401(k) Factors to Consider

By Dean Barber

May 13, 2021

401(k) Factors to Consider

Key Points – 401(k) Factors to Consider:

  • Pay attention to your 401(k) sooner
  • The many 401(k) factors to consider
  • What do you do if you change jobs?
  • 25 minute read | 39 minutes to listen

You’re 401(k), if you’re like anyone else, is likely your largest asset. If it’s not now, it probably will be in the future. What happens to that 401(k) when you change jobs? Should you do Roth or traditional contributions? Join Dean Barber and Bud Kasper as they discuss your 401(k), your largest asset.

Complimentary Consultation

Download: 401(k) Survival Guide

Podcast: The Guided Retirement Show

401(k) Factors to Consider

Dean Barber: Thanks so much for joining us here on America’s Wealth Management Show. I’m your host Dean Barber along with Bud Kasper. So, Bud, we’re going to talk about the biggest asset that just about everybody has; the 401(k). We’re going to focus on that today. 

Pay Attention to Your 401(k) Sooner

Unfortunately, as people think about their 401(k), they don’t really start paying close enough attention to it until they’re later in life. Do you know what I mean? 

Bud Kasper: Yeah, “Now I got to get serious; I have ten years until I retire!”

Target-Date Fund, Here I Come

Dean Barber: Yeah. The problem is that when you go to work and for those of you that are older today, I want you to think about your children or grandchildren that are just starting to work because now most companies have an opt-out provision, right? So they’re going to enroll you in the 401(k) automatically. When they automatically enroll you in the 401(k), they’re putting you into one of their lifestyle funds.

Bud Kasper: It’s a fund with a specific time in the future.

Dean Barber: Right. So maybe if you were starting work today in 2020, this will be a 2060 fund. They’re targeting that 40-year timeframe. So they continually change the mix in that as the individual gets older. 

Neither you nor I are fans of those for obvious reasons. Mainly, there is no proactive money management with those; it’s simply a change in the amount of equities versus the amount of fixed income in those as you get older.

Bud Kasper: That’s simple, perhaps some additional diversification, let’s say REITs or something like that, as opposed to just pure stocks or whatever, but for the most part, that’s right.

Dean Barber: Most of them are issued from mutual fund companies. And really, what they are is a fund of funds. Right, so it’s a fund that holds several different funds inside of that fund group.

Bud Kasper: Remember the controversy over that was you had an expense factor for each of the funds inside the target date. And then you had an overlaying fee as well. 

Dean Barber: For target date to tell us what? How much we should have in each one.

Bud Kasper: But that’s long gone.

Avoid Going on 401(k) Autopilot

Dean Barber: Right. But the point is that people start their jobs, and they go on autopilot. “Money’s going into my 401(k). I get a statement once a quarter, I open it up, and I’m like, Oh, okay, look, I’m starting to build up.”

Over time, you’re looking at it and go, “Well, we’re getting a pretty good nest egg in there!” But you’re not paying that much attention to what’s going on in the underlying investments.

What if I Change Jobs?

Then you change jobs and say, “Well, what should I do with that old 401(k)? I’ve got $50,000 in there. Oh, my new company has a 401(k). I’ll start that one.” And you leave the old one alone. It still sits there in the same target-date fund, not paying any attention to what’s going on, right.

Bud Kasper: No brainer fund.

Your Company Doesn’t Manage Your 401(k)

Dean Barber: You’re under the misconception that somehow, someway somebody from that old company understands who you are and what you want and your risk tolerance and everything else. And they’re handling those underlying investments, but nothing could be further from the truth.

Bud Kasper: That’s right. So, as with anything that involves money, you have to pay attention to it. You have to have a purpose for that money. You have to create a plan for how you’re going to get the result you’re hoping for.

