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3 Legged Stool of Retirement Planning: Social Security Plan / Pension Plan / Investment Plan

– One of the most fundamental concepts in retirement planning is the concept of the three-legged stool. We're gonna get into that in this video. (upbeat music) So what is this three-legged stool? Maybe you've heard about
it, maybe you haven't, but just go ahead and
imagine a three-legged stool. Now, for a three-legged stool to work, it's not a four-legged stool,
it's a three-legged stool, for it to work, every one of those legs has to be perfectly aligned. If you shorten one, what's gonna happen? You're gonna tip over, right? If you make one too long,
you're gonna tip over. Same thing goes for retirement planning. And what the three-legged stool is is three different things.

Leg number one is Social Security, and almost everyone has
it in the United States. There's a few pension plans
that made you opt out, but, for the most part, almost everyone has that first leg. And there's a lot of people
who don't have the other two, which makes retirement a little tricky. But the first leg is Social Security. A lot of times, people say, okay, yeah, I know about Social Security, I can take it at 62 or 66 or 70 or whenever it is. Well, yes and no, because it depends, when you should take your Social Security depends on a few different factors. And we've done some
videos on Social Security, and we're gonna go ahead
and link it up here. So if you wanna find out
when you should take it, you can go ahead and click that. But it also depends on the other two legs. The second leg is guaranteed income. And traditionally, the guaranteed
income came from pensions.

Well, as you know, not many people today have pensions. Back in the 50s and 60s and 70s pensions were very common to have. Now, they've become less and less common. Why? Because people are living too long. And because they're living so long, that's what can hurt a
pension plan, longevity. And because not many
people have a pension plan, sometimes they'll look for other forms of guaranteed income. Some people will use annuities, some people will use life insurance, some people will use some type of guaranteed CD or something like that. But they'll use that as
their guaranteed second leg. And the third and last
leg is retirement savings. So this will typically come from IRAs or 401(k)'s, or just money that you've saved up throughout your life towards retirement.

And so that leg is pretty
commonly neglected. People say, well, I've done
a really good job at saving, or I've earned a lot of money, or my interest rate is really good. And they think that that's
all they need for that leg, but that's not true. That leg is the most
important part to adjust based on where the other two legs are. So my recommendation is take a look, and you wanna make sure that your pension leg, your Social Security leg, and your retirement asset leg all match up so you have a
balanced three-legged stool.

A lot of financial advisors don't really talk about the other two because they don't really
get paid on it, right? Most financial advisors get paid on the money that they manage, so the other two are more of a burden. But to have a true retirement plan, you need to make sure
that all of those line up. And sometimes the account that earns the most in your investments is not the one that will keep the rest of your plan balanced. So my recommendation is, if you haven't looked at how all three of those legs combine, look for a financial advisor, and say I want the three-legged stool, and figure out how that fits
in to your retirement plan.

Thank you so much for watching my video. If you wanna see more, you
can click here to subscribe, or you can click right here for a video that YouTube
will think is best for you. It's their algorithm,
don't blame me for it, but I hope you enjoy..

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10 Essential Tips for Successful Retirement Planning

Hello and welcome to our channel. 
Today we will be discussing the   top 10 tips for retirement planning.
Before we get started, it's important   to note that retirement planning is a personal 
journey and what works for one person may not   work for another. It's important to take the time 
to understand your own financial goals and needs,   and to seek the advice of a financial professional 
if you have any questions or concerns.
  As always, make sure to Like and 
subscribe to the channel to stay   up-to-date on all of the latest news.
Now, without further ado, let's dive   into our top 10 tips for retirement planning:
Number 1. Start saving early. The earlier you   start saving for retirement, the more time your 
money has to grow through compound interest.

Even   if you can only save a small amount each month, 
it's important to start as early as possible. By   starting early, you may be able to retire earlier 
or have more flexibility in your retirement plans.   It's also important to increase your savings 
over time as your income and expenses change.
  Number 2. Contribute to a 401(k) or 
other employer-sponsored retirement plan.   Many employers offer 401(k) plans or 
other retirement savings plans that   allow you to contribute a portion 
of your salary on a pre-tax basis.   This means that the money you contribute to your 
401(k) is not subject to income tax at the time   of contribution, which can help you save more for 
retirement. These plans often come with employer   matching contributions, which can be an excellent 
way to boost your retirement savings.

