What the Tech is a 401(k)

I know how overwhelming it can be to have access to a 401(k), but be intimidated that you don't have any idea and probably not even the time to understand why you need one or how they work.

After listening to this episode you'll have a solid understanding of how your 401(k) works, so that you can more confidently put yours to use.

• My First 401(k)
• Why a 401(k) is Important
• Power of Time and Compound Interest (link to visuals in the show notes)
• Benefits
• Traditional Vs. Roth
• How Contributions Work
• How Distributions Work
• Cool Features (like BrokerageLink)
• Costs
• Investment Options
• FAQs

You can find the show notes and images @ http://www.levelupfinancialplanning.com/what-the-tech-is-a-401k/

Music: 80s Motivational Chiptune by Shane Ivers - https://www.silvermansound.com

Transcript

Copy Transcript Copied

SPEAKER_00 0:00

listening that's not going out, oh yeah, I've been doing the problem doing the right thing. I would encourage you to take that next level, take that next step, and increase your contributions. And it might feel a little uncomfortable at first, but by doing it, it is automatic. So it's not something that you'll feel as much because you're not physically having to push that money out. If you set it up to be automatic, you're not going to miss the money after the next month or two. You'll adjust to your new cash flow just like we do if we were to lose a job or as we get more income. As we get more income, we tend to spend it all just the same as if we have less income. It's funny how that works. This is techie personal finance bootcamp where I help tech professionals in their 20s and 30s balance a great life today without sacrificing their future possibilities. I'm your host, Lucas Casaris, certified financial planner and founder of Level Up Financial Planning, where I help educate, coach, and build strategies with my clients to help them take their financial confidence to the next level. Here's an important compliance disclosure this podcast is for informational purposes only and they're not to be considered recommendation. It is recommended you consult your trusted financial professional before implementing any information obtained from the techie personal finance bootcamp. Hello, welcome to this episode of Techie Personal Finance Bootcamp. Today I'm gonna have fun talking to you about what the tech is a 401. And so what I'm trying to do here is just giving a little bit more confidence. I know one of the biggest things that I realized when I was first getting into financial planning and figuring out that financial planning existed, it had a lot to do with my first 401 and I'll talk about that in a second. But what I found out was a lot of people don't understand how their basic 401 at work and that's something that I want to help address with this episode today. And let me tell you about my first 401 so I was about 19 20 years old when I became eligible to start contributing to my first ever 401 I was working at a community bank back in Illinois and it really opened up my eyes to what investing can do and some of the benefits of that. So actually putting your money to work for you that was the first time I ever realized how that actually worked. Previous to that I've heard stuff and had like one very minimal consumer education class where they talked about saving probably not too much about investment at all because that doesn't really ring a bell. And I know my parents opened up a couple of savings accounts for me when I was younger but other than that money wasn't really top of mind. I was really good with numbers and I enjoyed that but I I really didn't understand investing or all the cool things that investing could potentially do. So small amounts add up and I'm going to show you an example a little bit later about what that means in in real dollars and if you're watching the video version of this podcast you'll actually see the comparison as a visual as well so that will be helpful and and I'll make sure that I get it into the show notes in case you want to check that out. So another thing was when I was first enrolling it was right about before the recession started so uh initially initially it freaked me out a little bit because the the small amount of investments that I had started to put up probably for the a year or so um putting into that account ended up losing a significant amount of value. But what I realized was that was all relative uh $1,000 $2,000 at that time when I was 19 20 years old and start to see that fall in half yes it's scary because that's that's a lot of money to a 19, 20 year old but at the same time in the grand scheme of things it wasn't gonna ruin my life it wasn't going to impact my life really in any way unless I was going to let the stress get to me about it. What I did start to see is as what happens in a recession is things start to become more affordable. So you may see that a lot more sales are going on at the stores and things like that. The same thing happens with investments. So when your investments fall if you're still buying into it which is what you're doing with the 401check you're actually buying a lot more shares for significantly cheaper than they were the previous time period before the recession hit. So it's actually a really great opportunity for young people and not even just young people anyone who's still actively saving for retirement. So anyone that's in their 50s and 60s and still working a recession is probably a little bit more scarier for them because they're they may be dealing with $5000 or a million dollars before a recession hits and then see that get uh impacted dramatically couldn't definitely stress them out as they're getting closer