Sometimes, it’s hard to make financial sacrifices when the reward seems so far away. However, delayed gratification can be extremely beneficial when it comes to your finances. Eric talks about four situations when people may be tempted to choose instant gratification over a better long-term pay out.
(Click the featured times below to jump forward in the episode)
[1:10] 401(k) Match
- You can’t leave this money out there.
- David Bach, author of “The Automatic Millionaire,” says you have to pay your future self first.
- If your company has a match, you need to put at least enough in to get the match because this is free money.
- Eric gives an example of his son who is saving in a Roth account.
[3:40] Saving Only in Tax-Deferred Accounts
- You have to have tax diversification within your accounts. Taxable, tax-deferred, and tax-free money each have their place.
- If all of your retirement money is tax-deferred, then you’re at the mercy of tax rates.
- You don’t know what tax bracket you’ll be in when it’s time to retire.
- Having money that’ not subject to income tax is going to be a huge benefit later.
[6:53] Cashing Out Retirement
- Eric shares about a time in his youth when he cashed out stock for car upgrades.
- When you take the money out, you lose future growth, and it will be heavily taxed.
- Your retirement money is meant to support your life once you are in retirement.
- When you change jobs, make sure to roll over your 401(k) instead of cashing out your account.
[10:32] Working with the Wrong Advisor
- Consider who your advisor works for. The bigger firms may have sales managers that advisors answer to.
- If you work with a true fiduciary then you have full access to make your plan work toward your best interest.
Check out some other recent episodes
In part two of our series on the SECURE Act, we talk about some of the downsides to the changes. Eric explains the stretch IRA and what impact the SECURE Act made on it.Read More
What happens if you’ve maxed out your 401(k) contribution limit? When is a good time to make a Roth conversion? Eric answers three questions from the mailbag this week all pertaining to the options you have when it comes to saving for retirement.Read More
Are you considering making a move this year? When it comes to home buying or selling decisions, there are a lot of factors to consider. Eric answers a few questions from the mailbag related to real estate.Read More