 2: I would agree, colin.
• 31:12
  Speaker 2: have you come across a scenario or a client who has come to us and say, jeez, I wish I didn't do that, roth?
• 31:21
  Speaker 1: No, no, i thought about it for a minute just to make sure I wasn't mis-speaking, but I no, gee, i wish I didn't have that tax-free bucket of money.
• 31:28
  Speaker 1: I have made the decision.
• 31:30
  Speaker 1: I love taking these required minimum distributions that are painful come tax time.
• 31:34
  Speaker 1: I loved it Yeah.
• 31:34
  Speaker 2: I love paying all that tax when I take money out of my traditional IRA.
• 31:39
  Speaker 1: And for those of you who don't know, if you have traditional IRAs, traditional 401ks, they're taxed the same.
• 31:44
  Speaker 1: There's what they call a required minimum distribution And that's money that the IRS dictates has to come out at a certain age every year, and that's been changing a lot in the last couple years.
• 31:54
  Speaker 1: So we don't date the podcast.
• 31:57
  Speaker 1: I won't just throw the current age out there.
• 31:59
  Speaker 1: Fair enough, it's gone from 72.
• 32:01
  Speaker 1: And it's going to be 75.
• 32:03
  Speaker 1: It started at 70.
• 32:04
  Speaker 1: And now we're up to about 75 here not too long.
• 32:06
  Speaker 1: So depending on when you, how old?
• 32:08
  Speaker 1: you are, how old you are, and the birthdays and all that good stuff.
• 32:10
  Speaker 1: So let's simplify.
• 32:13
  Speaker 2: The difference between traditional and Roth is when you pay the taxes.
• 32:16
  Speaker 2: Oh, absolutely Yeah.
• 32:17
  Speaker 2: Do you pay the taxes on the way in?
• 32:19
  Speaker 2: Do you take money and tax it right now?
• 32:23
  Speaker 2: Put it in, that's Roth.
• 32:24
  Speaker 2: You put it into a Roth, go to gross tax deferred.
• 32:27
  Speaker 2: If you follow the rules, you don't pay taxes on it, conversely with the traditional.
• 32:32
  Speaker 2: When do you pay taxes?
• 32:33
  Speaker 2: Well, you get a deduction now, yep.
• 32:35
  Speaker 2: So you don't pay taxes on the money right now.
• 32:38
  Speaker 2: going in, it grows tax deferred.
• 32:39
  Speaker 2: But you got to pay taxes later And those things can be done in combination, obviously.
• 32:46
  Speaker 1: Definitely.
• 32:47
  Speaker 2: But before that's, also with the 401Ks, 403bs, you can divert some monies towards the traditional version of that, divert some monies in the same year to the Roth version of that.
• 32:59
  Speaker 2: But going back to kind of the general idea, if you have a limited amount of money in your budget they can go towards retirement.
• 33:09
  Speaker 2: Oftentimes, very often, the first step, the first stop, first step, is with a company plan.
• 33:19
  Speaker 1: Yeah, don't let the door hit you on the way out right, It's right there.
• 33:21
  Speaker 2: It's pretty hard to miss.
• 33:24
  Speaker 1: So yeah, I'd say that's a general rule.
• 33:26
  Speaker 1: I can't think of a time I recommended somebody not participate in their company's 401k.
• 33:36
  Speaker 2: No, that would be no, And I don't really see a scenario.
• 33:39
  Speaker 1: I mean it's possible, but I don't really see a scenario where that's a likely occurrence.
• 33:44
  Speaker 2: But I don't get it.
• 33:44
  Speaker 2: It's kind of it's always possible.
• 33:46
  Speaker 2: It's like healthcare.
• 33:47
  Speaker 2: You've got that very unique patient 99% of the time if they have these symptoms and this is their health profile and age this is the way you do it, but there's that 1%.
• 33:58
  Speaker 2: they're like well, this one's gotta be a little bit different.
• 34:01
  Speaker 1: Well, Mary came in and she was a bit difficult, so we steered her away.
• 34:04
  Speaker 2: no, And there's some other types of plans, depending on the size of your employer.