The 401(k) Survival Guide

Dean Barber: Right. No matter what age a person is, whether you’re in your twenties, just starting, whether you’re in your mid to late fifties, and you’re edging closer to retirement, we put together a 401(k) Survival Guide. This 401(k) Survival Guide is meant to give you a bit of a head start on what you really should be looking at and understanding when it comes to your 401(k).

Click here to get a copy of that 401(k) Survival Guide. Because chances are, if you’re average, you’ll change jobs and or careers six times. So that comes from the Bureau of Labor Statistics. On average, between 25 and 52 people will change jobs six times. So that means that you’re going to have to make a decision; what are you going to do with that old 401(k) when you go to the new employer, right.

So Many 401(k) Factors to Consider

There are arguments for leaving the money in that 401(k) and for rolling that 401(k) into your new company 401(k). There are arguments for taking that 401(k) and rolling it out to a self-directed IRA so that you’re in control of those underlying investments. As well as arguments for doing the rollover and then doing a Roth conversion.

All kinds of considerations when it comes to this 401(k). Whether it’s creditor protection, whether it’s access to the funds, and we’re going to get a chance to talk about most of those things today. But the point is that so many people, with their 401(k) being their largest asset, don’t give it the time of day or don’t give it the attention they need.

Many “Financial Advisors” Don’t Help Manage 401(k)s

Quite honestly, Bud, most of the financial advisors out there look at that 401(k). They’re like, “I can’t touch that. I can’t manage that. It’s stuck in that account. So what else do you have that I can actually manage?” 

Maybe they’ll take a look at it once a year or once every other year and give a little direction, “Oh, perhaps rebalance over here or do something a little bit different.” It’s not proactively managed now.

But you and I for years have looked for technology that would allow us to be able to go into our client’s 401(k) plans and manage that money. Just like we manage the money here. Now we can’t do it exactly the same because there’re limitations of your choices inside the 401(k). 

But the difference in what we can help you do and the difference in the amount of money you could accumulate with professional management is unbelievable. You need to see it. I want you to schedule a complimentary consultation by clicking here. We could call it apathy, Bud, and that is your 401(k)’s worst enemy.

Bud Kasper: Laziness might be it. Yeah. Maybe not understanding the importance of your future target and how you’re going to get there.

Dean Barber: Yep. And then, if you’re putting money into the 401(k), then what do you do? Are you going to put it into the Roth portion of the 401(k)? Or should you put it into the traditional pre-tax part of the 401(k)? All those things that people need to consider when it comes to their 401(k) are all part of a well-crafted financial plan. We can’t give that particular answer without a well-crafted plan.

So, What Do I Do with My 401(k) If I Change Jobs?

Dean Barber: What’s funny is, Bud, that just before the show, my son calls me, who’s living down in Florida, and he’s doing extremely well in his career. Another company in the same industry contacted him that he’s in now, saying, “Hey, why don’t you look at coming over and going to work for us?” and they’re dangling some pretty attractive things in front of him. 

So he’s asking the question, “Should I stay, or should I go?” and, Bud, somebody between the ages of 25 and 52, they’re changing jobs on average six times through their working life. So the question is, why are people changing jobs so much?

Bud Kasper: Well, a lot of times, it’s advancement. You’re trying to see, “What company can I work for that will get me to the result that I want for myself, career-wise?”

Dean Barber: Next level, more income, more freedom, less stress. I mean, there’s a lot of reasons why people might change jobs. Maybe they’ve got personality conflicts with their management. 

Bud Kasper: Well, let’s face it. It almost always comes down to money.

Dean Barber: Money. It does. It makes the world go round, right?

Should I Stay or Should I Go?

Bud Kasper: It does, indeed. The “Should I stay or should I go?” so when we’re trying to parallel this, if you will into, “Okay, I’m going to leave. I’ve got a 401(k), I have choices. I can leave it to the company that I’m just leaving.” That option is available to you. You could roll it over into an IRA if you wanted to do that. You could put it in the new company plan if that’s permitted, and most of the time, it is. 

