Investing in your Retirement

As we tackle new years resolutions and goals, we will continue to do a financial health check- This is the second of many episodes on Finance.  Don't forget to check out the first one on credit cards and credit scores.

In this episode  I discuss retirement investment vehicles i.e. 401k, IRAs and how more than finances, set us up for a holistic successful retirement.

I also deep dive into
1) The differences between traditional and Roth accounts
2) How to decide which vehicle & why you should start investing early (psst. compound interest)
3) The four pillars of retirement based on Edward Jones study
4) Why it's important to understand our budget so we can best plan for retirement
5) The importance of being invested in our Health and Relationships
6) How to think about where we retire and define our purpose


Take a listen, this episode is filled with little nuggets, I suggest you take out a pen & paper or an electronic device to take notes.

#credithistory #financialdecisions #401k  #IRA #RothIRA #Roth401k #retirement #successfulretirement #retirementcalculator #reirementplanning #purpose

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I'm a former tech executive, a podcast host and an entrepreneur. I work with Universities on Organizations to transition students to the corporate world and building successful leadership pipelines ensuring a healthy financial future.

If you're interested in coordinating or working with me on keynotes, workshops, or on a one on one basis, you can go to my website www.sirishakuchimanchi.com

Check out my other podcast "Women, Career & Life" where I share stories and practical advice to achieve your career & life goals as you strive towards financial independence.