to retirement age. But as long as you're still saving pretty substantially and hopefully they've diversified their assets a little bit where some of their assets may have held up a little bit better during those times. So I'm not gonna be able to dive too much into how to diversify your portfolio other than talk about the benefits of why doing so is important. We'll get to that later in the show. So I I mentioned this at the intro like I I was so surprised that some of the the older uh people I was working with they were in their 30s 40s 50s and I was about 20 years old when all this stuff was happening and I was really getting interested in my 401k they had no clue what was going on in their 401k they didn't understand how it worked they they just did what they were told to do by HR or maybe they they did a quick online search and says yep make sure you get the employer match and we'll talk about what the employer match is it's a really great feature of most 401ks. So that was something that really started to open up my eyes to how a financial planner could actually help a lot of people because a lot of people just are either too busy or lack of interest in their financial topics and it's it's pretty overwhelming if it's not something that you're interested in. So approaching these topics hopefully through my podcast you're gonna get a little bit more comfortable with these things and so that you have more confidence as you're applying towards your financial life in in any form or fashion. So start to build some of that confidence and then start to feel like you're making better informed decisions. So why is a 401k even important? So it's it's interesting probably 30 years ago most employers most larger employers big big corporations provided their employees a pension so it was very common actually for a lot of uh probably either your parents or grandparents to work at the same company for almost their whole career or probably they did work there for the whole career they ended up retiring with a pension. A pension is kind of like a guaranteed amount that they're going to receive every single month kind of like the paycheck while they were working and the difference is the employer was responsible for setting that up and managing that, making sure it didn't run out of money and then also to make sure that they're able to keep sending all their old employees who have now retired funds every single month without having any issues. There started to become a lot of stress on employers employers started to get sued and mismanage investments and so what happened is they moved away from the pension system and now that's when 401 started to become introduced and became more popular. And so they shifted the responsibility of retirement planning from the employers to the employees which isn't necessarily a bad thing. I think it's it's good for you to to be more informed and have more control over your financial future the problem is with that transition no one knew how to talk about it or knew how to educate their employees or their children as they're starting to kind of grow into these new landscape for financial planning and retirement planning. And if you think about it life expectancies have been gradually increasing pretty steadily and so 30 years ago the life expectancy was a little bit lower than it is now. And so it wasn't as much stress on the pension system or retirement plans if someone was passing way earlier than what you'd expect nowadays. Now you could be living for 20 to 30 years in retirement pretty easily especially if if you're a couple there's a good chance one of you is going to live 20 to 30 years in retirement. So that's a lot of time where you need to still have a paycheck coming from somewhere Social Security exists but it's not meant to cover your whole lifestyle so if you're used to making $70 $150 $2000 Social Security is not going to get anywhere near that you might be lucky to get $30 $400 from Social Security. That'd be a really high benefit from them. So I would not be relying on them to provide that same lifestyle that you may be used to and comfortable with today. And so that's why a 401k is important. You have the sole responsibility of creating and and supplying a plan of income for yourself in the future it gets even more layers of responsibility when you have the significant other because you don't want to use all the money either on your medical expenses or whatever it be and then you pass away your significant other your spouse is still alive and they don't have any money left. So that's a big fear of most people when they do retire and maybe you're listening to this show now in your 20s in your 30s and you're like well I'm I'm not really too concerned about it. It's so far away like why why would I care about it now? There's actually a huge benefit of letting time and your investments do the heavy lifting for you because if you get started earlier it's gonna make your life so much easier and it's it's almost going to be like an autopilot from that financial standpoint. And if you don't do those things it's just a huge burden to have to carry and the biggest fear of most people when they do finally pull the trigger in retirement and this starts to become more top of mind for people in their late 50s and in their 60s as they're approaching retirement is holy smokes did I do enough am I going to run out of money and so that's that's the biggest fear it's actually even above dying so it's it's pretty crazy that that's the the thing that's most top of mind is one of the highest fears in retirement. So I I promise you I was going to talk a little bit about the power of time and just the benefits of what that can do for you. So I'm going to