John, good to see you. I have a great topic today is it really a good idea to max out your 401 K for 2023? The 401k contribution limits 22 Five for most people, if you're 50 and over that jumps up to 30,000 a year 401 K is generally the most accessible and easiest way to save for retirement. So how important is it that we max it out every year?

Well, you made the comment that is the easiest, most accessible so yes, you need to save for your retirement. I'm not going to come in here and tell you don't put money in your 401k and no have a retirement plan. But understand that 401k could be a ticking tax time bomb. Understand that every dollar you put into a traditional 401k You're entering a partnership with the IRS because you deferred the income so they are part investors and they're gonna determine the taxes in the future when you take it out, and they're gonna have some control over it. So it's important to save into your 401k maxing it out that's a very individualized question. You know, there may be some alternatives I will say this though, nowadays, most every company should have a raw 401k max that out all day, especially with the new laws on on employer matching, get as much money into that Roth 401 K that tax for retirement, especially if you're a newer employer, and in those lower tax brackets.

I have heard before that you should contribute up to the max match and any other dollars you should put in other accounts. How do you feel about that?

Yeah, and I think that's going to really go back to the traditional 401k Because the Tax Time Bomb Yes, always take the employer match. Now with the new laws of the secure act 2.0. The the match becomes a little bit easier now with in regards to a raw 401k But you know, for traditional 401k That that's your only other option. Yes, always take up to the match. Take that free money. Then it's really going to be incumbent on you to find a different vehicle of sorts. You know, if you're if you want more of a tax free vehicle out there, instead of just stocking away all those tax dollars.

You and I have talked before about the limited investing options that come with 401k So when do you advise people branch out and start investing in stocks and ETFs?

Well, for a lot of people, it's 59 and a half, you know in terms of your 401k And the reason I say 15 and a half is the majority of companies out there will allow in service rollover so you could still be working. You can be 6061 years old, and you can actually roll all your 401k money into an IRA and now you have a universe of investments. For those younger investors while you're gonna have to find other alternative vehicles, that traditional IRA that's not always going to be the best scenario for you, especially with the company playing being offered. So you may say, Well, I'm going to tax I'm going to have a tax deferred vehicle in the 401k. And now I'm gonna put I'm gonna just take instead of investing all my money in that 401k I'm gonna put some money into a taxable account, you know, via whatever you know Vanguard e trade, whatever you're doing, but you have to understand you have to understand investing, right? You have to understand how to put together portfolio and if you are investing in that now taxable account that non retirement account, or non qualified to use the jargon. You have to understand that every time you sell an investment, you have a taxable consequence. So you have to be very aware of how your investments and your actions will have on your taxes.

Absolutely. That can be a big surprise. Now let's talk about one drawback though with the 401k. Let's say that I am maxing maxing out my contributions every year and then I become cash poor, but I need money for a big purchase. If I have to tap that 401k I'm gonna face some severe penalties.

Yeah, so your your 401k should have a loan provision so you should be able to at least take a loan out from your 401k up to you know, set amounts. But before you start saving for retirement, you brought up a good point. You don't want to be cash poor. You need to have a bank account. And you need to have at least six months of emergency savings Now the great thing with a 401 K is you know, let's say you're really aggressive, you're putting $1,000 away every paycheck and then you have a financial hardship and you can't afford to put $1,000 away, contact your HR and turn the faucet either down or off and say hey, you know I got this thought my payments in my 401 K right now or reduce them. And then once you're beyond that financial crisis, then you can turn them back on but always have an emergency fund before saving for the future.

What if I'm over 50 though and now realizing that I haven't saved enough for retirement?

Well, yeah, there's that conversation I have with a lot of, you know, 401k employees, the younger you are get this, get the funding started. Yeah, because it's a snowball effect. There's no more powerful interest instrument in the financial world. Than compounding interest. But not all the people have done that. And if you're beyond 50, well, now you at least have these nice catch-up contributions that you can take advantage of and you need to start putting as much money away in a Roth or traditional 401k. And at that point in time, right. You know, that traditional 401k You need to max it out because there's not going to be a retirement if you don't have the funds. You need to stop working then you know it's a conversation I've had to have a difficult one with with plenty of people have come into my office and listen retirements on your future. And only you can really control that. So you know, if you're behind the curve, you have to try to make it up as much as possible and you may have to delay. What you thought your retirement date would be.

Yeah, but that honest conversation is so important. Such an important service. John, if somebody has questions about whether they're properly allocated, where they should be putting their pre post tax dollars, what's the best way to reach you?

Yeah, so always visit our website www.go securus.com. We have a ton of resources throughout the website. And while you're on the website, you can actually go to the contact us tab and you can schedule a 15-minute conversation with me while I answer any questions for you. Or you can schedule a complimentary vision and clarity consultation. Or you can do it the old-fashioned way. Give us a call at the office at 858-935-6210 asked to speak with Emily Wale and she will get you on my calendar.

All right, John, thank you very much.

Thank you Erin