All: https://solo.to/sirishak

Instagram: womencareerandlife

LinkedIn: https://www.linkedin.com/in/sirishakuchimanchi/

#womencareerandlife #podcast #paintlifetogether

Transcript

0:00

Hello everyone. Welcome to Live Beats with cerisha on Radio Caravan 1 0 4 0.1 FM and 700 am This is your host, SIA Kumanchi. I'm a tech exec, a podcast host, and a working mom. I'm so excited to be here today. I wonder if some of you go to the MABA Golden Jewelry Opening Ceremony as well. And today we have been talking, Week when I started, it was the new year. We were talking about financial health are getting our finances and our financial house. In order, I am going to talk about retirement and investing. It may not be the most glamorous topic or the most fun, but think about it this way, if. we figure this thing out early on. It just makes life so much simpler, to take that trip you wanna take or you wanna go shopping or even that life experience you wanna have, we have things on our, maybe on your bucket list that you wanna do and just makes it so much easier. And there's so many things we can do early on. The earlier you get started, the more. Runway you have, and it just makes all the math work so much simpler. So I wanted to talk essentially around this, and I host a podcast, women Carrier and Life. It's spelled W O m E n C a r E r, Anant, l i f e, on the podcast. You can find it on Spotify. Google Apple on any of your podcast platforms, and it actually for 2022 was in the top 30% of podcasts. And the reason I brought it up is I interviewed one of the financial advisors and she was talking about some research, Edward Jones and one of the nonprofits had done. On retirement. And most of us, when we think of retirement, we really think of more the finances and the financial aspect. But this is something I want all of us to think about it. It was eye-opening for me. And as always if you're not driving, hey, take on maybe a pen and a paper or an electronic device to take some notes. You might find things that you wanna follow up on later and check. So there are four pillars of retirement. That's what the research showed. Of course, finances is number one. The second one is health. Because when you are ready to retire and you wanna enjoy it, you want to have your health to do all the things you might have put at the end to do, maybe to travel, visit people, do whatever you choose to do. So health was a very important one. Another one was relationships and family because people want to be invested socially, emotionally be connected be it if they're service or if they're volunteering. But relationships was the third one, and the fourth one was purpose so that they knew what they wanted to do. here was a tip that I learned and I've read and I've heard from many people. If you are thinking of retirement in a few years, one of the things you can do is of course you start to plan a few years before that, looking at your numbers and what you wanna do, where you wanna live. So four to five years before, at least three years before, if you have the time, start thinking about where you wanna live, what kind of lifestyle you. Have, what do you wanna do after retirement? Often people want to travel, but beyond that, what else do you wanna do? Because say you wanna volunteer, it's a good time to start looking at organizations where you're going to be and start building those relationships, maybe volunteering for a little bit of time so that you are built a solid base by the time you're ready to. even volunteering very much works like work in the sense there is a network. People, for you to do more than maybe some of the basic stuff and get more engaged with an organization. They really need to get to know you to be, understand what you can bring to the table so you can start taking small steps and then when you're ready retirement doesn't, obviously ne needs to be same like work and structured so much, but you can do what you want and figure out where you want. a lot of people go back and do, little side hustles and other things and giving back or, start on a new career and so many ways to do it. I wanted to spend time talking about a lot around the finances today, and I will weave in stories. The reason I wanted to talk about finances is I'm, maybe some of you might be in the same boat. I came here to the US for graduate school and I've been living here for some time. And a lot of conversations I have with friends and others is many of us. When you come to a new country, the challenge can sometimes be where you find the information and you'll learn trickles of information over time. Listening to radio caravan gives you information in so many ways as well. And a recent conversation with a friend of mine who came here to work. Time, when she had young children in her twenties and she was telling me that she only understood about 401ks and IRAs, almost a decade later, March into her thirties, that concept existed and. That creates a huge challenge because when you think about it's 10 years of potential savings to put aside and invest of our money. So the earlier we share this information and this conversation around money, it just makes it so much easier for all of us to, head and enjoy life and move forward and help others as we wish to do, and just have a huge impact on our families and our. And I think it's very important because compound interest is one of those basic things that actually really helps us. So when you think about it, if they say that the earlier you start, if you were to invest, say a hundred dollars in your twenties versus if you started in your thirties, the amount that you save is significantly different over time in just what you're looking at. So when you look at those calculations, it makes a huge. So one of, if you have young children and they've started their first job, one thing they can do is invest in an I rra. So there are different types of retirement accounts. So I'm gonna start with the I R A. The I R A is available. The, basically all these retirement accounts are. IRS tax rules and stuff. Any investment you need to do, you need to talk to a financial advisor and a tax advisor. But I'm just gonna talk to you about the type of accounts, not how to invest and what to invest because that is a personal decision and you need to be talking to professionals about it. But the accounts exist. There's a I RRA accounts, which is, there's the traditional and the Roth ira, and the differences are one. You, one of them is pre-tax and one is post-tax. One gets taken out money over time that you will, you'll pay the taxes and then it grows afterwards. And very often in the Roth, you take it out, you pay your taxes and it grows without, you don't have to pay your taxes afterwards. So the reason I'm bringing up the ira, If you have young adults working 16, 17, 18, and they have their first job, they could actually put money into a Roth Irn start investing today. I know at 16 you're not thinking of retirement. It's not something you're planning for like many decades away. what's the fun in that? You wanna go hang out with your friends and do things and totally, you should, but maybe there's a little bit, maybe even like$10,$20. See if there's an account that you can slowly put money away and let it grow. Just aside, I think it just teaches us the sense of financial savviness we need to do, because let's be honest, none of us learn it as. School. They don't teach us economics or money. There might be some school districts, and some schools they do most of what we learn. We