kind of explain this example because obviously I don't have visuals for you they they will be in the show notes but this is what we're gonna be looking at the power of time and compound and interest. So we're gonna be looking at an example of three different start periods for someone this is all hypothetical and used for projections for illustrative purposes only your returns may vary your returns year to year may be negative they might be all over the place but for this example we're using someone starting to contribute $300 a month into a retirement account and they're gonna do this from whatever date they start between the three examples all the way through age 65 and we're gonna use an assumed return rate of 7%. So again that return is going to vary substantially from your real life scenario but this is just a good illustrative purpose really you need to assess your own situation as far as how you're managing your investments whether that's going to be an accurate number so let's let's look at the first starting period. So I'm a big fan of starting early so let's say someone starts at age 23. They graduated from college they get their first 41k plan and they say you know what I don't really have that much responsibility right now I can start putting $300 a month towards this if you just do the $300 a month starting at age 23 through age 65 at a 7% return you're gonna contribute so the money that you'll put in over that time period is going to be $151200. Sounds like a lot right but you're spreading that over the course of 42 years so it's not it's not that much in the grand scheme of it when you kind of break it out that way so uh $3600 a year basically what happens is by having that time and that potential growth and that compound in interest the growth that would occur would be $767,238. So that is a ridiculous amount of growth right and so the total is $918,438. So your investment would have grown from $151,200 to $918,438. And that's just contributing $3,600 a year for the next 42 years. What happens what's the dramatic impact by wait in 10 years and this happens a lot because a lot of people don't want to think about retirement or it doesn't even seem like a real thing like what the heck is retirement when you're in your 20s right but that that could be a mistake and we'll look at a reason why so if you waited 10 years until you were age 33 to do that same thing saving $300 a month until age 65 at a 7% return well you're saving for 10 less years. So you actually don't save as much initially for the previous example you ended up saving $151,200 but by getting a start 10 years later you save substantially less so you're only putting $1150 it's still the same $3,600 a year the difference is you just subtracted 10 years of doing that. Subtracting that 10 years is pretty substantial and it's more than that difference between your total savings. The growth amount that would actually occur in this scenario would be $31523. Drastically less huge it's it's less than half of what you ended would have ended up with if you would have started 10 years earlier. And it's not like you're saving half the money you still saved a good chunk of the same amount so it's it's pretty ridiculous. So let's compare those two totals so if you started at age 23 you would have had $918 wait in 10 years sure you save a little bit of money by not saving over those 10 years but your total is $4310 and so it's it's not even close. It's not even close. It's pretty ridiculous and I'm not even gonna go into the the third one wait until age 43 that's just a horrible idea because you you end up with practically nothing when you retire and and so that's not even worth going into do not wait if if you are listening to this and you're in your 40s and you haven't saved anything yet it's not to say that you can't turn things around but you have to start subs saving substantially more than $300 a month to even get ballpark with someone that would have started at age 23. If your younger version of yourself would have started at age 23 uh they would have been sitting in a lot more comfortable position so just be aware of that and I'm not saying that you're doomed if you waited that long I'm just saying there's a lot more work to do and $300 a month it will not do it at that point. For anyone watching the video version it's it's it looks dramatic. So you look at if you start at age 23 practically saving not that much more than some of the other options but the the growth is more than double and so it's pretty substantial it's pretty eye popping actually if you take a look at it so I encourage you to check this out it's yeah just dramatic and if you start at age 43 you can see kind of what I was talking about. It's just practically nothing you you barely double what your savings is where if you start at age 23 you uh compound that so significantly that it's it's a multiple of what you would have saved in over that time period. Obviously we've talked about that but what are some of the other benefits of your 401k it it's gonna force you to save for retirement I mentioned that it's not really something that's top of mind. So if anything that's gonna help you do something that's that's not uh high interest and it doesn't give you that immediate short-term benefit is helpful because it's gonna be something that you'll do automatically it's not like you have to decide every single month well how much did I put in this month you tell your employer what you're gonna do and then it saves that much every single paycheck. So it's an automatic retirement savings that you kind of set on just an automatic situation there. There's some tax incentives too so even if you have a Roth option for your 4K there's special tax