So some things need to be evaluated at that particular point in time to do what? Maximize the result for yourself.

Many times, Dean, people will never do this, is it’s an examination of the investment options. But no one has the expertise that is fully employed with another company to go in and make that evaluation.

Leave the 401(k) or Roll it Into 

Dean Barber: Right. Let’s think about this, Bud. Why would you want to leave the money in your existing company plan or roll it to your new company? One reason could be a tax reason. 

So, if you have money only in 401(k) assets and you have no money in an IRA, and your earnings exceed the amount that allows you to contribute to a Roth IRA; then you can contribute to a traditional IRA and immediately convert to a Roth IRA with no taxes due.

Why is that? Because if you’re at that level, your traditional IRA is nondeductible. That nondeductible IRA, you’ve already paid taxes on the money that went in. So, let’s say you put $5,000 into that nondeductible IRA and immediately convert that over to a Roth IRA; it’s not a taxable event to you.

Now you get an opportunity for that $5,000 and then subsequent years, as you’re making those contributions, to begin to grow tax-free. Then as long as you leave the money in that Roth IRA until you’ve reached 59 and a half or for five years, whichever is longer, all the money in the future comes out tax-free.

To Roth or Not to Roth?

Bud Kasper: Tax-free. Well, you know I’ve railed on this for years that even though mathematically, especially at the beginning of someone’s career, it might be more beneficial to do the traditional 401(k) and make the contribution on a pre-tax basis going in. 

Of course, the concept behind that is that now you’re working on Uncle Sam’s money to make your money grow. However, that’s a little short-sighted because when you get to the distribution part of your life, that will be a taxable event when it comes out.

Dean Barber: Right. Let’s say that somebody is 25 years old; they’re just starting in their career, they’re going to make $60,000 a year. I’m going to tell that person all day long, use the Roth portion of the 401(k) because you’re in a low tax bracket now. Yeah, you’ve got to pay money on it before it goes into the Roth 401(k). But then, for the next 40 years, it grows tax-free.

When you start distributing it, it comes out tax-free. So you got a whole bunch of earnings potential inside of that Roth 401(k) that will never be taxed. If you did the traditional, “Oh, you put $5,000 in, you save $750 in taxes,” woo-hoo. But some people will get excited, “Look, I saved $750 in taxes this year.”

Yeah. But we’ve said this so many times. As long as you live in the United States and either have money or make money, taxes will be a fact of your life. 

“How do I pay the least amount of taxes over a lifetime?”

So when you look at long-term planning and especially long-term tax planning, you have to say, “How do I pay the least amount of taxes over a lifetime?” Not “How do I pay the least amount of taxes now?” 

When we look at the deficits that we have out there today, and you look at where the current administration is saying that tax rates are going and looking at somebody young today, they’re in a low tax rate.

They’ve got a promising career ahead of them, and they’re going to inch up in earnings over time. They’re going to be in a higher tax bracket in future years and likely in a higher tax bracket when they retire than they were in those early years. So do the Roth when you’re young.

Ed Slott on IRAs

Bud Kasper: Right. Exactly, right. A friend of ours and somebody we’ve been learning from for the last, I don’t know, 15 years, something like that, Mr. Ed Slott, better known as Mr. IRA in America, what did he say? He said you got a choice. You’re working, and you’re young. It doesn’t matter what your age is specifically.

What he’s going to say is you can either pay the tax on the seed or the tax on the harvest. If you pay the tax on the seed, yup, you’re taking a bite upfront. But from that point forward in that Roth IRA, there is going to be no tax. And more importantly, there’s going to be no tax at the time that you need the money in the distribution phase of your life.

Dean Barber: Ed will be joining me on The Guided Retirement Show™ podcast, which should be coming up sometime early to mid-July.

Bud Kasper: Great.

Dean Barber: Here’s what I want you to do so you make sure that you don’t miss this podcast. Go to your favorite podcast app, find The Guided Retirement Show™, subscribe to it, and then you’ll get a notification as every new episode comes out. You can also subscribe to our YouTube channel. 

