 Hey, hey everybody, how you doing Russell Moore coming to you live from Dedicated financial literacy once again. It's good to see everybody be sure to hit the subscribe button. Hello Give me a thumbs up if you like the content and hit the bell so you can get content in the future Let's jump right into it. You guys are ready. Are you ready to jump right into it when I talk about? The 401k it's been a lot of questions about the 401k and a lot of people are advising people nowadays to Get out of your 401k and mostly the reason why they're saying that is A lot of people are expecting a major market crash between now and 2023 a major market crash deep recession Possibly a depression. I'm not making all of that. I'm not making all of those I'm not saying that that's what's gonna happen. No one knows the future. All right I do want to say off right off the cup as a disclaimer. I am not a financial planner I am not a broker. I am not I'm just a guy that has been in the market for over 20 years and I've learned some things and I got this channel established so I could help some of my friends and my church my family people to ask questions about stocks bonds 401k whatever okay anything that has to do with finances I'm one of the things that I want to say real quickly before I get into this 401k thing 2023 you want to reduce your debt If it all possible go into 2023 with no debt If it all possible or very low debt attack your debt attack your debt attack your debt All right another thing I want to say right now We're in a market a bear market bear meaning 20% or lower is a call considered a bear market So once the market goes down 20% or less. We're considered a bear market. We a we've been approaching 30% NASDAQ 2,500 the Dow Russell 2000 which is small cap and mid caps and so Be careful during this time, but let's jump right into it concerning the 401k. All right gang 401k the 401k was actually started 1980 1981 by a guy by the name of Ted Bennett Look him up. I'm not gonna go into all the history of the 401k But before that there was pensions mostly what companies would do is add pensions and It was very costly for the employer. So the 401k was kind of an alternative. All right For that and so Ted Bennett is the one that's kind of basically they call him the father of the 401k All right, so basically a 401k. Let me kind of give it to you and I'm going to try to make this as simple as possible It's actually a tax code. It came from a tax code. It's the 401 tax code, but 401k is When and here's how I'm gonna explain this you can have a 401k outside your employer But I want to talk about the one that that's employer based Okay, where you are on a job and your company has offered a 401k program All right. Now that 401k many times not all the time but many times It's company match meaning if you give 5% the company will give 5% All right. Now these are pre-tax dollars. I want to say that again pre-tax 401k Pre-tax dollars. So in other words say you take say you're getting three hundred dollars out of your check Going to this 401k All right, three hundred dollars is going Your money your company is gonna match that So you've got six hundred dollars Every payday so you get paid twice Right you get paid twice in that month So that's $1,200 going into your that's got $1,200 going into your 401k All right six hundred by you Six hundred by the company because they're matching so that's 1200 For 12 months the reason why I'm bringing that up. It's because because it's pre-tax dollars That's gonna reduce Your total income which is gonna help you tax wise That's gonna help you at the end of the year Because all of that money that you put in a 401k is it's pre-tax So they only tax you on the money after the 401k is taken out then they then they say this is your income So you get taxed on that so that's good news. So it's pre-taxed That's one and it's a company match. That's two. That's great. Here's some of the here's some of the cons though You are getting a fee you're getting a fee You're getting a fee You're getting a fee a lot of people don't realize that and it seems so small seems so small But over the life of your 401k if you if you happen for 30 years that money adds up gang Because those fees increase as your 401 for one increases say the first three years It's five thousand dollars first then eight years is at twelve thousand Well, those fees are increasing Keep that in mind What are the fees for? Because the 401k is managed you have an a manager assigned to your 401k. All right, it's a it's it's a manager It's a management fund. So someone personally is managing it, but they're really not managing it This is where I have a problem with it another con You tell them what fund you want say it's the Black Rock seven thousand mutual fund and it's it's it's comprised of stocks and bonds Okay, and you say hey, I want 90% of this fund to be stocks 10% bonds that's what they're gonna do the manager's gonna set that up and Then they leave it alone. They don't touch it. They don't adjust it if the market goes down the next day They won't adjust it you have to do that And in most cases they only let you adjust it once or twice a year So you're at the mercy of the market. So if the market goes down Market goes down your fund goes down the market goes up the fund goes up What I did a few years ago And see here's the thing about you said well, what can I do? I want to get my money out of the 401k in most cases for a company you cannot get it out They won't let you get it out Now there are withdrawals that you can do you can withdraw your money There are hardships and there are loans a lot of companies nowadays. They're not allowing hardship Like in a hardship is probably like a medical condition Or say you're you're in you know your house is about to be foreclosed That would be considered a hardship But in most cases they're not giving hardships and they're definitely not giving loans and a lot of these 401ks All right, so you will have to just withdraw your money But here's what happens when you withdraw before the age of 59 and a half