learn at home by watching family, by watching friends and around us, and we learn our money habits quite early. That's how we pick it up. And we may choose to follow those habits or do differently, but. that is a good way to get started. So when you look at retirement and investments, one of the things is there's the 401k. So if you are working in a corporate job and almost all of you should have access to a 401k, unless your employer might not have enough employees, then they have other ones like a SEP 4 0 1 things and things. So 401ks are structured in two different ways. There's the traditional 401K in the Roth 401k. Some companies, a lot of companies do have access to Roth 401k, which came only a few years ago that you could start investing in it. And the difference is this, for a traditional 401k, you would invest the money. Pre-tax. And that is the big advantage of it, meaning that when you get your paycheck, that paycheck before it gets taxed can be put into a 401k. And the i r s has limits everywhere every year on how much that can be and how much you can max out. So it'll be a couple of thousand that you can put into that. And if you are over 50, 55, then the tax bracket, I mean that contribution amount goes up. So that is a big thing because. First of all, you can get put money pre-tax, but it traditional 401k is not the only option. There's really the advantages of doing the Roth four ohk. You have to see which one works best for you in your circumstances and what is the best investment for you based on everything else you're doing. So either you do the research, you talk to a financial advisor and a tax advisor and figure that out. Or even to the, your financial agency, the investment firm that's managing your. The advantage of the Roth four Ohk in the other side is yes, money is put in after taxes, but all the growth that compound interest will give you over time means that you will not have to pay taxes when you withdraw it while in a traditional 4 0 1 you will pay taxes afterwards and then some of the other differences. For one of them. For traditional, you will have to take out the money at a certain percentage at a certain age. I do not wanna give the ages and the percentages because the rules keep getting updated. And it's best to do your research because you know the tax rules change while for Roth you have to go look and at that point you do not have to pull the money out. There are pros and cons for both of it, so see which one applies to you. Sometimes people do a mix of traditional and Roth 401k over time so that they have access to their money at different times as well. The biggest reason you should invest in the 401k is more often than not, your company will have a match. Like companies will be doing 2% match, 4% match, 6% match. What that means is if you are putting money into your. 4% of that, say your company does, they will match it. So it's like getting free money into your account, so you at least want to contribute that minimum amount so that you, if you're able to, so that you can make the most of this money. If you have been listening to the show from the beginning, I did a show on being laid off and how we can move forward. One of the topics there I talked about was essentially looking at your four. and looking at your investments and seeing where they are and what you should do. If you have gone through a layoff or are going through a layoff, one of the decisions you can make is to keep your money in your 401k where it is currently itself and not touch it. But a lot of suggestions, a lot advisors, a. Knowledge of that basically says it's best to roll that money over into a rollover IRA because you consolidate it and look at your whole investment portfolio as one big thing, but one caution when you're doing a rollover ira. you have to be very careful and check with the investment firm. Say you're using Fidelity or Vanguard or Charles Schwab or whoever you have your accounts with, that when you're rolling over, you follow the right processes and the right procedures. You do not want to inadvertently withdraw the money because. There are penalties for withdrawing money early from a 401k. This applies when you're doing a rollover or you want to take out money for a big purchase. So if you are trying to take money out and borrow from your 401k think really hard and do the numbers or maybe run that must be online calculators and, understanding that information because there's a penalty that they tax you for taking the money out. So as much as possible, the advice is not to touch this so that you can have that and keep that going as you move forward. And so that is the way to look at it if you are just tuning in. This is Live Beats with Siri Schmid. what we can do as we prepare for retirement. A lot of us might be thinking about it, what that looks like. You might have a plan in a, Maybe in a few years, a long-term plan, maybe a decade long plan, and there are so many ways you can get started on this journey early and think about how you want to invest. We are just briefly touching on the concept of 401ks and why it's important to invest in your 401k and start from the day you start your job and whether you run work in a corporation. you run your own business. There are different ways you can invest for retirement. And the earlier you get started, just time is your friend here. So you should just make, take advantage of that. And the other part is if you work in a company, they do a match. So it is the best way for you to take advantage of that. And this free money that they're giving you is to. At least be investing to that match so that you get all the money you can get out of that and get some more contributions in your account. The I R S has mac limits each year on how much you can contribute, so that's the maximum you can contribute each year. And if you are over a certain age, it does give you extra contributions you can put in as well. When you're also looking at it, the other thing is, in addition to your 401k, you could invest in an ira and that is something to look at as well. When you're looking at the investments, we, this is January, so you know, a lot of us are thinking about what finances are going to look for this year. Are you may be budgeting, you are getting ready to pay your property taxes. in three months. Four. I mean in four months you'll be essentially getting ready to pay your taxes for April 15th deadline. So when you're thinking about all this, the 401K and IRA can become part of the tax planning that you're thinking of, not just for your retirement, but as you're looking at yearly taxes on. leverage that part that benefits your taxes and benefits your long-term retirement as well. So look at that. And one of the things that I really like, there are a lot of these online tools. So say you have. When Charles Schwar, fidelity or Vanguard, they have tools within their own sites, whichever firm you might use on doing these retirement calculators. And if you haven't used it, you totally should, no matter if you just started working or you are close to retirement or somewhere in the mid path, take a look at those numbers. I think it's a great tool because it's really eye-opening to see what those numbers look like. In essence, if you were to break the calculator down, they want very simple inform. they want to know how much you spend each year. And if you haven't done that's something to think. Start calculating in 2022. If you have not budgeted for the year, go look at how much your expenses and what your