Is a 401(k) Really the Best Way to Save for Retirement? | Rachael Ray Show

Updated : Oct 09, 2019 in Articles

Is a 401(k) Really the Best Way to Save for Retirement? | Rachael Ray Show


Okay, so our aim today is to help you reach peak financial fitness. I’m here with somebody, oh my God, we’ve been friends for years. I fell in love with this lady, we had a conference together, and I heard her speak and she does with finance what I try and do with food. Show people that it’s for everybody. Having a good life’s for everybody, saving is for everybody, learning to invest is for everybody. It’s not just for the elite or the rich. She’s the founder and CEO of LearnVest. This is Alexa von Tobel. (audience applauding) You guys have heard of the premise of, you know, fact versus fiction? Well she says that there’s some common money myths that may be holding us back in our financial lives. So that’s what we’re going to address today, right? Yep, we’re going to dive, first of all, everybody has these things that they think are true that aren’t, and myths that aren’t, and so, we just want to dive right in and poll you guys. So we did. So we polled the audience and we asked our in studio audience if they thought that it was a myth or the truth. Want to walk us through we’ve got here up first? Sure, so the first question is a 401(k) should be the first stop for retirement savings. Dun-da-dun-da, you guys said, you guys said truth. And the answer here is it’s actually a myth. The audience is wrong. So, really quickly, very important for everybody to know, so if your 401(k) matches, where it’s free money at work, then yes, that is your first stop. So again, if your employer is going to put money in. If your employer’s gonna match. Think of it as a second bonus. I love it, it literally is like extra cash just going to you. But if that’s not the case, then if you make $118,000, you want to put your money into a Roth IRA, where you can put $5,500 a year. And if you make over $118,000, then you want to continue to put it into the 401(k) where you can put $18,000 a year. So the take-away there is, first and foremost, yes if they match 401(k), then your Roth IRA, and then your 401(k). Simple enough. Simple enough. (audience applauding) One question that we get all the time is how on earth, how much money should I have in retirement? And so, we wanted to quickly go through some different ages and get a quick sense. So, first of all, if you are 30, we want you to have 100% of your take-home pay in your retirement by the time that your 30. So that’s 100%, right? Of one year’s take-home pay? So if you make $100,000, we want you to have 100% of it. Gotcha. When you’re 40, we want you to have 300% of what your take-home pay is. So it’s three years of your salary. Yes. Wow, people are getting really bummed out right now. Just wait, just wait. There was a little moan here, once we got to the 40’s, like oh. These piggies need to get bigger and bigger. By the time that your 50, we want you to have 600%. So again, really important, 600%. You’re freakin’ them out. I know, well just wait, and by the time you get to retirement, 1,200% of what you make in retirement. So, Rachel, very important. These numbers big, they scare everybody, and I do not want people to think about these numbers as the reason why they should not be saving. Right. So the take-away here is even if you’re not there, get started. My request to everybody home and just put more in your retirement account tonight, increase one percent at your employer with your 401(k) and get started because it’s about building good habits. That’s right, you can start small and those habits get better and the money comes in and then you can get bigger. (von Tobel) And it begins to grow. (audience applauding)

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