We have gotten to do many great things on that podcast, but the one with Ed will be extra special because he just came out with a brand new book called The New Retirement Savings Time Bomb.

The New Retirement Savings Time Bomb

Dean Barber: If you recall, Bud, you and I started studying with Ed about the time that he wrote his initial book, the Retirement Savings Time Bomb and How to Diffuse It, and that was 20 years ago.

Bud Kasper: Was it 20 years? Wow.

Dean Barber: Yeah, yeah.

Bud Kasper: Gosh, I haven’t aged at all.

Dean Barber: We both had more hair, and it was darker.

Bud Kasper: Yeah. But it’s a concept that he drives home every time you speak to him; eliminate the taxes as quickly as you can, and compound for the rest of your life tax-free.

Why Else Would You Leave Money in a 401(k) After Leaving Jobs?

Dean Barber: So why else would you keep money in a 401(k) if you left? You and I know that unless the company that you have your 401(k) plan offers what they call a self-directed option inside that 401(k), some would call it a brokerage option or something like that, where you have access to all of the different available investments that are out there, and not just the 20 or 30 that might be available in the traditional 401(k)s.

We know that the investments that can be handled outside the 401(k) give a person a lot more flexibility and a chance to do a better job of not only performance but risk management, right?

Bud Kasper: Yeah.

Dean Barber: It’s never a guarantee, but you do have that opportunity, and I think it’s more prevalent there.

But one of the things that the 401(k) has that the IRA does not is creditor protection. If that’s a worry of yours, if you have some risk or debt, that might be an issue. Keeping the money in the 401(k) for the time being would be a smarter thing to do, even if you don’t have as good of investment options.

You Need to Understand the Rules

Bud Kasper: Well, you have to know the rules, right?

Dean Barber: Right.

Bud Kasper: But it’s like, we’ve said before too, how many times have you had people come in who’ve done a good job. They’ve saved a million dollars, right?

Dean Barber: Right.

Bud Kasper: The question will be at that point, “Well, you want to bet you got a million dollars because we know that every dollar comes out of that is going to be taxable.”

Dean Barber: Right, you have a partner, Uncle Sam.

Bud Kasper: That’s why these options we’re talking about are so important.

Dean Barber: Right. And even if you do have to keep the money in the 401(k), remember what I said last time; we have the technology today where we can actively manage your 401(k) like we would in a self-directed account. So we can apply some of our rules and things like that.

It’s not going to be exact, but it can enhance what you have going on with your 401(k). 

Can You Manage Your 401(k) Without Emotion?

Most people don’t have the expertise they need, Bud, to make the right decisions in their 401(k). I’m not saying there are people out there who can’t, and there are many people who can.

Bud Kasper: Sure.

Dean Barber: The question is, can you do it without emotion? Okay.

Bud Kasper: Well, I think if you have to look at it, it’s a lost opportunity. I mean, you’re right. People are busy with their jobs, with their careers. They have the money go into the 401(k) automatically, and it just kind of gets lost. 

“It’s there. I’m putting money into it. I’ll be okay.” Sorry, things change, and as we’ve just saw with the election, what’s going on this year, and everything. So we need to understand what we’re trying to accomplish here and use the tools as effectively as possible to get there.

Asset Allocation is Critical

Dean Barber: Okay. I want to talk about asset allocation for a minute, Bud, because this is critical. All right. Let’s just set up a picture. Somebody’s got a million dollars. 

Well, let’s do $500,000 because more people are going to be closer to $500,000. So they’ve got $500,000 in their 401(k). They’ve saved; maybe it’s $300,000 outside their 401(k). There are still five to seven years out from retirement. They’re trying to get that thing built up to a point where they can have a decent retirement and see a financial advisor. 