For example,   if your employer offers a 50% match on your 401(k) 
contributions up to 6% of your salary, and you   contribute 6%, your employer will also contribute 
3% of your salary to your 401(k). It's important   to contribute enough to your 401(k) to take full 
advantage of any employer matching contributions.
  Number 3. Consider a Traditional or Roth IRA. If 
you don't have access to an employer-sponsored   retirement plan, or if you want to save more 
for retirement on top of what you're already   saving through your employer plan, you may want 
to consider opening a Traditional IRA or a Roth   IRA.

These are both individual retirement accounts 
that allow you to save and invest for retirement   on your own. A Traditional IRA allows you to 
contribute on a pre-tax basis, similar to a   401(k), but the contributions are tax-deductible. 
A Roth IRA allows you to contribute after-tax   dollars, but the money grows tax-free and 
can be withdrawn tax-free in retirement. Both   Traditional and Roth IRAs have annual contribution 
limits, so it's important to be aware of these   limits when making your contributions.
Number 4. Diversify your investments.   It's important to diversify your investments in 
order to spread out your risk and potentially   increase your chances of earning a return. This 
can be done by investing in a mix of asset classes   such as stocks, bonds, and cash. Within each 
asset class, you can also diversify by investing   in a variety of individual securities such as 
different types of stocks or bonds. For example,   you could invest in large, medium, and small 
company stocks, as well as international stocks.   This type of diversification can help reduce the 
impact of market fluctuations on your portfolio.
  Number 5.

Understand your risk tolerance. 
Different investment strategies come with   different levels of risk, and it's important to 
understand your own risk tolerance when planning   for retirement. If you're not comfortable 
with a lot of risk, you may want to focus   on more conservative investments such 
as bonds or cash. On the other hand,   if you're willing to take on more risk, you may 
want to invest a larger portion of your portfolio   in stocks. It's important to find the right 
balance for your own situation and to review   your investment strategy regularly to ensure 
it aligns with your goals and risk tolerance.
  Number 6.

Rebalance your portfolio regularly. 
As you get closer to retirement, it may be a   good idea to rebalance your portfolio to be more 
conservative. This can help reduce the potential   for loss as you near retirement and need to 
start withdrawing from your savings. Rebalancing   involves selling some of your higher-risk 
investments and buying more conservative   investments in order to bring your portfolio back 
into alignment with your desired asset allocation.   For example, if you originally had a 60/40 
asset allocation (60% stocks, 40% bonds),   but the value of your stocks has increased 
significantly, you may want to sell some   of your stocks and buy more bonds in order to 
bring your portfolio back to a 60/40 allocation.   Rebalancing should be done on a regular 
basis, such as annually or every few years,   to ensure that your portfolio stays in 
line with your goals and risk tolerance.
  Number 7.

Consider working with a financial 
advisor. A financial advisor can help you   develop a retirement plan that aligns with 
your financial goals and needs. They can help   you understand your options and make informed 
decisions about your retirement savings. They   can also help you create a financial plan that 
takes into account your current and future income,   expenses, and debt. Working with a financial 
advisor can be especially helpful if you have a   complex financial situation or if you're not sure 
where to start with your retirement planning.
  Number 8.

Plan for healthcare expenses. Healthcare 
expenses can be a significant factor in retirement   planning, especially as you age. It's important to 
consider how you will pay for healthcare expenses   in retirement, whether that be through Medicare, a 
private insurance plan, or out-of-pocket expenses.   Medicare is a government-run health 
insurance program for those 65 and older,   but it does not cover all medical expenses. You 
may need to purchase additional coverage, such   as a Medigap policy or a Medicare Advantage plan, 
to fill the gaps in coverage. It's also important   to consider the potential costs of long-term care, 
such as nursing home or assisted living expenses.
  Number 9.

Think about your lifestyle in 
retirement. It's important to consider what your   lifestyle will be like in retirement and how much 
money you will need to sustain it. Will you want   to travel or pursue hobbies? Will you need to pay 
for housing or will you have a mortgage-free home?   Understanding your retirement lifestyle can help 
you plan for the amount of money you will need to   save. It's also important to consider how long you 
expect to live in retirement and whether you will   have any sources of income besides your retirement 
savings, such as a pension or part-time work.
  Number 10. Keep an eye on your retirement 
accounts. As you get closer to retirement,   it's important to regularly check in on your 
retirement accounts and make sure they are   on track to meet your goals.

This can help 
you identify any areas that need improvement   and make any necessary adjustments to your 
retirement plan. It's also a good idea to   review your investment strategy and make sure 
it's still appropriate for your situation.   If you're working with a financial advisor, 
they can help you with this review and   make any necessary changes to your plan.
Thank you for watching. We hope these tips   have been helpful as you plan for your retirement. 
Remember to consult with a financial professional   if you have any questions or concerns.
Make sure to Like and subscribe below to   stay up to date on all of the latest 
news. We will see you next time!.