budget was for 2022. You could go to wherever. If you use a credit card or your bank account, you can go look at those numbers. There's lot. basically apps and things where you can do there's mint money, then there is personal capital. A lot of these places where you can track all your finance together. Once you know what your expenses are and what your projected expenses are, how many years you want to work, I'm breaking it down very simplistically and that's sometimes how the calculators are. They usually account for inflation. They'll tell you if they do or not, and it gives you a number of what things you need to have when you plan to do it. Tired. I think it's always good to run those numbers. If you haven't, I would say run it this weekend because I had a friend of mine who was contemplating retiring and This calculator, which took her maybe five, 10 minutes to run. What she found was, Only a small percentage of what her mental estimate was. So I think whether it'll be eye-opening in the, oh, I don't need as much, or, oh, I need that much, whichever way it is, I think it's always good for us to know how much we need to retire. So go ahead and run that numbers and look at that and see what that looks like. If you have more questions, you want me to discuss this in more detail, either the budgeting the numbers or get someone. like a professional to come on the radio show to have a talk about it or talk about the type of investments and get someone to talk. You can email me at live Beats 1 0 4 0.1 gmail.com. So let me spell it out for you. L I F E B E A T S. 1 0 4 0.1 gmail.com. So let me repeat again. L I F E B E A T S 1 0 4 0.1 gmail.com. If you have questions in this or any of the rodeo shows I've done in the past or anything we want to be talking about, you can email me. You can send me a voicemail with your name and where you are from and ask the question and I may email played on the radio. So as we are talking and you have tuned in right now, this is Live Beats with on Radio Caravan, one of one FM and 700 am Thank you for joining us today. The show we various things that our finances are live so that we can all learn. So last week we talked about, getting our financial house in order and basically, improving our financial health. Of course, it's here we are looking at new resolutions and stuff. We talked last week about credit history, credit cards, credit bureaus and stuff like that. Today we are talking about retirement and investments. If you missed any of this, you can find the same show on a later date on the podcast platforms as well to check live beats with Cerisha, and you should be able to hear some old episodes. One of the things when we look at retirement that we often don't think about, I'm going to go back to the research I shared in the beginning. that Edward Jones and a nonprofit did together of a lot of people at that, it was a huge population that they studied and found that there were four pillars for retirement. Often, most of us think of only the finances, but really the other three pillars are just as strong. It's you need these four pillars because you think of a three-legged stool versus a four-legged stool. Of course, unless three legs, stool is made we need all four legs to stand. Every piece of furniture you see almost always has four legs. So these four legs are very important for you to have a successful retirement. It's not that you cannot retire, but you want it to be successful. So finance is of course, a very key part. A second one is health. So as the new year comes, I know a lot of New Year resolution, so I'm hoping you are able to execute on them. Maybe step out for a walk, go for a walk with a friend, whether you've taken up yoga, you're going to the gym, maybe swimming, what, whatever that thing is to you, however you're choosing to improve your health, build strength, get stronger. Invest in your health because that is one of the most key things that will. the most important things when you retire as well. The other two things were family and relationships. Having strong relationships and family because you want to feel socially connected and emotionally connected and have a community around you. And family relations does not have to be just siblings or parents or kids. Family can be extended friends. It could be whoever you define as part of your family. So think of. family in a more broad term, and you can decide what that family looks like for you, what the structure looks like for you. And it doesn't have to be obviously decided today. Life changes, you figure things out. And one of the other parts is the fourth leg is also purpose like, often, if you're especially working for an organization and you have worked for a long time, you know you have worked very hard. Retirement will be different. Can you think of how many hours? So if you have worked eight hours a day into 40, I'm doing the math as I'm talking to you, that's 160 hours a week. Actually, no, let me go back 40 hours a week into approximately 50 weeks. So it's about 2000 hours that you. in a year. Retirement often is, 20 to 30 years. That's 40,000 hours that you will have in retirement. So what are we going to do with those 40,000 hours? We've talked about the money, but money is not going to fill the 40,000 hours. That's why the health is there needed for doing everything else. The relationships, the purpose. Now we are talking about purpose and that's why the purpose is important for the 40,000 hours. It could be anything you choose to. you could take up a new hobby, a new sport travel, move to a place, maybe find deeper relationships, volunteer, but think about it in a very broad scale. If you are really planning for retirement or thinking about it and it's in the near future. Something to think about a few years ahead is I'm restating this is think about where do you wanna. what kind of setting you wanna live. Maybe you even wanna think of what kind of place, whether apartment, a house and a farm, whatever it is. Think of what that looks like. who is going to be near you? Because now we've talked about the setting. You've obviously, you should run the numbers and see how much you will need for retirement and what that lifestyle will look like, and whether the setting suits it, you may wanna look at the community around you. So that takes care of the family and relationship part. So there's finance, there's the family and relationship. how are you going to engage? When you say how you know, what is that community, social, mental, physical, everything around you and the purpose, like how are you going to engage in the community around you? And if you are thinking you wanna travel, you wanna volunteer, especially if you want to volunteer, you may wanna start some of these engagements earlier, a few years ago. So you build a solid network around you to find those opportunities. We are pretty much in the last minute getting down to wrap up the. Thank you for listening. This is Live Beats with Cerisha on Radio Caravan. You can also check out my podcast, women Carrier and Life. I'm gonna spell it out. It's spelled w o m E n C a r e R. And. L I f e. You can find it on Spotify, apple, Google, where I share stories and practical advice for you to achieve and advance your career and life goals as you strive towards financial independence. We have been talking about how to get our finances in order, and our financial health. You can email me at live Beat 1 0 4 0.1 gmail.com. Thank you for listening. You can tune in every Saturday at five 30. Have a great. Bye.