The financial advisor looks at it, and they say, “Well, I can help you with that $300,000 that’s not in your 401(k), and here’s how we’ll manage it.” Okay? And they say, “What about my 401(k)?” “Well, let me look at your options, and maybe I can give you some ideas.”

How Does Your 401(k) Fit in Your Overall Plan?

The problem is that they look at those one time and then maybe never again until that person gets into retirement. You’re risking that the investments outside of the 401(k) don’t play nice with the investments inside the 401(k). 

In other words, your asset allocation is broken. We have the technology available to link your 401(k) to our asset management system. You see the money that we manage right alongside. The money that’s in the 401(k), what does that do? 

That allows us to make intelligent decisions because what we can do is we can say, “Okay, we got this money in the 401(k). Here are all the options that we have for the 401(k). We have a universe of everything outside the 401(k), so let’s construct the portfolio for you by starting with what we have inside the 401(k). Then we can build on that with funds outside the 401(k) where the universe is our options.”

So what that does is it allows us to have much better asset allocation, much better visibility of your entire investment strategy. 

Watching Out for Financial Salespeople

Bud Kasper: No doubt about it. Many people have an investment advisor, but their financial salespeople. If they can’t get paid on it, they’re not going to pay attention to it. That’s why you have to deal with somebody who is a fiduciary who’s working in your best interest all the time and is exercising the best skill sets a planner could ever have. Of course, that is having a comprehensive financial plan.

Dean Barber: Right. So that was where exactly I was going, Bud. Here’s the thing. We’ve talked about asset allocation. How do you know what the right asset allocation is? Okay?

Finding the Right Asset Allocation

Through our Guided Retirement System™, identify something we call your PRI, your personal return index because, through that holistic financial planning that we do, that comprehensive planning, we’re going to go through. We’re going to take a deep dive into everything that you’ve got today, what it is that you’re trying to accomplish, your short, your intermediate, and your long-term goals, your legacy goals, et cetera. 

How much money are you going to need to spend in retirement? How often are you going to need to replace vehicles in retirement? What’s your inflation rate going to be? Do you have health insurance going in retirement? We’re looking at everything, right?

Once we understand everything what you’re trying to accomplish in the future, then what we do is we say, “Okay, what’s the money need to do?” We can identify that PRI, that personal return index. 

Only then do we go in and say, “Okay, here’s the right asset allocation for you.” And that asset allocation needs to be fluid. It needs to be something that can change at a moment to notice. That’s why we must be able to manage the funds inside that 401(k) for you alongside the assets that we manage outside the 401(k). So we can make those adjustments on the fly.

401(k) Turned into a 201(k)

Bud Kasper: Right. Remember in 2008, what happened? Well, we had the great recession, right? This is when we coined the phrase of 401(k) turned into a 201(k). And while we chuckle a little bit about that, the reality is, look what has happened just in the last three years! I mean, if you go back to 2019, we had a great market. If you look at last year, we had a pretty decent market. 

Now with the COVID crisis, everything else… These are challenges to keep our focus where it needs to be. And that is, “What is the purpose of this money? What’s it going to serve? How do we get there? When do we make adjustments?”  

I think that’s a pretty hard thing for individuals to be able to do without having some professional help, and that’s what we’re all about.

Rebalancing Your 401(k)

Dean Barber: You’re right, Bud. We talked in January of 2020 and then again in January of 2021, specifically about rebalancing your 401(k) plan. Why did we talk about that? Because if you had a 60/40 portfolio starting January 1st of 2019, you had a great year. By the end of the year, you were probably 70% equities, 30% fixed income. Well, okay, it’s time to rebalance. If you had done that, you would have lost a lot less as COVID hit, right?

Bud Kasper: Right.

Dean Barber: Then when you have a big event like COVID where you have a significant market drawdown, guess what? You’re out of balance again. Now, you’ve got too much in fixed income and too little in equities. It’s time to rebalance again, and then you picked up all the gains for the last half of last year; time to rebalance again, right? Otherwise, you’re just letting the market movements move your portfolio with the wind, and there are smarter ways to do it.