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Family Wealth Killer 2: Bad Investments

Family Wealth Killer #2: Bad Investments All investments look good the first time you see them…right? I met a guy with millions of dollars. He could really accumulate capital, but he couldn’t pick a good investment if his life depended on it. He would only see what he wanted to see and commit precious capital to things he couldn’t control with little possibility of producing a return worth the risks. A good investment policy changed all that. Sticking with our investment policy we always know how to deploy capital because we know what we're trying to accomplish. The deeper we dig with due diligence, the more we understand an opportunity and how it lines up with our values and goals. Picking winners is easier and more fun this way. Building capital is like building anything else— the better the quality of the parts and how they all fit together for us, the better it will perform..

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401K Explained in தமிழ் (US Retirement Series – 1)

This episode and next few episodes are going to be US specific episodes. All these US specific episodes will have US flag in their thumbnails. Indian audience, feel free to skip these episodes and save your time. US folks, there are 2 main retirement plans in USA. 1. 401K and 2. IRA. We will cover more in detail about IRA in another episode. In this episode, we will cover 401K in detail. Hi. My name is Vijay Mohan. You are watching – Investment Insights. 401K is a retirement plan offered thru employer.

We will not be able to open a 401K account just by ourself like a brokerage account. We can contribute to a 401K, only if it is offered through our employer. Almost all employers offer 401K plan. Very few small companies do not offer 401K. How much can we contribute to a 401K? Each employee can save up to $20,500 per year. If husband and wife both are working, both can contribute $20,500 each. People older than 50 can contribute more – $27,000/year. That is called as "Catch up contribution". Other than our contribution to 401K, many employers match up our contribution up to certain percentage. Let's say that an employer is matching up to 7%. If our salary is $100K, 7% of that would be $7,000. Let's say that we are contributing $20,500 to our 401k and maxing it out. Employer would have matched up the first $7,000 of that $20,500 and would have contributed that $7,000 to our 401K.

So in total, our contribution $20,500 + employer match up contribution $7,000 = $27,500 would have gone into our 401K account. Employer match of $7,000 would not come under the contribution limit of $20,500. This match is over that contribution limit. In this employer match, each employer has a catch called "Vesting Schedule". This vesting schedule defines when that extra amount matched up by the employer is going to actually credit in our account. Let's say that an employer has a vesting schedule of 2 years, then in that 2 years, the match up amount contributed by the employer will be in our account, but not vested. That means, if we leave the job within the 2 years of joining, then we will not get that matched up amount. But after 2 years, that matched up amount will be ours totally, even if we leave the job. Also, after that vesting period of 2 years, all money matched up by the employer will be vested (available) to us immediately. That means, there will not be any restriction over the matched up money after passing 2 years.

The 2 years I am referring here is just an example. It will be different for every employer. So what is the advantage to us from this 401K? The advantage is, we do not have to pay the tax on the amount we are contributing to 401K. But we should pay tax on withdrawal after retirement. What? No tax for the contributed money, but taxed on withdrawal? What benefit does that offer to us? Good question. To understand that, we should know about our tax bracket.

What we are seeing here is 2022 Married Filing Jointly tax bracket. Let's say that our family income is $120,000. We will come under 22% tax bracket. That does not mean that we will be paying 22% tax for the whole $120,000 we earned. First 20,000 of $120,000 will be taxed at 10%. Next 63,000 will be taxed at 12%. Money earned over that will be taxed at 22% tax. So the 22% tax is charged for the top most dollar we made in that year. This is called as Marginal Tax rate. If we add up all the taxes for individual brackets of 10%, 12% and 22%, that comes out to $17,634. This is 14.7% of our total income $120,000. So actually we are paying only 14.7% of our income as tax. This 14.7% is called "Effective Tax Rate". May confuse between marginal tax rate and effective tax rate. Hope it is clear now. So when we contribute $20,500 to our 401K, it comes out of our top most tax bracket. That means, the tax we saved from the contribution of $20,500 is 22%. $4510. If we withdraw the same $20,500 after our retirement, the tax rate for that would be 10%.

Tax saved for contribution is 22%, while money coming out is taxed at 10%. The difference is 12% in our favor. Or in other words, we save tax in marginal tax rate for contribution and we pay effective tax rate while withdrawal. We all know that effective tax rate will be always lower than the marginal tax rate. This is first advantage. Let's check out a sample calculation to understand the next advantage. Let's say that our family income is $120,000. Then federal marginal tax rate is 22%. Let's use Illinois state tax rate – 5%. For 401K contribution, not just the federal tax, we don't have to pay the state tax as well. Let's assume that our 401K will be growing at 8% growth rate.

