open

How to Open a 401k: So You Don't Have to Work Every Day UNTIL YOU DIE



Sharing buttons:

how would you like to go to work every

day of your adult life until you got

that's what rich beef is by night and

pissing into a 401k my name is James

Travis and today I'm gonna help you open

your first 401k you're gonna learn how

to open up and if you don't I can also

teach you how to open up IRA

I've taught this as several of my

friends to not only help them open up an

account but to actually get money in

their investing so they can have in this

portion of the video I'm gonna be

talking about a 401k or a Roth IRA both

of which are retirement accounts and

they both offer huge benefits if and

only if you agree to save over the long

term with them we'll first start off by

talking about a traditional 401k a

traditional 401k allows you to

contribute pre-tax money into a

retirement account let's look at your

typical paycheck let's say you get

$1,000 for the work that you did this

pay period before you even see a single

cent uncle sam takes his cut and you get

whatever is left over let's keep

everything simple and that north state

and local taxes right now here's what

this may look like your check is one

thousand dollars let's say you get taxed

25% this leaves you with seven hundred

and fifty dollars of take-home income

that's what you have to live and pay

bills off of if you make any returns

investing with any post tax money you've

got to pay taxes on it all over again if

it's not in a Roth IRA because it's

short term let's say we invest a hundred

dollars and we return

ten dollars ROI if the tax rate is 20%

that means we actually take home eight

dollars so after all that is said and

done that means you bring home seven

hundred and fifty eight dollars and you

pay Uncle Sam two hundred and fifty two

dollars in taxes now let's compare that

to a 401k if you want to invest a

hundred dollars using a 401k you can

invest it before the taxes come out

what's better is if you make money the

money that you make isn't taxed the

money will keep piling up year after

year and you don't have to pay taxes to

it until your return

the only drawback is you can only

withdraw it once you turn 59 and a half

years old at that point you'll pay taxes

on the money that you've earned best of

all you'll even save some money on taxes

today since you're investing $100 of

pre-tax income to Uncle Sam you only

make $900 instead of a thousand so

you'll pay less money in income tax that

means you'll get taxed two hundred and

twenty-five dollars instead of two

hundred and fifty that means you take

home six hundred and seventy five

dollars plus the one hundred and ten

that you've made off investing meaning

that you now get seven hundred and

eighty-five dollars if you compare

investing the same money pre-tax versus

after taxes you're taking out you all

have a nine percent tax savings just

because we decided to invest pre-tax

instead of afterward what's even better

is our money has years and years to

compound tax-free after a thirty year

period you have the potential to earn up

to fifty percent more in your portfolio

companies offer a match will match a

certain percentage of how much money

that you put into your portfolio for

example some companies may match three

percent of your contribution to your

401k that three percent is three percent

of your paycheck so they're essentially

saying that they're going to double

three percent of your paycheck if you

choose to invest it you are literally

drawing away free money if you choose

not to do this let's talk about the

drawbacks now as I've already stated you

have to pay taxes and the money once you

would drive the max contribution you can

make sure your 401k currently is 19

thousand a year you'll also be charged a

big penalty of 10 percent if you would

draw before the age of 59 and a half

let's move on to a Roth IRA a Roth IRA

is just like a 401k except in Reverse

when you make money every year you have

to pay taxes on it with the Roth IRA you

can take this after-tax money and invest

it and pay no taxes when you withdraw it

the one drawback with a Roth IRA is that

you charge a 10% early withdrawal

penalty if you would drive before T we

are fifty nine and a half years old the

best part about Roth IRAs are there are

plenty of exceptions you can withdraw

principal or the amount that you

actually invested at any time penalty

free also exceptions are for down

payments on a home funding your

education for you your partner your

children your grandparent how many

grandchildren and some other emergency

reasons I'm not really here to argue the

benefits of Roth IRA vs. our 401k the

most important thing is to open up an

account and get started today so you can

enroll in your company's 401k other

companies handle it online so like I

said contact your HR department and they

should be able to walk you through the

process once it kind of set up and

you've already allocated your

investments you don't have to worry

about it as much you can monitor your

investments but this is something that's

very hands-off you probably only have to

look at it two times a year now you'll

finally have something to say when your

parents ask you about if you're saving

money or not truth be told if your

employer offers a 401k you are in the

minority of people only 14% of companies

offer a 401k for its employees so what

happens if you're part of that other 86%

you're gonna have to open up an account

on your own it won't be a traditional

401k where you might get the benefits of

having a company match but you'll still

have the opportunity to set money aside

every month and invest it so you can

grow your money over time if your

company does not offer a 401k I still

highly recommend that you have your own

Roth IRA because like I said earlier who

wants to work until they die not me I

want you to be able to live and work on

your own terms

especially in old age if your company

doesn't have its own 401k the link in

the description is for net benefits the

company that I use to manage my Roth IRA

I'm gonna walk you through on how to set

an account in this part of the video I'm

gonna show you how to set up your own

Roth IRA account I'm on fidelity's net

benefits website and I'm gonna choose

open a traditional IRA from here I'm

just gonna enter in personal information

there's a lot that I couldn't show you

because I'm not a brand-new member but

after that you just need to fund the

account and you're in the account it's

gonna look like this

[Music]

[Music]

I've heard differences between the 401k

and a Roth IRA how to open these

accounts depending on your situation now

that you finally open for retirement

account in my next video

I'm gonna show you step by step two ways

I had an abyss in those accounts I can't

wait to show you thank you so much for

watching if you like what you heard

please hit the like button for more

videos

of how the financial literacy for young

adults please hit the subscribe button