treatment we'll go into those comparisons between a traditional 401k and a Roth 401k either way they both have really cool tax incentives to incentivize you to actually save for retirement because the government knows that a lot of people are not doing what they should be doing and they don't want people to be living in the streets and Social Security that's what Social Security was invented for is to keep people from living and dying in the streets during the Great Depression. Hopefully that's that's not even going to be close to a scenario for you or anyone that you know but that's why it's beneficial to start saving and and really Social Security is not going to do too much more than get you basic housing and very very minimal basic level of nutrition as well. Another cool benefit almost all employers offer an employer match which means if you put a certain amount of money in your employer is going to match either a fraction of it or a certain amount dollar for dollar. So that's free money and it's it's that's one way to quickly increase your savings. The the previous example that I kind of talked you through that didn't even factor in your employer putting in additional money for you too so that's additional growth that's going to help you feel more confident as you're approaching retirement and and maybe even thinking about retiring early if you yeah you probably won't be able to retire early with $300 a month but if you are able to increase that as your pay increases it gives you a lot more flexibility and freedom to live the life you want to and and make sure that if you're not enjoying work that you have more options and flexibility at that point. There's also some unique creditor protection so if you're going through bankruptcy or are getting sued the assets in your 401k are going to be protected from a lot of those things doesn't protect you from things like divorce actually quite the opposite you're you're required usually to whatever the court decides is going to get kind of partitioned out and the the spouse could be entitled to it. If you're on the receiving end then you would be entitled to a portion of that so something to be aware of what I want to talk with you about right now is the the the cool tax treatment between the traditional and the Roth. So we'll work down the traditional side first and so another way that people may categorize and I call this aka also known as pre-tax dollars that's the traditional 401k the cool things about that is it's tax free when it goes in which means that it actually reduces your taxes for the years that you apply your contributions and so that reduces your taxable income which is helpful both on the federal and state level it doesn't relieve you from Social Security or Medicare taxes though so that's important to be aware of but the federal taxes and state taxes that is something that is put off for now so it's tax free it helps reduce your taxable income for that year. Then the growth is also tax free so as long as you leave your investments in there if there's any growth at all that's gonna be tax free as it's growing and the big the big thing to be aware of though is eventually the IRS does want their money. The government wants their money they're gonna tax you once you withdraw it. So it may be 20 years from now 30 years from now if you're starting really early 40 years from now so when you retire and start to take money out that's when it starts to get treated as taxable income which who knows what the tax brackets are going to look like at that point in time but just know that that's when that will be kind of filling your income brackets at that time. So how that compares to a Roth for one K so Roth is actually the opposite and if you take a look at the visual I provide there's like a a complete opposite look to what the Roth looks like and another way that people consider a Roth account is post-tax so it's actually you paid taxes. I know this is a a little bit complex but I I want to make sure that you're aware of it in case you ever see it while you're um looking at your tax forms or anything like this but if you make traditional contributions that are not allowed for tax deductions those are also called post-tax deductions but they sit in your traditional account it's very different that's not the preferential way if that ever does happen you want to try to get that to a Roth account but there's some complexity there so make sure your your work with something or do your due diligence and make sure you handle that right way but a Roth account is also called post-tax so I wanted to make sure I I gave you that information so you're not not too confused if you run into that scenario but again it's the opposite of how the traditional 401ates your contributions are actually taxed so it doesn't save you in taxes today or this year. There is tax-free growth so that's the same as the traditional 401 right and then the cool part about this is as you take money out when you retire that's all tax free. So it's basically the inverse or the opposite of what the traditional 401 does instead of being taxed at the end when you make the withdrawals you're taxed at the beginning with the Roth 401k and then when you withdraw your funds in the Roth it's actually tax free. So an awesome benefit and I actually encourage people to try to have a little bit of both because it allows for a lot of tax strategies and flexibility during retirement. How do your contributions even work? You might be like oh yeah 401k sound awesome how I I want to get a little bit more comfortable with what to expect as I'm making contributions and so contributions are typically going to be applied on a per paycheck situation. Anything you put into your account