Bud Kasper: Yeah, and what are we talking about? We’re talking about managing your future. We’re talking about managing your retirement in advance of being retired.

You have to think in advance as to when you’re going to start needing this money and what the tax consequences are going to be. We have to do that in advance, not at the time you’re retired.

The Roth IRA 

Dean Barber: So way back when Bud, in the ’90s, Senator Roth came out with the Roth IRA and not too many years later came along the option to use the Roth version of a 401(k). 

Now there is the son of the SECURE Act being proposed in Congress, enhancing the Roth 401(k) option. We should talk about that a little bit. 

But, people who are five years out from retirement, they’re in their peak earning years. The question is, should they be contributing to traditional at that point? Or should they be contributing to Roth at that point?

Where You Put Your Money Matters

Bud Kasper: Let me make a point here, Dean. And that is, we call it a 401(k) plan, but there’s not a whole lot of planning inside a 401(k) other than allocation, meaning where are you going to put the money. 

I tell people who I meet for the first time. I say these investments are important. Okay. That’s where the money is held. 

We must be able to construct portfolios at specific levels of risk. But you’re not going to hire me for that. You’re going to hire me because of how we do comprehensive financial planning. We take taxes, estate planning, and all the important things to an overarching financial plan.

Should I Go Roth or Traditional?

Dean Barber: All right. So I agree with you, Bud. To answer the question: Should I do a Roth contribution to the 401(k) or the traditional contribution? You have to have a plan constructed to answer that question. 

We always say that you don’t put your money into anything until you know the rules to get the money out. And what’s your tax situation going to be when you go to take the money out.

Bud Kasper: So critical.

Tax Diversification

Dean Barber: So if you’ve done a good job of creating tax diversification throughout your working lifetime, and you’re in that scenario that I just laid out, you’re five years before retirement, and you’re in your peak earning years, chances are, there’s no rule of thumb here, but chances are the traditional contribution to the 401(k) may make the most sense.

Here’s why. Let’s just say that you’re up in that top bracket, 36%. Okay. And you could put your money in pre-tax, so you’re saving 36% on every dollar that goes in. Now let’s assume that this person, as I said, has done good tax diversification. When they retire, now they have some money in a taxable account that they can begin to spend in those early years of retirement with no taxes due because it’s already been taxed at that point in time. 

Now we can begin to do some methodical, slow conversions from that traditional contribution that you made over to a Roth, and maybe we’re only taxing it at 15%. 

Maybe we’re only taxing it at 22%. So if we got to defer it at 36, and then we get to convert it to a Roth, that will be tax-free forever at 15 to 22%. All of a sudden, we start to win the tax game by putting more money in your pocket and then getting Uncle Sam out of your pocket on that portion that we convert for the rest of your life.

Different Sources Are Taxed Differently

Bud Kasper: Yeah. My son, Matt, who is also a CFP®, talks about to clients all the time tax arbitrage. And that’s what you’re talking about, Dean. When we talk about different sources of money, we’re talking about different sources of money as defined as how that’s going to be taxed.

Dean Barber: Right.

Bud Kasper: When you use the coordination of that, and maximize the lowest tax bracket to do, let’s say a conversion, wow, you can’t do it any better. It’s the sweetest thing. I know I’ve heard from you, I know it’s personal as well, I’ve never done so many conversions as we did this last year.

Dean Barber: Right.

Bud Kasper: And it makes such great sense. And it’s going to give higher rewards for the people that have gone through that process.

“I paid no taxes for the last two years.”

Dean Barber: Yes. You know though, Bud, I talked with Ed Slott about this in my last conversation with him. But several years ago, this was probably back in 2009 or ’10. And you and I’ve been talking about tax planning and the right way to save, and the right way to get money out. 

I had a gentleman come in, so we talked about understanding from a distribution perspective, where do you get your money, how do you pay as little tax as possible over your lifetime, et cetera?