We are maxing out our 401K contribution every year by contributing 20,500/year. Tax savings from this contribution is 27%. $5535. We are continuing to do this till our retirement for 25 years. By the end of 25 years, our 401K balance would have reached 1 million 600,000 dollars. The $5535 that we saved every year in tax alone would have grown into $437,000. The absolute tax saved is 5355 * 25 = $138,000. The growth from that savings is approximately $300,000. Or in other words, just because we did not pay (deferred) the tax of $138,000, the extra growth we got from that is $300,000. The growth of money by deferring (not paying the tax now) the taxes to pay later is called as "Tax deferred Compounding". This tax deferred compounding is 401K's second advantage. For these 2 advantages, we can contribute to 401K. We should. So far we have seen a regular pretax 401K. There are other flavors of 401K like Roth 401K and After tax 401K. We will dig deeper into that in the next episode. Thank You..

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401K to Gold IRA Rollover

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Building Wealth (Ep.2) – Delayed Gratification (தமிழ்)

We went through the importance of "Developing Financial Knowledge" in the last episode. If you have not watched it yet, please watch that first. Today we are going to watch the second episode in the series "Building Wealth". Delayed Gratification Gratification means – We all have our own desires right? When we attain those desires, we get this great satisfaction right? That satisfaction is what is called "Gratification" in English. "Isn't attaining our desires is a good thing? Why should we delay?" – you ask. Explaining that is the purpose of this episode. If "Financial Knowledge" is the architect of building wealth, "Savings Rate" is its foundation. Our foundation will be as strong as our savings rate. We already know this from "Financial Freedom" episode. Most of us will achieve 20% savings rate easily. But to go beyond that, we need to know some strategies. Normally what we do is, we keep upgrading our lifestyle in line with our earnings. We will be with four roommates when we start working.

In 2-3 years, our salary will double. When that happens, we upgrade ourselves from 4 room mates to 1 room mate. Then in 2-3 years, we get married. Then we upgrade ourselves to a one bedroom apartment. Then in 2 years, we upgrade to a two bedroom apartment. Then after kids, we buy our own home. So depending on our career growth, we keep upgrading our lifestyle. Then expenses add up with kids, school fees and so on. It never comes down. After 40 years, we will come to a sudden realization, that we have crossed half our life time, but all that left is just our home as asset.

We start thinking about retirement and investments only after that. But by that time, we will have other responsibilities. Saving for kids college, marriage become our priorities. Just like that, our life would just pass away. Next generation will follow the same pattern as well. How can we build wealth if we live like this? Life of a US settled person is also very similar to this. But they do one more thing after 40. They sell their current home and upgrade to a bigger home. So we are keep upgrading our life style depending on our financial growth from our career. Regardless of how much we earn, we spend to match that earnings growth.

If we want to break this cycle and move to next level, there is just only one option. That is – Delayed Gratification. That is – instead of enjoying the life upgrades immediately we can postpone it to some time, and attain financial growth. Before we check out on how we can do that, a small tidbit about "Delayed Gratification". In 1960's, Stanford University conducted a psychological experiment called "Marshmallow Experiment" with kids.

Marshmallow is something that looks like a thicker version of Cotton Candy. It is white and super sweet. Kids love it. They used 3.5 to 5.5 years old kids for this experiment. What they did was, They asked a kid to stay inside a room and they put a marshmallow on a plate in front of them. They made a deal with that kid. The deal is – I will leave the room now. But will be coming back after 15 mins. If you have not eaten the marshmallow by the time I come back, you will get two marshmallows instead of one. So – the kid has two choices. There is a marshmallow right in front of kid's eyes. Instead of waiting for another marshmallow for 15 mins, the kid can eat one right now. Or wait for 15 mins and eat two marshmallows instead of one. When we hand over a fish to a cat, is it possible for the cat not to eat the fish? 7 out of 10 kids ate the marshmallow immediately. But 3 out of 10 kids controlled their temptation and waited for the second marshmallow successfully.

Stanford University did not stop their research at that. They followed these kids for 40 years to see how they are doing in their life. The kids who waited patiently settled better in their life. They did well in their college entrance exams. They did not fall addicted to any drugs. They did not have obesity issues. They used their "Self Control" capability totally to their advantage. What we learn from here is, people who have a strong mindset and who do not get distracted easily are very disciplined and they set up a goal for themselves and attain it as well. They do not think in short term. They plan for long term and achieve it successfully.