is your money so it kind of gets categorized and is tracked as this is your money if it grows That's still all your money if it goes down. Whatever's left of value of that portion is still yours. So you're you never are gonna lose the amount that you put in, but your investments could potentially lose value, which it's still your money, it just may not be as much, but it's not like your money disappears or you lose investments or assets. Those things are yours to keep and they're able to move with you too. That we'll talk about a little bit later. Employer contributions, though. So when the employer gives you that free money, that free employer match, there's that that kind of gets categorized separately. And sometimes your employer makes it available immediately for you and it becomes yours the equivalent of your own contributions. But sometimes your employer wants to build in incentives to make sure you're gonna stick around with the company. So they may wait, uh make you wait a few years to get the full amount, but every year that goes by you receive an additional portion that becomes yours. So you'll see everything in your account, but it may not be all yours if you quit that day because you you have to wait a certain amount of years and it varies. It might be three years, it might be four years. Uh, you'll want to know what that looks like, especially if it's part of your uh strategy when making a career change, thinking that you're gonna get a certain amount and be shocked if for some reason you weren't fully invested with your employer shares. So that's what it's called a vessing schedule. That's what you'd want to look for in your documents for your 401k. And there's actually a limit to what you can contribute and deduct from your taxes if you're doing traditional, and it's the same contribution limit, even if you're doing the Roth post-tax type contribution. So that contribution limit for 2019 is $19,000. And if you happen to be over the age of $50, you can make an additional $6,000 a year. And remember that it happens per paycheck. You actually can't pay it out of your own checking account or savings account. It's not like you wait till the end of the year and say, you know what, I want to make these contributions. Let's dump all this money in now. That's not how it works, it has to come out of your paycheck as you go. So make sure you plan accordingly and make sure that you're uh maximizing your employer match and benefit as well. All right, so you may be wondering, well, how the how the heck do I get the money out? And hopefully, hopefully you're not in the situation where you need to, because it's definitely better to let your investments have a long-term growth horizon. Uh, wait till you're in retirement, and there's a few reasons for that. So you're actually not allowed to make normal distributions until you reach age 59 and a half. So uh some of you that may be listening to this, that may be way out there. If you withdraw your funds earlier than that, there's actually a 10% penalty, which doesn't necessarily feel good. Um, if your balances are pretty small, a lot of people justify it by saying, ah, it's not really that big of a deal. And as you change employers, you end up taking it out. The problem with that is if you keep changing employers and you keep doing that, you're gonna keep starting all over. And we know what happens a lot of times when you take that money out when you move from 401k to 401k, you're just spending it on miscellaneous things. It's not something that's uh you're moving it to another investment, or it's it's adding significant amount of value to your situation. So if you're able to move from employer to employer and not cash out your 401ks, that's gonna be better. You can still consolidate them in another form or fashion. So as you take the money out of the traditional side, we covered this already, but I just want to reinforce this. If it comes out of your traditional 401k side of the equation, which is where most people tend to have their assets, it's gonna be taxable income as it comes out. So if you withdraw early, you might be facing not only taxable income, but that 10% penalty in addition. So it could be eating up pretty quickly. You may end up with 80%, 70% just due to the taxes and penalties if you make those early distributions that have that penalty applied. I mentioned this that, but you can actually move those funds with you after you leave your employer. So it's not like, oh, I hate my employer. I really wish that I didn't have to keep my funds there once I leave. You don't. You're able to take them with you. You'll want to make sure that you follow a certain process so that you're not taxed and you're not penalized, and you can roll it into an IRA or uh your new employer 401k if the plan allows that. There's some really cool features that I encourage you to explore and find out more about. I'm not going to go into them in too much depth because they don't relate to everyone that uh may possibly uh have them or they they just may not be as beneficial. So one cool thing that I see every now and then on 401ks is there's a rebalance feature. So what that does is it basically allows you to set a time period. You can usually you don't want to do it too often. The highest frequency I would recommend would be quarterly. So if you want to say every quarter, I want things to be rebalanced and placed at the same percentages as your plan for your investments. So when you're choosing your investments, there's a lot of different options. And what you'll probably end up doing is you'll you'll set out a breakout of how much you want where. And so this rebalance feature will make sure as your investments kind of bounce around, some