The Similarities and Differences between a 401(k), IRA, and Roth

ABOUT THIS EPISODE

On today's episode, Amazon bestselling author and financial expert John Browning explains how to understand these different acronyms. Connect with John by texting "LIFE" to 21000 or GuardianRockWealth.com.

Welcome to the build your life podcast with John Browning. Build your life as a relaxed and unedited conversation with financial expert in number one Amazon best selling author, John Browning Jones, the founder of Guardian Rock Wealth and serves clients across the United States. John's the author of the book build a life, not a portfolio, a guide to your financial future based on your personal values, which you can purchase on Amazon, or stay around to the end of today's show and I'll tell you how to get a free copy mailed right to your door. I'm Michael The lawn, your host for the next few minutes as we chat with financial expert and business owner John Browning and John Browning, how are you today? I'm doing well. How about yourself? I'm good. I exercised yesterday. Did exercise today. You you motivated me from the last podcast about going to your exercise thing and being consistent. So I've set myself up to exercise like three or four days a week now so I can be consistent with that and I'm working on it. So you've influenced me. All Right, I love that. Yeah, yeah, I wait yesterday too and they tell me, you know, you got arrest in between. So I arrested. Yeah, they said don't working out core every day. So I try and do that every day, but everything else it's like every kind of every other. Yeah, well, I like to. I like to exercise one day and rest for six and exercise like rest. They didn't think that I got it. I'm not sure what's going on. But the the other thing that I don't get, why we're talking today specifically, is you, you financial gurus, throw around these little acronyms and in phrases that you understand but we don't. So today I want you to have unpack for me. All right, the the sick. What's the similarities in the differences between A K and I are A and a Roth? Can you do that, because I to me, there they are very similar, but I know there are...

...some differences. What what are those differences? Sure, we can. We can go through that. And you know, it's also important for people to know that there are, there are more than just those three and they yeah, it can. It can be really important and can be very beneficial for people to know about those other things that are out there. Okay, depending on their personal situation, because again, this is a podcast, not investment advice. This is strictly general information that you can use and you can you know sort of the more you know the better. But there are some other things out there. For the about is leave it at that. There's things called steps, there's there's just, there's kyos, there's Penshi, there's still pension fan plans still exist here and can be beneficial, especially for certain and types the small businesses, which is really interesting in a lot of people overlooked that that's out there. But I want to get people confused about all those different things. To answer your direct question. For one case, and and there's also something called a four row three be. Okay, and and those are generally issue. Those are generally not for profit organizations have those for three bees, okay, and they are different. They're not the same. Most people say, Oh, they're the same thing. They're not quite the same. Okay. So the biggest difference is for three bees, for the issuing organization, like whether it's a church or or a foundation or whatever the charitable organization is, it's much easier to administer for that organization or merely as many hoops that you have to jump through as an organization. That's the biggest difference. So if you are part of a not for profit organization, I encourage...

...you to get in touch with me just by texting the word life to twenty. One thousand are going out to the website already and rock wealthcom and we can talk about some of those ideas for you. But a for one K is what I call, generally speaking, a good option. It's not a great option. So let me explain that for a minute. I'm I am not saying don't participate in your fore k. You absolutely should participate in the one K. The reason it's a good option is because often the company will match what you put in and there's no way any financial advisor can beat a hundred percent. That's right, you know, I return. That's that's fantastic. So contribute up till at least the point at which your company matches that for one k. The reason I say it's a good option, not a great options, because you lack a lot of control. There's usually limited options and you know some for one ks are better than others. You know depends on the company. So if you leave a company and you just leave your one k just sort of sitting there isolated, I call them orphaned assets. Are You Goin? All right, then, that's not usually a great idea for a number of reasons. One is you don't have as much control over it. Number too, it tends to be good options, not great options. Number three are do you think you're really going to remember? Shoot, even if it's there right, twenty thirty years down the road, you'll probably remember that it's there, but will you remember who to contact, how to contact them and and how to get it withdrawn? And will you know how to withdraw it for the best tax advantage? Not a can't is pretty much zero, between between zero and negative one, exactly, or at least that...

...it will be easy to figure out. Right. That's right. So I always encourage people to consolidate things, put them all into what they call, and I are a or an individual retirement accounts. Okay, okay, and they're there two main types of individual retirement accounts. One is called a Roth and one is called just a regular IRA. And I think you and I were talking a little bit about this, right and you came up with a great analogy. Remind me what I owe you to the IRS? Yeah, yeah, yeah, your I owe you to the irs because if, as I understand it, if you have your money in a fur, a traditional one, K that my money goes in pre tax it, but I take it out later in life when I'm retired, taxi bull right, and so the money I'm saving, all of it's not mine. The government has a portion of that that they've helped me. What tax deferred? Is that whether the right term? That's a good term. Yep, okay, I think that's how I understand it. Is A kid. You. You are correct. And there there is such a thing as a Roth K, which we won't get into because I don't want to confuse people to make this a really long podcast. Yeah, but the difference between a regular IRA in a Roth IRA is that is kind of the opposite of that. And while people seem they really think, Kate, not paying taxes now is a really good thing, right, it is. You're right. Yeah, I mean it is, but if you really think about this and think about the math on it, right, the whole idea is that you want to grow this over the next twenty or thirty years, right. So would you rather pay tax, given the taxes charged as a percentage of what you have? Would you rather pay tax on a little bit now or a whole lot later? Later,...