We will see this "Long Term Planning" more in detail in another episode. Coming back to our topic – "Life Upgrade" How many upgrades do we see in our adult life? We upgrade from 4 room mates to 1. We upgrade from 1 room mate to separate apartment. From 1 BR we upgrade to 2 Bedroom. From 2 Bedroom, we upgrade to own house. Even for own house, we again upgrade to a bigger home. All these are housing upgrades. Like this, We upgrade from pubic transportation to bike. From bike to car. From car to luxury car. These are upgrades in our personal vehicle. We don't do these upgrades without a reason. We do it to match our earnings. If we do not upgrade our life styles along with our earnings growth, but delay it by 2 to 3 years – what happens then? The salary rise will go directly to our savings rather than for life upgrades and will increase our savings rate.

If the savings rate increases, the foundation of "wealth building" will be super strong. Think about it. If our whole life is 80 years, Its not really a big deal to delay our upgrades for 3-5 years. We are going to attain all these anyways. Its just that we are going to do it bit later. So, we have two choices. 1. Live in the moment by upgrading our lifestyle depending on our earnings growth. Or 1. Postpone the upgrades for a while and use that savings to build a strong nest egg so that we can even pass our wealth to next generation.

The choice is ours. Now we can see the benefits that we can get out of "Delayed Gratification" at high level. We will see how we can apply this strategically in different stages of life in next episode. Thank You..

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2 Laws for Generating Wealth

Any successful plan to generate and sustain
sufficient wealth must incorporate two very basic rules: 1) Generate Investible Savings. The first step to unlock the path to building
tremendous wealth is not about investing at all. It is about generating Investable assets. For most people this begins by terminating
any expensive debt such as credit card or high interest debt. The reason being that expensive debt increases
one’s expenses and eats into investable resources. Second step for most people is redefining
certain parts of their remaining income as compulsory payments that must be done. That payment is, in fact, the first step of
savings for investing. The third step for most people is to invest
time and entrepreneurial energy to increase their gross income. Getting a better job, a promotion, a new skill
or starting a business that can generate profits disconnected from your immediate personal
labor resources. The fourth step would be establishing some
kind of an emergency fund and getting sufficient insurance to cover yourself against unpredicted
expenses. When the four steps are done, you can start
generating sufficient investable assets that can be put to work growing over a minimal
period of five years.

When this is done, you can proceed to the
next rule. 2) Invest investable savings into exponentially
growing assets, growing for many years while limiting the taxes you pay. Once you generate investable assets and are
ready to put them to work, comes the next tough question: Where should I deploy my investable
assets to maximize my investment and to generate more wealth? You should know that any and all investable
assets you will ever encounter can belong to one or another of these two categories:
Exponentially Growing Assets or Regular Growth Assets.

If you ever hope to generate sufficient wealth
from your investable assets, you must learn how to separate your exponential growing assets
from your regular growth assets and then make sure you are sufficiently exposed to the exponentially
growing asset class. Exponentially growing assets are a rare creature
few understand, even among seasoned investors. There is a set of strict rules to become eligible
for the coveted title: A) At their very core, they must yield very
high returns on internally invested resources and expenses – such as inventory, labor, plant
& factory or R&D; What sets exponentially growing assets apart
from any and all investable assets is their ability to make a large profit on a small
base of required resources. The more expenses and investments one needs
to make a profit, the less profit is left to increase the value of the asset itself. B) They must have sufficiently large market opportunities
ahead of them to enable many years of sales growth displaying high returns on invested
resources; While many possible assets can generate high
rate of return, exponentially growing assets are not a one-off occurrence or limited activity
and must be able to maintain their course of growth over many years to build sufficient
appreciation for their owners.

C) They must provide extensive internal reinvestment
opportunities to use profits at similarly high returns To really become an exponentially growing
asset capable of building imaginary amounts of wealth, the asset must provide managers
the ability to use the rivers of cash generated regularly from the asset in a similar high
rate of return. When these criteria aren’t met, owners soon
realize the resulting rivers of profits do not grow at a high rate and the growth in
wealth soon slows down due to the ever-growing profits invested in lower rate growing assets.

D) They must be led by honest, high integrity,
talented managers, who are actually risking their own wealth alongside their investors. For these executives, a small increase in
the share price will generate much greater wealth than any increase to their paycheck. Executives of public companies have the ability
to loot the company’s coffers or engage in wealth destruction in an infinity of ways. To avoid that, check to see how large your
CEO’s stake in the company stock is before choosing any investment.