some will go up, some will go down, and they kind of do it at different times, and depending on what's going on in the world and different industries and different countries and things like that. So they're not all moving it at the same pace or the same speed or in the same direction sometimes. So the rebalance feature actually brings all of those percentages back in line. And again, the most I would ever recommend you do that would be quarterly, and probably the most beneficial one would just be to allow it to happen annually. That's how I'd approach the rebalance feature if you have it. That's kind of a rare one. I don't see it too often, but it's a neat feature and it helps keep you on track and it doesn't let your investments get too far out of whack, especially if you don't have time to keep an eye on them. Most employers offer 401k loans. That's where you're eligible to actually take funds out of your 401k and not have to pay penalties or taxes as long as you follow the rules. You do have to pay the 401k loan back. Um, but that's something to be aware of. Again, it's it's not usually beneficial to do things like this unless there's either a dire need, an emergency situation, or how you're gonna be applying it is actually an investment into kind of what your life is looking like. And so if you're doing it just so you can go on vacation or or go spend some money, that that's not a good reason. I I would not encourage that type of behavior for uh using our 41k loan. There's also a cool benefit. So I work with a lot of tech employees and tech companies, and a lot of them, especially if they're uh associated with Fidelity, have this cool option called brokerage link. So that actually opens up the world of your investment choices from all of the target date funds you may see and some of the mutual funds that probably like a dozen or so, to being like hundreds and thousands of different options for you to choose from. So that one really takes an expert level of confidence with choosing investments, but I think it's a pretty cool option. And uh what I do with my clients when that is eligible is we build customized portfolios and we try to reduce the cost and the expense ratios as much as possible. And I'll I'll talk about that here in a second. Also, another cool feature of 401ks is if you are age 55 or older when you leave, which 55 is younger than age 59 and a half, right? Which is to make those normal distributions. But if you're age 55, still working for your employer, but then leave after you turn to age 55, you're allowed to take distributions out of the 401k, and it's a 401k only, too. So you want to make sure you don't make the mistake of accidentally transferring it to an IRA account because if you do, you'll have to wait till age 59 and a half again to avoid the penalty. But age 55 working for your employer still, you could retire the next day, and basically you're allowed to take contributions from that 401k as you need them without any 10% penalty. So it's a cool, unique benefit, and it's one that I know people make the mistake of consolidating it or taking it out of their IRA account, and then they need it and they're like, oh shoot, now now the 10% penalty applies. So be aware of that. That is a good good and awesome strategic feature for 401ks. Costs, a lot of people think their 401ks are free, something their employer provides for them for free. Now, your employer may pick up some of the administrative costs, but really they're not free. Um, you're paying a lot sometimes. Uh the higher the balance, the more you're paying because each of your investments have their own expense ratios built in. And it's really unfortunate because they don't make these transparent. They it's not going to show up on a statement essentially saying that you paid this amount this month or this quarter. It just gets taken out of the value of your share. So if you're had a share that was worth $20, that gets reduced by a small, small bit every single day that it's that goes by to pay the fee and you don't see it or feel it. Um, and then if there are admin fees, most of the times those are the things that your employer picks up, which is pretty minimal in the grand scheme of things. But uh every now and then employers will also pass like a $15 a quarter type fee to you. So just be aware of those because those things add up and they're not in all plans. So you'll just want to make sure that you understand where your money should be if you're changing employers and know what all your options are. So investment options. This one's a little tricky. Uh I'm gonna have to do a separate video and podcast and then different strategy get all together for investment options because there's so many things away, and it takes a really good education and foundation to understand what's going on. But that's really a good core place to start. You need to understand the risk versus reward scenarios with investments, you know, because it's super important. No one knows what's gonna happen. And I know there's experts, there's people that have paid millions and millions of dollars, but the problem is 50% say things are gonna be really awesome, and 50% people say it's gonna be horrible this next year, or and and that's for any given year. There's always people on both sides, experts kind of for their own reasons think things are going one way or another. So no one really knows, and so you have to be very comfortable if things do not go well, how you feel about that, and then you also need to make sure that the risk you are taking is gonna be high enough to provide you the reward that you may need in order to retire or actually accumulate assets and wealth over time. I mentioned this way earlier, but