...yeah, so if you have the option in there's rules as to whether or not you can use a roth, there's there's income rules and all that kind of stuff, which we can help you with, of course. But if it's a possibility, the idea of a Roth for one K or a roth rot H, by the way, wroth, if there's a if that's an option for you, I typically suggest that's what you use, and there's even a way that you can convert that for one K that you've been contributing to, or and you don't have to contribute. You don't have to convert the whole thing to our Roth. You can convert just part of it. And the reason people will say, Oh, I don't want to do that is because you got to pay a big tax bill. You can, especially if you've got a big nut that you've built up over say, a couple decades or something like that. You know, maybe it's five hundredzero right, if you convert all that to a rath because you become eligible to do that a Roth IRA, it's a really big tax bill all at once, HMM. And so what I tend to encourage people to do is let's let's do the math on this. Let's see what's reasonable, what you can afford, and maybe you do a partial Rath conversion today and maybe you wait a little while and then you do another little bit, a little bit you do, you along the way and the other you know, there's other ways to do that. You can wait to do that conversion for a little bit of time to win. Maybe you're not making as much money in your tax. You know, you're taxed at a lower income tax rate. Yep, there's all sorts of different things to talk about right. Well, and that's somebody, somebody mentioned that to me and that and when I was having this conversation, because it was the four one game was sold to my parents anyway, and probably to me, that when you're in retirement you're going to be in a lower tax practice. So that's why it's okay to save money this way, to...

...defer your tax, because you're gonna be in a lower tax brander. Well, that's not always the case. Well, number two, tax rates might be going up, and so then so that whole concept that you just talked about, it being able to convert something that's in afore one can into a rough might make sense, but it's again it comes to a conversation right through a financial plan or financial expert like yourself, to go here's what I got, here's what I'm trying to do, what makes sense. It comes down to what's great for you. Yeah, and what's right for you is not the same as what's right for your neighbor. And isn't that where we get most of our financial advice correct at the water cooler or at the other neighborhood, you know, barbecue pit, right, whatever. Actually, yeah, yeah, because those people aren't asking the questions that you ask your clients. They're not. Look, you know my my retirement is vastly different than many people because of my wife and I and how we view things and how we look at things and our goals for life and retirement. Is Not to a mass eighteen million dollars right. That's just not who we are. So we've structured things differently and if we have that water cooler discussion, most people look at us like we're batty. That's okay, it's US right, but too many downs those conversations don't happen at the water cool they should happen with your financial advisor like John Browning, Nick Guardian rock well, to say this is what we're trying to accomplish. That's right. And the other thing about those water cooler conversations that I have found in my experience is that they're they're extremely one side. I Made I invested in XYC stock and it went up to a gazillion dollars and two months and I'm amazing. What they did tell you...

...about is all the other you know, sort of flyers. I call those flyers that you just throw out there and see if that's by the way, not a bad thing if that's your entertainment budget, that type of thing, but it is being good one side. The other two things about the water filler things is one, yeah, you never see those people in the market is down or they've lost money into they never really tell you how much they've invested in. My vessel was up sixty eight percent. I only invested five dollars, but it was up sixty eight percent. It's like, okay, shut up. So that's what you know. It's like my sports team. Write all of that. That's not how you want to plan your life, your financial life anyway. You need a plan. It with somebody like you in your corner, John, with Dardian Rockwellton and John Bryant, to really build your life the way you want it, to have a portfolio that is constantly manage adjusted in that connects with who you are and what you're trying to do in life, not just not just in retirement, but today, you know, and as your kids grow up. You know, you got grown kids. I've got grown kids, we got college expenses and weddings coming up and all kinds of things that that's all part of the financial plan that you, John, helped your clients work through and talk through to say won't make sense right now and how do we? How do we afford this thing that we want? You know, I've got a wedding coming up in next they were my son. Well, how can I afford that? What's the best way? And that's why you have conversations with you and you say, well, we could do this for this, for that. They're right. You know, rarely is there one answer. Very rarely is there one answer that's right. That's that's the cool things. That's why I always ask people to reach out to you, Guardian Rock wealthcom John Browning. You can text them at twenty Onezero or text the word life to twenty Onezero on your phone and you'll get John's contact information. You will see a cute video there of him and see his book. I mean there's all kinds of fun things their.

Text life to twenty Onezero or reach out to him at Guardian Rock Wealth. And I learned learn from John, not just the differences in the similarities between for one days and I Rais and roths and steps and Keyos and all these other acronyms and things. You have, more importantly, understand how to build a portfolio that supports your life so that you can you can enjoy life, you can enjoy retirement and things will be taken care of because you get somebody like John Browning in your corner. So, John, that's that's helpful. I know we could go on and on and get more Cho but that's the beautiful thing about you is because you're an expert, you know this stuff inside now and I know who to call when I have a question. So thanks for being on and now thanks for having this podcast, for eating me, and I'm pretty certain a lot of people, and you're listening to audience, are more like me than they are like you, and that's why we need you in our life. So thanks for being here, thanks for the PODCAST and we'll talk to you next time. All right, sounds good. We'll see you next time. Money really is a big part of our lives, and John Browning can help you and your family learn how to keep money in the proper perspective. It's important, but it's only a tool that can help you build the life that you want. If you like John Emil, you a free copy of his book build a life, not a portfolio. Go to John's website, Guardian Rock wealthcom, and click the contact to US link and send your request. John Will Mell a copy of his book right to your door absolutely free. Thanks for listening to building your life podcast with John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it's released. Have a terrific day. Nothing in this podcast should be construed as personal investment advice, and past performance is no guarantee of future results. Investing is not appropriate for everyone. There is a risk of loss associated with investing in the markets. No representation or implication is...

...being made that using any methodology or system will generate profits or insure freedom from losses. Please remember that investing carries risk. Guardian Rock Wealth LLLC and it's affiliates are fiduciary investment advisors. Please consult with US or another experienced, qualified investment advisor before making any investment decisions and or trying to implement any of the strategies and tactics we may discuss in any of our publications or podcasts.

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