Money Guy Show
How To Maximize Your 401(k) Strategy!
Jan 15, 2025
This discussion covers the ins and outs of optimizing 401(k) contributions, particularly the choice between Roth and pre-tax options. It emphasizes the importance of early contributions for long-term financial health. Listeners learn humorous insights on how fashion intersects with finance and how to manage mortgages while prioritizing investments. The talk wraps up with strategies for maximizing tax efficiency in investment returns, making it clear that a well-thought-out approach can alleviate financial stress.
30:48
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Quick takeaways
- Prioritizing Roth contributions can be advantageous for individuals under a 25% tax rate due to potential future tax-free withdrawals.
- Utilizing donor-advised funds allows for maximizing charitable contributions while reaping significant tax benefits through appreciated asset donations.
Deep dives
Maximizing 401k Contributions
Understanding how to optimize contributions to a 401k involves strategic decisions regarding Roth and pre-tax options. Contributions to a Roth IRA receive no tax deduction upfront, but offer the potential for tax-free growth, while pre-tax contributions offer immediate tax benefits but tax liabilities upon withdrawal. A young individual who can max out both a 401k and Roth IRA should consider their current income and tax rates when deciding. Generally, individuals under a 25% tax rate might benefit more from prioritizing Roth contributions due to the future tax-free withdrawal advantage.
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