On this episode of "On the Money" we discuss retirement saving tips for millennials and explain Roth IRAs.
Recent Market Swings; The Economy, and Increasing Life Expectancies (0:01 – 13:47)
“On any given day you are up 400 points or down 400 points depending on who says what.”
- Paul A. Ruedi
“Manufacturing isn’t tanking, it’s employment in the manufacturing sector that’s tanking. We’re manufacturing more than even, we’re just doing it with fewer people.”
- Dr. Fred Giertz
“In our industry, financial planning and retirement planning, [increasing life expectancies] is becoming a bit of a curse because if you are going to live an extra 10 years or longer compared to only a decade ago it does have financial planning implications for how long your money must last.”
- Paul A. Ruedi
Retirement Savings Tips for Millennials (13:48 – 37:29)
The Importance of Saving Early and Compounding (14:32)
“Those early dollars people invest are the powerful dollars.”
- Paul A. Ruedi
“A person like me (in my mid 20’s) is looking at 50 or 60 years of saving for retirement. If you don’t start now and that compounds over 60 years, that’s a lot of money lost.”
- Daniel Ruedi, RICP®
The Importance of Investing in Stocks (22:01)
“If your money is for retirement and you’re (a millennial) – it should be invested in 100% stocks, because you need that compounding over your lifetime.”
- Daniel Ruedi, RICP®
“If you just save in 100% cash over your lifetime, you have to save astronomical amounts.”
- Daniel Ruedi, RICP®
Tax-Advantaged Retirement Accounts (25:15)
Buy and Hold (27:28)
“You recommend the buy and hold approach – I might say it’s the buy and buy and buy and hold approach!”
- Paul A. Ruedi
“Market timing doesn’t work, it has been proven over and over again that it doesn’t work!”
- Daniel Ruedi, RICP®
“It is irrelevant if [stocks] go down 10% next week if you are not pulling your money out for 30 or 40 years. So having that long-term perspective and remembering what the money is for and when it is going to be needed, the short term is really irrelevant.”
-Ryan Repko
Keep Investment Costs Low (33:27)
“If an investment charges you 1% and your gross return is 10%, you get 9%. Let’ say you can get the same thing for 0.25% and your gross return is 10%; now you get 9.75%. So you get to keep more of the return.”
- Daniel Ruedi, RICP®
What is a Roth IRA? (37:30 – 50:20)
Roth vs. Traditional IRA (38:35)
“A traditional IRA allows you to put money into an account, much like a 401k, where you are not paying taxes up-front, and when you take the money out, let’s say at retirement, that is when you pay the tax. So it allows for tax-free growth, and then you get taxed on the back end.
A Roth IRA is the opposite; you pay the tax up front so that (provided you meet a few rules) when you pull that money out, there is zero tax of any kind. So it builds both the contributions and any interest or dividends tax-free.”
- Ryan Repko
How Much Can I contribute to a Roth IRA? (39:59)
“People under 50 can contribute $5,500 per year. Once you are50 or older, you get an additional $1,000 to contribute, for a total of $6,500.”
- Daniel Ruedi, RICP®
Roth IRA Income Limitations (40:24)
When Can I Contribute to a Roth IRA? (41:34)
“You have up until tax day to apply your contribution to a traditional or Roth IRA for the previous year. So for this year, given tax day this year is April 17, 2018, I have until April 17 to make a contribution for 2017.”
- Ryan Repko
Roth IRA Withdrawal Rules (42:22)
Strategies for using Roth IRAs (45:57)
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