you withdraw your money from a 401k You will be taxed. Remember you are taxed in the beginning when you started that money's not getting taxed And money's not taxed It's it's that money's not taxed game So when you get it out you got to pay federal and if you're in a state like i'm in like california You're gonna get you're gonna get hit up for your state taxes and then you're gonna get a penalty What's the penalty for because you got it out early? You got it out before 59 and a half See that's what it gets you buddy So they're basically they're trying to What they're doing is trying to encourage people keep your money in your 401k. Don't take your money out Save it. We're keeping it for retirement But it's going to depend on the market gang It's going to depend on how the market is doing So what I did when I left my job and that's the way you can get that 401k out is after you leave fired resign Now you can get it out. How do you get it out? You roll it roll it over into another Account and what I did is put it into a Roth. I'm not going to do anything about a Roth today But there's several types of rock a traditional Roth There's so uh, I mean, I'm sorry true. I'm sorry ira an ira An individual retirement account ira so I went from I went from a 401k and rolled it over into a Roth So there's a traditional ira. There's a Roth ira. There's a simple ira There's even a what's called a sep ira scp Those are the simple and the sep were for basically small businesses Say you got a you got a small business. You don't have a lot of employees You can open up a sep ira or a simple ira or if you're um Say you're an independent an independent contractor you work for Lyft or uber or something like that door dash Yeah, you can do that. Okay, so um, but it's such a wonderful alternative I rolled it over. Here's the thing my the Roth is not managed Now you can't have somebody manage it, but I had the option. I don't I didn't want somebody to manage my fund Now I can sell and buy stocks You can buy and sell stocks with a Roth. Another thing is after tax So when you you can withdraw money and won't be taxed for it because that a Roth is used the after tax It's after tax now Remember you rolled it over from a 401k So you gotta they're gonna get you somewhere they're gonna get you So if you get money out of a Roth out of your ira before 59 and a half You can you can end up paying taxes because remember it's after tax All right, so I'm not gonna go into the Roth. Let's get back to the 401k. Let's just go over this really quickly I just want to run it down to you one more time A 401k It's money that you get out of your out of your paycheck They take it from your paycheck and it goes into an account. It's managed So there's a fee on that there's a fee on that 401k. All right The 401k is affected by the market if the market goes up The 401k goes up your 401k goes up if it goes down the 401k goes down It's usually company matched you put in 5% the company matches it with 5% now. You got 10% coming You got 10% every paycheck Got that. All right, and then what do we say about the cons? There is a fee You're also you can't do anything with the fund you can't you can't um You can't trade stocks on your own you can't do individual stock trading from a 401k Now you can't if if you set it up and it's outside Of your employer There might be some some things that you can do when it's out when you purchase a 401k outside your employer I'm talking about an employer based 401k. You're very limited. Somebody's managing it, but they're really not managing it because You're telling them what to do you give them the allocations you give them what fund you want They set it up and then they leave it alone While they're connect collecting a fee from you They do not manage it on a daily basis You have to tell them what you want in that fund a 401k. Okay All right, so I hope this all made sense gang I'm not telling you to get out of your 401k It really depends on your situation many people have been um Many people have been saving for years and their 401k is grown. It has it's actually grown But remember this gang this is not the 80s or the 90s. This is not the 80s or the 90s any longer Our economy is not as great. It's our federal government one would want us to think so be wise Pray about it And if you feel like it's time to move it if you can Roll it over into something See when I rolled my 401k over into a to a Roth IRA I rolled it over and now it's in cash and all I needed to do if I'm going to buy a stock or etf Which is an exchange traded fund all I needed to do is just take some money and say I want some of that stock My whole fund isn't affected see Very few people When you have a 401k with the company They don't have like cash sitting on the side like part cash part stock part bonds stocks are bonds I've heard of some that have had a little bit of cash, but pretty much it's allocated all into that fund With an IRA I got cash I rolled it over and it became cash and then I allocated it. Here's another thing about a Roth IRA an IRA You can pay put up to $10,000 towards a new home And not you have to pay a penny of tax $10,000 up to $10,000 Medical bills there's so many things you have options to use that IRA for and not be affected from a tax standpoint. All right, so I'm you know, you got to use wisdom. Let me pray for you Lord, I pray I pray I pray I pray for those that have a 401k those that are in iris Give our people wisdom Give our people wisdom lord with their finances And I praise you father. Thank you that they're prospering. I speak life life over their accounts life over their accounts And we take authority over that bear market And we speak for a bull market Thank you that even though the world might experience recession Not the kingdom of god let your kingdom come and let your will be done in our lives in jesus name Thank you lord. I give you praise for all my people out there Go for it. Go for it. God is on your side and he's going to prosper you during this season So so so and you'll reap a great harvest. I'm out of here. Love you