• 34:10
  Speaker 2: There are what are called SEP IRAs, which stands for Simplified Employee Pension.
• 34:16
  Speaker 2: This is a little bit different than a 401k403B, 457, and IRAs.
• 34:21
  Speaker 2: It's a little bit different in the sense that your employer makes the contributions.
• 34:27
  Speaker 1: Oh yeah, it makes quite a bit of difference.
• 34:28
  Speaker 1: So let's move out of the typical.
• 34:31
  Speaker 1: You're working for a major healthcare system, maybe something a bit.
• 34:34
  Speaker 1: Maybe you're an independent contractor.
• 34:38
  Speaker 1: You get 1099 income.
• 34:39
  Speaker 1: That changes the world drastically when it comes to retirement plans, or you might be.
• 34:44
  Speaker 2: there's not as many of them, but there are still healthcare practitioners that are not affiliated with a huge healthcare conglomerate And it might be an office of a few physicians, some nurses, some staff, and they are truly independent.
• 35:01
  Speaker 2: That's where the SEP IRA might come in.
• 35:03
  Speaker 1: Yeah, see a lot of SEPs there.
• 35:04
  Speaker 2: There also might be a simple IRA With the SEP.
• 35:09
  Speaker 2: Your employer makes your contributions, you don't make contributions, and that's based on a percentage of your income.
• 35:14
  Speaker 2: And then the simple IRA, which stands for Savings Incentive Match Plan for employees.
• 35:22
  Speaker 2: That's simple, somewhat similar, similar to the 401ks and 403b's in the sense that you make the contributions out of your paycheck.
• 35:32
  Speaker 2: In 2023, if you're under 50, you could put 15,500 into those.
• 35:38
  Speaker 2: There is a catch-up contribution for 50 or older, an additional $3,500.
• 35:44
  Speaker 2: So those limits are similar to 401ks, 403b's, 457s in the sense that you take money out of your paycheck and put it in there, but the contribution limits are lower.
• 35:54
  Speaker 2: Yeah, i think that makes a big difference.
• 35:55
  Speaker 1: I mean, really, at the end of the day, there are a ton of different letter combinations and names and types of accounts, but it's really the basics, right.
• 36:06
  Speaker 1: It's the fundamentals that matter.
• 36:07
  Speaker 1: It's saving an appropriate amount for your goals, right, and we can help you gather that.
• 36:14
  Speaker 1: And there's a billion and a half calculators online that'll tell you how much you need to save to and sell you something else while they're doing it Right.
• 36:20
  Speaker 1: So there's a ton of different calculators, but it really comes down to picking the vehicle, sticking with it and being consistent.
• 36:27
  Speaker 1: I don't think there's any rocket science People kind of get caught up in well, what do I have to do to maximize my 401k?
• 36:32
  Speaker 1: What do I have to do to maximize my IRA?
• 36:34
  Speaker 1: Just put money in it and pick suitable investments.
• 36:37
  Speaker 1: Like.
• 36:38
  Speaker 1: It's not rocket science, right?
• 36:39
  Speaker 1: We're here to kind of demystify this.
• 36:41
  Speaker 1: I think that was one of our biggest reasons we wanted to do this episode early on is we have so much confusion?
• 36:47
  Speaker 1: And then, another thing I'll mention too is, like some retirement systems refer to it as an annuity.
• 36:53
  Speaker 1: So like annuity is a term that gets thrown around often in retirement.
• 36:57
  Speaker 1: That kind of muddles things up a little bit, because annuity can have a number of different meetings, but no matter what retirement plan you have, if you take the basics to heart and the fundamentals, you can tribute an appropriate amount of your income, appropriate percentage every year.
• 37:12
  Speaker 1: You pick suitable investments based on your risk and your time horizon, and you're consistent with it.
• 37:17
  Speaker 1: I think you're gonna do great.
• 37:20
  Speaker 1: That's my thought on the whole process.
• 37:22
  Speaker 2: Save as much as you can, as often as you can, give yourself as much time as possible towards whatever that goal is.