diversification is super important. You don't want all of your eggs in one basket because it's very easy for that to not recover as quickly or as as easily. So if you're not diversified and something happens to that investment, it's not as easy to recover sometimes if as if you did have it spread out a little bit more and spread the risk out a little bit further. A lot of people are automatically set up with target date funds, which are not too bad. Um, if if you do start to get more comfortable with investments, I do encourage you to uh look at what else is available, typically they're mutual funds, and just kind of compare the cost, compare the asset allocation, which is a fancy way. And again, I don't have time or I don't want to drill into that in this particular episode, but uh basically that's where you decide how much should I put here, how much should I put there, how much should be in the US, how much should be in large companies, small companies, uh, how much should be in Europe, all these different things. So you want to make sure those things are diversified and understand what's going on. But once you get comfortable with that, it may be a lower cost or a better strategy to actually pick and choose your own mutual funds, but have a process and have an understanding of what's going on. And I and I can't tell you enough again, the cost is very important. Sometimes the mutual funds in your former case are super expensive and there might be a little bit uh more affordable options. And so I'd encourage you to take a look at those things. So a lot of the frequently asked questions that I get is how much should I contribute? So it's it's tricky. I would say early on, just think about the trade-offs, right? Because you're probably thinking, well, I'm not gonna need this for a while, and maybe I don't want to save that much right now. But you also probably don't have as many responsibilities, and sure, student loans are a pain in the butt, but those are all these things that you have to kind of balance away. I would say, at a minimum, make sure you contribute enough to get the employer match because again, that's free money. You don't want to lose that opportunity, especially if you're gonna be with your employer for a long period of time. Should you pay down debt first, you don't want to pay down debt first and make that your only focus if there's that employer match. So again, I think it's at a minimum, you want to try to get that free money as much as possible because it's basically a hundred percent return sometimes, uh, with depending on what your employer matching percentage is. But if you put in 3% and your employer puts in 3%, that's a 100% return where uh most of your debts are gonna be relatively lower interest, hopefully. Hopefully, you don't have too much credit card debt where those are really high interest rates. Once you start getting into that neighborhood, and if you have just kind of crippling debt with double-digit and high 20% interest rates, you yeah, then you start to focus a little bit more on the debt. But uh most people have a little bit more balanced debt. And if you have auto loans, uh student loans, and mortgages, like those things, pretty reasonable interest rates. So I would definitely focus on getting your employer match as best as possible. Should you take out a 401k loan? I hinted at this earlier. It's kind of breaking a case emergency. I would not do it just to supplement your lifestyle or uh to just enjoy or feel better about leaving your previous employer. The more responsible thing to do as you leave employees is to keep track of it, and then if you want to, you can roll it into an IRA or to your new 401k and make sure everything is consolidated. You don't have all these different pieces of retirements all over from your last five employers. So you can consolidate those things, and I urge you not to touch those things unless there's just a huge emergency and and really you don't have any other option. What if I don't plan on staying long? So if you don't plan on staying long at your employer, I would say don't let that be an excuse not to put in because again, your own contributions are yours to keep. So it's not like you have fear of losing that. And so hopefully addresses part of the fear that you have. But the other part is if there is a vessel schedule and you think that, well, maybe you're not even going to get the employer match to keep, well, that's free money anyway. So that's additional stuff. And every year that you do stick around, you still get a portion of that free money. So you're leaving money on the table if you decide not to do anything and you stay with your employer for two years. Uh you would have gotten a decent chunk of what they put in and been able to keep that for yourselves. And then another kind of example I will just give you is I thought the same thing when I first was 19, 20 years old, starting my 401k, and I was still working my way through school, and I didn't I didn't know what it looked like the next year. And so I was like, uh, like I'm enjoying my work enough, but like, am I really gonna be here in a year or two to where it's gonna matter? And I ended up being there five years, and I'm glad I did start doing it, and I had a good role model to get started, uh, and kind of encouraged me to do so. But basically, though that set me up for a lot of good, strong financial decisions and created a lot of opportunity, not only just learning for myself how to help clients tackle these issues and questions, but it just really helped me build financial confidence as I was making a big move out to Colorado. So if you have any additional questions, definitely reach out. Um I don't mind getting back to you