He slides his tax returns for the last two years across the desk to me, and I look at him, and I’m like, “Wow.” He goes, “I don’t know how you can do any better than that.” And he goes, “I tell you, I paid no taxes for the last two years.”

I’m like, “That’s impressive.” I said, “Let me ask you a couple of questions.” So I said, “Where are you getting your money to live on?” He goes, “Well, I’ve got a whole bunch of money in savings. I got that from a buyout. And that’s what I’m going to live on for probably the next five or six years.” And I said, “Oh, okay.” I said, “Are you taking Social Security yet?” And he says, “No, no. I’ll plan on taking that at 66.” I said, “Oh, okay.”

I said, “So don’t you have any money in IRAs?” And he goes, “Yeah, I got about $2 million in IRAs.” And I said, “Okay. So when your CPA told you that you could have taken out at least $25,000 out of those IRAs and paid zero tax on it, was there a reason you didn’t do it?” And he goes, “Well, wait a minute. How’s that?” And I said, “Because you wasted all the deductions that you had.”

Bud Kasper: Right.

“My CPA never told me that.”

Dean Barber: He said, “Well, my CPA never told me that.” And I said, “Well, surely your CPA told you that you could have converted $95,000 then.” That was the number at the time. “And only paid $11,000 in taxes. So we’re talking a little over 10% tax rate on that. And then it could have been tax-free forevermore. So when he showed you that, was there a reason you didn’t do that?” 

He goes, “Well, he never showed me that.” Okay. He had already missed two years of converting over $190,000 to Roth IRAs for only $22,000 in taxes. Luckily I got to him at 64. Now he’s got a bunch of money in Roth IRAs, and life is different.

It’s All Part of the Plan

The thing is, you’re right, Bud, what’s that part of? That’s part of comprehensive financial planning. Remember your 401(k) is your biggest asset. You need to understand and be able to manage the underlying investments and the risk adequately. And you need to understand the tax complications that come along with the 401(k). 

Bud Kasper: How many times would you think, Dean, that people have lost that opportunity to do a conversion and to use that tax arbitrage I was talking about before that they can’t get back?

Dean Barber: It’s millions of times a year, Bud, because people don’t think about it. And the average financial advisor is just there to manage money. They’re not doing comprehensive financial planning. 

Professionals Looking at Things from All Sides

They don’t have the CPAs in-house sitting next to the CERTIFIED FINANCIAL PLANNER™ Professionals going through and saying, “Okay, how do we approach this from a tax perspective? How do we get the most money in this person’s pocket and keep as much money out of Uncle Sam’s pocket as we possibly can?”

Bud Kasper: Yeah, don’t be a victim of your ignorance. And that is simply understanding what the potential is in your life’s work of saving money for your retirement. By the way, you’re going to be in retirement for a good number of years. If we can eliminate Uncle Sam early, guess what? More money stays in your pocket.

Dean Barber: Well, there’s no better tax rate than zero.

Bud Kasper: Right.

Dean Barber: Right. And like we said at the beginning of the show Bud, the earlier a person starts making those contributions to Roth IRAs, making the contributions to the Roth portion of the 401(k). And then maybe later in life when you’re in that higher bracket. 

You know that in retirement, because you’ve done the plan that you’re likely to be in a lower bracket, then maybe you make traditional contributions. You can win this tax game if you know the rules and know how to play by those rules. 

But the only way you do it is by first creating a comprehensive financial plan and then having a good qualified CPA that can look at that financial plan from a tax perspective. Then you know that you’re always putting money into the right bucket.

Bud Kasper: There you go.

Dean Barber: That’s the key. We hope this has been helpful for you here on America’s wealth management show. I’m Dean Barber, along with Bud Kasper. Remember to schedule your complimentary consultation and get a copy of our 401(k) Survival Guide. We’ll be back with you next week, same time, same place.

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