As long as the company still embodies the
4 rules that we covered here, you stay invested; this is the one last requirement when investing
in exponentially growing assets. ALL exponentially growing assets see their
stock price cut in half several times during the decades, usually due to different parameters
that don’t reflect the actual company value. Holding these assets through turbulences,
and even adding to them, requires temperament and familiar understanding of the business,
which results in the conviction to stay the course..

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Retirement Planning FACTORS | Age and Income

what to look for when selecting the right 
retirement plan so age is a big factor when   it comes to deciding which plan is right for you 
if you're offered a pension that's fantastic not   many companies do offer those nowadays however 
if you have the benefit of getting one then yes   take it but I also think you should also have a 
retirement plan in addition to your pension just   to diversify your savings another situation to 
consider is your financial situation so someone   with a higher income level is most likely going 
to want to prefer choosing their own retirement   plan because then they're going to be able to 
not only write off those contributions but also   distribute it later in life so it maximizes their 
potential to not incur penalties or other taxable   income kind of situations essentially the more 
money you make you're looking for more write-offs   you're looking to claim less you're looking to 
you know have security but you got to be a little   more deaf and clever in how you're taking your 
distributions so to not trigger taxable events

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Gold IRA Investing: How To Set Up Your Gold IRA

Hi, Doug here from Investing In Gold Advice
dot com. In this short video I'm going to give you
the resources for setting up your Gold IRA very quickly and easily. It continues to amaze me that so few people
realise that they can include physical gold in their retirement plans, and that many of
those who do assume that it will be a complicated and time consuming process. That just isn't the case, and it's for
that reason that I've written a comprehensive report about Gold IRA's which you can download
within the next few minutes completely free of charge.

I've been successfully trading and investing
in gold since 2003 and I created my website Investing In Gold Advice dot com to share
with you the knowledge, experience and contacts that I've gained during that time. Go there now and you can grab my Gold IRA
Report without even having to submit your email or join a mailing list. Once you've downloaded it you will have
instant access to information about what a Gold IRA actually is and what you can include
in it.

It answers the most Frequently Asked Questions
about Gold IRAs. It explains all the benefits to be gained
by including physical gold in your retirement plan. It explains the procedures involved in setting
up a Gold IRA. Actually I do that by giving you a step by step walkthrough of how I set
my own one up. Then finally it shows you how and where you
can get free expert assistance to get started right away with your own Gold IRA, and how
you can save all the initial set up fees.

To get this free report go to Investing In
Gold Advice dot com. Simply click on the link below now..

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What is a precious metals IRA

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Top 3 Do’s and Don’ts for Building Wealth