either through email or jumping on a phone call or even possibly just recording another chunk of uh episodes or special, special episodes to answer specific questions like these types of ones. So I do highly recommend a 401k for all the reasons we covered, but I just want to remind you, starting too late just adds a lot of unnecessary stress to your future self. And so I know it's hard to think about it, but just try to imagine it, and there may even be some crazy filter on Snapchat or or Instagram or one of these types of things. If you can make yourself look older and try to put yourself in the shoes of that future self of you or current spouse's future self, and just think about what that future looks like, how you want to feel, and how much better it'd be if you didn't have finances as a stress. Maybe finances are currently stressed, but as you start to make incremental improvements, start to level up day by day, month by month, year by year, these things don't have to be a stress for you in the future. And you can just live a great life and be old and gray or whatever ends up happening to your hair. And so just think about that. I know it's it's not easy to do, but try to do it as much as possible. I know from my perspective, I just watch a lot of movies and I like putting myself in other people's shoes. I think it's something that helps me with my clients, is try to think from their perspective. And obviously, I don't have all their details, I don't have all their history to know everything, but I do my best, and I think that helps me think about the future for myself as well, to kind of take myself out of my body and kind of project out a little bit to the future. So I know it's weird to think about, but I think it does help if you're able to try to do that, and it creates a little bit more responsibility than probably what you're feeling now, especially if you're in your 20s, 30s, maybe you don't have a significant other, you still are gonna be responsible for yourself in the future. And so 401ks are just an easy way to increase your financial confidence, and it may not feel like much as you first started out, but we saw from uh the examples that I kind of put out there that over time small amounts will add up to ridiculous amounts, and it's just gonna create a lot of confidence, give you a lot more swagger as you're approaching important financial decisions in your life. And 401k is probably something you're not even gonna touch as you're making other financial decisions. But when when you're getting married or you're buying a house or relocating for a job, it's just one less thing that you have to worry about because you know that, well, I've I've been doing really well, and so it gives you that flexibility to take chances and things that you want to do, even if you weren't planning on touching them. It's well, this is kind of in case of emergency, like a backup to your emergency plans and or emergency funds and things like that. So I definitely highly recommend it. Hopefully there was some valuable information and and maybe you knew a little bit about your 401k, but just wanted to find out more. Hopefully, you've got one nugget of information that you can continue to build upon and start to have more confidence and understand why it is so important to start today. And and if if you're listening to this now and you're like, oh yeah, I've been doing a 401k, I've been saving, I'm doing the right things. I would encourage you to take that next level, take that next step, and increase your contributions. And it might feel a little uncomfortable at first, but by uh doing it, it is automatic. So it's not something that you'll feel as much because you're not physically having to push that money out. If you set it up to be automatic, you're not gonna miss the money after the next month or two. You'll adjust to your new cash flow, just like we do if uh we were to lose a job, or or as we get more income, as we get more income, we tend to spend it all just the same as if we have less income. It's it's funny how that works that every single month you so you kind of work it pretty close, like a I call this like a spending ninja. You get as close to uh running out of money until that next paycheck. So I encourage you to keep keep making progress and and don't rest on your laurels because there's there's benefits and you're not gonna miss it, I guarantee it. With that, I would like to thank you for listening to the show. And yeah, reach out, let me know uh what I should be covering next, who I should be interviewing next, and uh take care. Thank you for listening to Techie Personal Finance Bootcamp. I invite you to reach out, review, let me know what you want to hear more of. Uh if there's things you don't like, definitely reach out, let me know. I want to make this that the best resource it can be for you. And just like you starting your kind of education and internet foundation, that's essentially what I'm doing with that podcast. I would say I'm doing it as well first on the class, but that's not that much of a concern. But I kind of looked at the way that that's going to do it, and it's really meaningful for you to the point to where you'll start sharing it with other people that you think that's really where I want to get this show. So, anyway you think I can improve any specific questions, uh feel free to reach out. I'm gonna be happy to incorporate that into future episodes. And everything I do, whether it's in my business or any of the additional content I produce, is really just to help people take their financial confidence to the next level and just really improve and just live a better quality of life. So, catch you next time on Techie Personal Finance Boot Camp.