• 37:29
  Speaker 2: We're talking about retirement today.
• 37:30
  Speaker 2: Save as much as you can, as often as you can Give yourself plenty of time before you get there and figure out how to do it in the most tax friendly way, whether that's tax friendly, right now or later.
• 37:40
  Speaker 2: I love it.
• 37:41
  Speaker 2: That's it.
• 37:42
  Speaker 2: That is the whole thing.
• 37:44
  Speaker 2: That's it.
• 37:45
  Speaker 1: It's pulling.
• 37:45
  Speaker 1: the whole episode boils down to that, and then one other secret tip for wealth that I have is stay single and don't have kids.
• 37:56
  Speaker 1: Financial wealth, but not emotional wealth.
• 37:59
  Speaker 1: Kristen, if you're listening, i'm very happy.
• 38:01
  Speaker 2: We made our choices, we did right.
• 38:05
  Speaker 1: But so, joking aside, it's not rocket science.
• 38:07
  Speaker 1: Don't let all these different retirement plans and these decisions, don't let them paralyze you from action.
• 38:13
  Speaker 1: I think that's analysis paralysis.
• 38:16
  Speaker 1: We don't want that.
• 38:17
  Speaker 1: We want you to take suitable action based on your scenario, whether that's with our help or without our help, but just get educated enough to make sure to feel good about the decisions you're making and then commit to it and set it and forget it.
• 38:30
  Speaker 1: You know, it's one of those.
• 38:31
  Speaker 1: It's the nice thing.
• 38:32
  Speaker 1: That's the nice thing about those work retirement plans especially is we don't have to really think about them.
• 38:36
  Speaker 1: Take care of themselves.
• 38:37
  Speaker 1: Money comes out of the paycheck, goes in there, gets invested, and it has one of the.
• 38:42
  Speaker 1: You know, one of the best strategies to long-term investing there is, and that's called dollar cost averaging, where you know you're gonna invest money in the market when it's up, when it's down, when it's sideways, but that what that does effectively is even out that graph in those ups and downs.
• 38:59
  Speaker 2: It helps.
• 39:00
  Speaker 1: It helps it really helps smooth out some volatility.
• 39:02
  Speaker 1: But that's my song and dance for all you nurses out there.
• 39:07
  Speaker 1: You know, don't let these decisions overwhelm.
• 39:09
  Speaker 1: You, don't get burdened down with trying to make the perfect decision.
• 39:13
  Speaker 1: You know, oftentimes just having a basic plan, sticking to it and following it through will have a monumental impact on your success down the road, 20, 30 years from now, even 10 years from now.
• 39:24
  Speaker 1: You know there's a lot of things you can do right now that will impact the future, and they're not nearly as complicated as you may think, and that's what we're here to help with.
• 39:33
  Speaker 2: Yeah, we pride ourselves on simplifying things, taking a lot of the lingo and then 401K, 403B, 457, simple SEP, IRA and all those other things and simplifying it to a specific case, specific individual.
• 39:51
  Speaker 2: We had talked about in our last episode that there's so much lingo in the financial services.
• 39:57
  Speaker 2: A lot of people like to throw out these big words that are really very simple concepts and when they throw out the big words, it makes them look very important and smart, but it's confusing.
• 40:06
  Speaker 2: We like to simplify it.
• 40:08
  Speaker 2: So if there's any questions along those lines, how does my plan work?
• 40:13
  Speaker 2: What makes sense for me?
• 40:14
  Speaker 2: We might be able to give you a little bit of guidance on that in a very simple, approachable way, definitely, so.
• 40:21
  Speaker 2: Save as much as you can, as often as you can, give yourself plenty of time and do it the most tax friendly way.
• 40:27
  Speaker 2: And like Brian said, save for retirement, because nobody else is gonna do it for you.
• 40:32
  Speaker 2: Because nobody else is gonna do it for you.
• 40:35
  Speaker 1: We will catch you all next time.
• 40:36
  Speaker 1: Thanks so much for joining us today.
• 40:38
  Speaker 1: Be safe.