[Music] welcome in coming up on today's program top three do's and don'ts for Building Wealth I hear folks say I'm good at the don'ts of Building Wealth or the dues don't they require money don't they wealth how to get it how to keep it and how to avoid the trip wires that could blow it when it comes to wealth what are you experiencing with the do's and don'ts we've had many viewers ask about that let us know what you think in the comments section you're watching what's next with money a program that holds a promise of second chances for growth and financial empowerment with wealth three critical principles and advice saving for wealth how to keep wealth what not to do when you're on your way to wealth but also when you are wealthy we're going to reference a lot of great Insight from the psychology of money book by Morgan Hansel and have a link to it in the comments section now we're talking about that top three do's and don'ts for Building Wealth here's number one you saving your way to wealth this is how to get it Building Wealth has little to do with your income or investment returns but it's got a lot to do with your saving rate Morgan talks about that savings rate wealth is the accumulated leftovers after you spend what you take in now this is actually pretty easy to control if you latch onto this idea learning to be happy with less money creates a gap between what you have and what you want it's kind of like that Gap created if you've got a growing paycheck your savings goes further and can get bigger as that income Rises but savings without a spending goal attached gives you options and flexibility now folks I want to actually repeat this this is the core idea of wealth building savings without a spending goal attached gives you options and flexibility this is the concept of saving just to save but you get time to think and set your actions and intentions on your own terms a great writer and business advisor Dan Sullivan who wrote the Strategic coach calls this a walk away fund and we've talked about this in some of our other videos this is if you've got enough savings you've had it with your job or there's something unethical happening there you can walk away and do okay and reset your career path by Saving in this manner your financial Independence grows and folks I have personally lived this flexibility gives you the ability to wait for good opportunities in your career small business and especially your Investments the hardest Financial skill is getting the goal posts to stop moving according to Morgan it gets to the classic case of more versus enough and a quick example the real estate business my wife and I started we could have kept going to develop and acquire more properties but at some point we stopped we met our goals and we paid our debts early and completely all out of rants with no outside partners yet we're still actively investing in other forms of assets and Equity markets but I had to stop and think who or what was I trying to impress if I kept making the real estate business bigger would it be other people who don't know me or don't care you know we reached a Target that was very good and it's still growing in value and wealth we did not need to move the goal posts and we didn't generating wealth is often linked to generating Envy they seem like they're on Parallel slopes on a graph in other words it's a form of social comparison and we're talking about the top three do's and don'ts for building well here's number two getting wealthy and staying wealthy this is how to keep it bottom line strive to consistently not screw up we have to hold in our minds and our attitude some combination of frugality and paranoia now this is a very unique tension but it's very profitable with frugality we live below our means with paranoia we're questioning am I doing the right thing and am I doing that right thing well but by keeping on learning and getting professional advice we can do this so getting money is one thing keeping it is another getting money requires taking risks being optimistic putting yourself out there keeping money is kind of the opposite of taking risks it requires humility back to that frugality and it requires a little bit of fear paranoia the idea that what you have made and achieved can be taken away and that some of your financial investing success and I would add real estate success you've got to admit some of this is attributable to luck the time you're in the markets or you're buying them I could list probably five examples of luck during real estate and other types of investing bottom line here past success can't be relied upon to be repeated indefinitely external events markets family needs change and we change the ability to stick around for a long time without wiping out or being forced to give up staying in the game not capitulating is financial endurance it's a key to Building Wealth powering through recessions and downturns smartly we have many videos that help you do this on our what's next with money Channel swinging for the fences and investing for home runs or grand slams can put your portfolio at risk so strive with investing to hit singles and doubles and obviously don't put all your eggs in one basket a friend of mine years ago said if you had an investment if it doubles sell half and this is really about stocks if it triples sell it all it's pretty good advice I don't always follow that some to my regret we have another set of videos they're actually too called investing in what you know where I talk about letting your winners run compounding only works if you can give assets years and years to grow Warren Buffett we've got several of his books here hasn't always been one of the richest men in the world as of this taping this guy is age 92.

Warren Buffett didn't even become a billionaire until he was 50 years old in fact this blew my mind 99 of Warren Buffett's net worth was earned after that 50th birthday I have seen this pattern and dimension of net worth growth first hand and we've got a fantastic video called net worth equals net wealth so if you're getting value from this video be sure to hit that subscribe button and the like button and share it with folks it's free and non-commercial we're talking about the top three do's and don'ts for Building Wealth and here is number three wealth what not to do this is avoiding the tripwires Warren Buffett's what not to-do list is really interesting he's not loaded with debt no he didn't panic and sell during the 15 recessions he's lived through as an active investor he does not jump into excessive Trading he's generally very tax sensitive and he pays for good advice to help you he's kept a sterling business reputation with his ethics he's not locked into one strategy world view or trend he did not use other people's money but he does use Insurance floats and we explained that in some of our videos how Berkshire Hathaway is structured he did not quit he kept going he is still going and I take great excitement from this as an investor small business owner and media influencer I can keep going you can keep going Warren Buffett and his partner Charlie Munger have stayed wealthy they had an edge and survived to stay wealthy requires that margin of safety he talks about so much reserves and to not put all of your assets at Great risk think about this concept and it comes from Morgan's psychology of money book that having cash buckets to prevent you from selling during a bear Market or a downturn if you need to pull money for your household or in retirement you take it out of the cash bucket you don't sell stocks or mutual funds when when they're under pressure or low and you might think wait a minute I'm only earning an interest rate of one or two percent on that cash actually you have avoided a loser return you've avoided much more negativity by having not to have to sell that stock at a low price you didn't sell equities at low prices so that return on that cash is higher than one or two percent now what about compounding compounding means good returns uninterrupted over long periods of time and that's what Berkshire Hathaway does now returns won't be up every year only Bernie Madoff claimed that and you know how that turned out so be sure to hit that subscribe and like button and don't forget to share new episodes of what's next with money or posted on Thursdays I'm Bretton Eiser looking to see you next time on what's next with money [Music] thank you

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Retire Wealthy Home

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401K Explained in தமிழ் (US Retirement Series – 1)

This episode and next few episodes are going to be US specific episodes. All these US specific episodes will have US flag in their thumbnails. Indian audience, feel free to skip these episodes and save your time. US folks, there are 2 main retirement plans in USA. 1. 401K and 2. IRA. We will cover more in detail about IRA in another episode. In this episode, we will cover 401K in detail. Hi. My name is Vijay Mohan. You are watching – Investment Insights. 401K is a retirement plan offered thru employer. We will not be able to open a 401K account just by ourself like a brokerage account. We can contribute to a 401K, only if it is offered through our employer. Almost all employers offer 401K plan. Very few small companies do not offer 401K. How much can we contribute to a 401K? Each employee can save up to $20,500 per year.

