If you want to live comfortably in retirement planning ahead
is essential from starting a 401k in your twenties to
diversifying your investments. Experts say it's important to start
saving as soon as you can. And joining me
now is Jake Falcon, founder and CEO of Falcon
with wealth advisors. Uh Jake, thank you for
coming on the show. At what age ideally should
someone start saving for retirement? Thanks for having me
and we tell our clients to save early and save
often. Compound interest is a beautiful thing when used
appropriately. And frankly, if you get a W-2
, you should consider starting, go ahead and saving
for that retirement. How much of your monthly income
should you allocate toward a retirement savings plan? Yeah
. So this is a tough one because it's going
to vary from person to person and according to your
financial goals, but a great place to start is
that we recommend saving 10% of your gross income in
retirement and 10% into savings. This leaves you 80%
to pay taxes, mortgage rent and other bills and
hopefully some leftover money for some fun purchases as well
. I like that. We all need to have
a little bit of fun. Right. Play has
to be involved a little bit along this journey.
But let's talk about the difference between a 41 K
A Roth Ira and an Ira. What do our
viewers need to know about these different products? Yeah
, there's a lot of nuance here, Kristen in
each one of those different types of accounts. The
first one to understand is that a 401k is an
employer sponsored plan. And if your employer offers a
401k, you want to take a look and see
if they offer any matching. So if you could
put 6% in and they match 6% that's almost like
getting free money. Now, an Ira and a
Roth Ira, those are more sponsored by the IRS
and they all come with their own nuance and rules
. There's different taxation on all of them. So
again, we could have a whole show on this
. But the ideas that a lot of people don't
know is that you can actually have a 401k,
an Ira and a Roth Ira. So again,
lots, lots to unpack there and discuss. Ok
. So just quickly, Jake and I know there
is a lot dedicated to that very topic. But
what is the best one? Depending on your situation
? Generally speaking, the higher tax bracket you're interested
in the, or a pre tax or Ira that
you can deduct the money going and makes sense.
The lower your tax bracket, the more a Roth
Ira may make sense. And the reason is when
you pull money from a pre tax retirement account,
that income is going to be taxed as income.
When you pull money from a Roth Ira, it's
going to be tax free. So again, a
lot of nuance there, but that's generally speaking,
one quick note, one thing you can do is
that you talk about investment diversity, you can actually
do tax diversification and have a 401k with pre tax
or an Ira and a Roth Ira and even a
brokerage account that's tax as you go to set yourself
up to be tax diversified. Ok. So let's
talk about different decades, right? And of course
, if you're not on this path right now,
I don't think you should be discouraged per se,
but just kind of good guidelines, right? To
try to have goals to strive towards. So what's
the best way jake to start saving for retirement in
your twenties? Right. Chris. And I know
retirement isn't the sexiest of topics, but in your
20 there's a few things you can do to really
set yourself up. Number one is to not sleep
on that Roth. I hopefully this is the lowest
tax bracket you'll ever be in because your income will
grow. And so we really love clients in their
20 to look at that Roth Ira. Or 401k
. Look at growing your income annually asking for a
raise, getting a side hustle other ways to earn
more income. And then the quick one here is
, don't be in a hurry to buy a house
. There are a lot of other expenses that go
into home ownership and you don't want to have to
put your retirement on the back burner because you've got
to buy a new roof, for example. Ok
, good advice. Thirties. What are some of
the big goals that people should be aiming for in
their thirties? Yeah. So we're seeing many people
starting to get married in their thirties or start a
family again. You don't want to sleep on your
retirement. What's exciting about getting married and me being
a bit of a financial nerd when I got married
, I was like, oh, great. Now
I can double up my retirement savings because I have
a wife. And so looking at combining forces when
you get married and against starting a family, don't
let the retirement be on the back burner and don't
forget about the wrath at some point. Hopefully you
will earn out up and you won't be able to
contribute to a Roth Ira. So I want you
to continue to contribute to a Roth Ira as long
as you're eligible. Ok. And forties, what
are some goals there as does in a little bit
closer in that decade? You're right. It's creeping
up fast for clients in their forties. And you
want to look at your tax bracket, maybe now
you are in a higher earner and maybe it's now
time to flip to the pre tax and maybe not
put so much money in a Roth 41 K or
Roth Ira. So you definitely want to review your
tax brackets, make sure that you're maxing out other
type of retirement or not even retirement accounts, but
like savings accounts, deferred compensation or stock purchase plans
. And then if you want to retire early,
the best thing you can do for yourself in your
forties is to start building up a brokerage account that's
tax as you go. But it may offer a
lot of flexibility if you're looking to retire in your
early fifties, for example, interesting. What are
some of the most common mistakes jake that people make
when they are saving for retirement and how can our
viewers avoid them? Yeah, the, the easy
one is not saving enough and not saving early.
Like we've already commented on also thinking they're maxing out
their 41 K when they're not just because you put
6% in, for example, and if your employer
matches 6% you may not be fully maxing out what
the IRS allows for. And then also two quick
things maybe not investing appropriately. You may be too
conservative with your investment mix or you may be too
aggressive and then like we've already discussed not being tax
diversified. So you want to make sure that you're
looking at the various different types of retirement accounts and
making the ones that are best suitable for you today
? What about minimizing the tax burden? I know
you've been talking a lot about taxes, right.
And obviously those costs can add up over time.
Yeah, just like financial planning and investment management need
to be reviewed annually. So, does your tax
situation, We're dealing with a big unknown. We
don't know what tax rates are going to be a
decade from now. And so what we advise our
clients and what we do for them is we review
their taxes today and we make the best decisions based
on the information that we have today, knowing that
we may need to pivot in the next 10,
20 or 30 years. So again, understanding that
things are going to change, the rules are going
to change and being able to adjust to that and
then also doing that tax diversification. All right,
Jake Falcon, founder and Ceo of Falcon Wealth Advisors
. Jake. Thank you.