If husband and wife both are working, both can contribute $20,500 each. People older than 50 can contribute more – $27,000/year. That is called as "Catch up contribution". Other than our contribution to 401K, many employers match up our contribution up to certain percentage. Let's say that an employer is matching up to 7%. If our salary is $100K, 7% of that would be $7,000. Let's say that we are contributing $20,500 to our 401k and maxing it out. Employer would have matched up the first $7,000 of that $20,500 and would have contributed that $7,000 to our 401K. So in total, our contribution $20,500 + employer match up contribution $7,000 = $27,500 would have gone into our 401K account. Employer match of $7,000 would not come under the contribution limit of $20,500. This match is over that contribution limit.

In this employer match, each employer has a catch called "Vesting Schedule". This vesting schedule defines when that extra amount matched up by the employer is going to actually credit in our account. Let's say that an employer has a vesting schedule of 2 years, then in that 2 years, the match up amount contributed by the employer will be in our account, but not vested. That means, if we leave the job within the 2 years of joining, then we will not get that matched up amount. But after 2 years, that matched up amount will be ours totally, even if we leave the job. Also, after that vesting period of 2 years, all money matched up by the employer will be vested (available) to us immediately. That means, there will not be any restriction over the matched up money after passing 2 years. The 2 years I am referring here is just an example. It will be different for every employer. So what is the advantage to us from this 401K? The advantage is, we do not have to pay the tax on the amount we are contributing to 401K.

But we should pay tax on withdrawal after retirement. What? No tax for the contributed money, but taxed on withdrawal? What benefit does that offer to us? Good question. To understand that, we should know about our tax bracket. What we are seeing here is 2022 Married Filing Jointly tax bracket. Let's say that our family income is $120,000. We will come under 22% tax bracket. That does not mean that we will be paying 22% tax for the whole $120,000 we earned. First 20,000 of $120,000 will be taxed at 10%. Next 63,000 will be taxed at 12%. Money earned over that will be taxed at 22% tax. So the 22% tax is charged for the top most dollar we made in that year. This is called as Marginal Tax rate. If we add up all the taxes for individual brackets of 10%, 12% and 22%, that comes out to $17,634. This is 14.7% of our total income $120,000. So actually we are paying only 14.7% of our income as tax. This 14.7% is called "Effective Tax Rate". May confuse between marginal tax rate and effective tax rate. Hope it is clear now. So when we contribute $20,500 to our 401K, it comes out of our top most tax bracket.

That means, the tax we saved from the contribution of $20,500 is 22%. $4510. If we withdraw the same $20,500 after our retirement, the tax rate for that would be 10%. Tax saved for contribution is 22%, while money coming out is taxed at 10%. The difference is 12% in our favor. Or in other words, we save tax in marginal tax rate for contribution and we pay effective tax rate while withdrawal. We all know that effective tax rate will be always lower than the marginal tax rate.

This is first advantage. Let's check out a sample calculation to understand the next advantage. Let's say that our family income is $120,000. Then federal marginal tax rate is 22%. Let's use Illinois state tax rate – 5%. For 401K contribution, not just the federal tax, we don't have to pay the state tax as well. Let's assume that our 401K will be growing at 8% growth rate. We are maxing out our 401K contribution every year by contributing 20,500/year. Tax savings from this contribution is 27%. $5535. We are continuing to do this till our retirement for 25 years. By the end of 25 years, our 401K balance would have reached 1 million 600,000 dollars. The $5535 that we saved every year in tax alone would have grown into $437,000. The absolute tax saved is 5355 * 25 = $138,000. The growth from that savings is approximately $300,000. Or in other words, just because we did not pay (deferred) the tax of $138,000, the extra growth we got from that is $300,000.

The growth of money by deferring (not paying the tax now) the taxes to pay later is called as "Tax deferred Compounding". This tax deferred compounding is 401K's second advantage. For these 2 advantages, we can contribute to 401K. We should. So far we have seen a regular pretax 401K. There are other flavors of 401K like Roth 401K and After tax 401K. We will dig deeper into that in the next episode. Thank You.

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401K to Gold IRA Rollover

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