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[Music] hey Dustin Tibbets here financial advisor with jazz wealth managers and I'm on vacation this week sort of Monday through Wednesday this week and I thought what a good time to actually help my beginners I mean the real beginners out there right I get a lot of phone calls a lot of emails from people that really have very basic questions that to ask and as I look around YouTube yeah we're all focused on the other stuff but never the SuperDuper basic you know why because there's no money in that people that make videos on YouTube generally want to make money off the ad revenue nothing wrong with that by the way we make a few dollars here no problem but they're not very hot they're not highly viewed videos so people want to make them but I thought well let me help the beginners and maybe that maybe they'll keep us in mind maybe it's marketing in a way but other than that maybe it helps people get started and if they get started with the right information it might mean less mistakes which means you can make money faster so let's dive in here today we're talking about the 401k how it works what's going on in there unfortunately if you just started a job and you've got a 401k offered to you you don't get a lot of help they don't they don't really help you they give you a bunch of paperwork maybe a fancy log in to your own portal and you've got to decide what to do so let's get started with the first thing you're gonna look at the first thing is you only want to contribute and participate if you find this three-letter word not buy me five letter words three letter so you only want to participate if there is a match and the match just simply means you put in a few dollars they put in a few dollars it's free money right so you can't turn that down indent generally this is how they word it they will say if you participate in the 401k we will match three percent of your contributions there may be a limit on that by the way and what that means is they say alright if you put in well let's say you make a hundred thousand dollars a year they are saying if you put in three percent of your salary which is three thousand they'll put in $3,000 really they actually will right so that's what they're saying they're saying will match up to 3% of your salary so long as you put in 3% of your salary it's a one-for-one sort of thing now sometimes what they'll do is they'll say we'll match 3% on the first three percent of your salary that you put in and then we'll match 50% of the original contribution the I'm sorry this is not my wording I would change the wording if it was me what they're telling you is we'll put in three percent for the first three percent you put in then we're going to put in half the amount right 1.5 percent why we can't just say that but they say we're gonna put in half the amount for anything remainder and there may be a limit on that as well they may say up to six percent or something like that bottom line is you're looking for the match right and I hope you find that it's something like we'll put in six percent of your salary it'll say something like six percent up to six percent of your salary meaning you can't put in a hundred percent of your salary and they match six percent like it doesn't work like that so you put in six percent which in our previous example be six thousand by the end of the year after making those contributions you would have also made six thousand dollars just in free money that they just give you that's a hundred percent return simply for participating if there's no match right if the 401k is offered to you and they say we don't have any kind of match nothing at all now you want to go look at an IRA a Roth IRA or one of those whatever you're looking at there okay so that's the first part is the match it can be a little complicated just read it a couple times it messes with me still at times as well but just know that it's there for you and you want to participate if you have a match all right second thing in your 401k you may see a few things there's a there's another video is we all won't get off topic here but you might see that you have a 401k a lot of times they just leave it like that it'll just say 401k and they don't either say Roth option which is very unfortunate that they name it that right or it might they Roth 401k which is what it should say so many people think that the Roth option is actually a Roth IRA not the case what they're telling you is a Roth 401k and without getting all the words confused all they're really saying is this is pre-tax and this is post tax not every 401k plan offers it but that's all they're saying very simply they're saying do you want to put money in and put it in before you pay taxes on your paycheck or do you want to pay taxes on your paycheck and then have the money go in if you have this option you more than likely want to start there here's the catch remember the example a second ago where we said if you put in six percent they match six percent well you can choose which one you want it to go in if you decide over here I want to put in six percent post tax I never want to pay tax again man this is a headache I don't know what taxes are going to be in the future so I want it to go into the post tax or Roth 401k option well the six percent that they match still has to go over here by law and now and and there's no way around that right so the match goes into the pre-tax always right so you're always gonna have a good mix anyways so you put your money over there they'll put their money over here and yet that's it so it's just like having a Roth IRA however it is not a Roth IRA at all all right next thing where's the money go so you put money in how do you invest it well you're gonna be given a menu and on that menu will maybe be twenty thirty different mutual funds that you can choose from now this depends on how old you are how long until retirement you have to go it's also going to depend on do you have other investments if you're already investing and this 401k is in addition to it you want to keep that in mind you may want to be more aggressive but in this menu you're gonna see some things like this twenty thirty twenty let's just go forty five and twenty fifty five you're just gonna see a bunch of 20s and then the number well this is the year it's called a target date retirement fund and these are the easiest things to invest they really hope you invest in these you basically go how what year is closest to when I'm gonna retire let's say it's this one then that's the fun you would pick and you would invest in that one right those will be some of the options you're also going to see things that say like blue chip all right those will be more aggressive a lot of times those are more aggressive they're the way they're structured you're gonna see S&P 500 index right is their index funds you're gonna see in there as well you might see small cap I'm just trying to throw out some of the words that you might see you might see value could be anything you might see growth these are key words right they'll be followed by like the Blackrock super duper Value Fund the fidelity super duper small cap index fund something like that right these are just the main code words you're going to be looking for bottom line is if you have no idea what all this stuff means look at these find the date that's closest to your retirement that's more than fine for now as you get a little bit more savvy and you want to tweak a little bit then you're gonna go look at these funds here S&P 500 by default a lot of people choose that because it's an index fund small caps gonna be more aggressive value doesn't necessarily mean conservative but it's definitely not aggressive so you might want to there depends on what type of Value Fund it is blue chip growth funds right they're gonna be more aggressive and anything that says growth is going to be more aggressive you'll see it in the return the performance there now if you ever see something where there's a mix of words small cap value S&P 500 growth maybe not so much that one you might see blue chip growth all they're really trying to do is identify that these things are really aggressive in there you can also look at the long term returns don't look at what it did last year don't look at what it's done this year look at what I did over the last ten years last five years even at whatever your choices are you want to see the long-term growth of the fund doesn't really matter like this years off to a great start so you could be mislead into picking something that's just having a good year right so look at the longest term performance you can and that's really it right you put money into the 401k if there's a match and you just want to know what the match is how much do you need to put in if the match is 6% you got to put in 6% that's like saying I'm giving away $100 to anybody that gives me $100 and then I'll put both of the hundred dollars in an account that's like saying I'll I'll give you a 50 you only have to give me 50 right now I don't do that take the 6% that was a really bad analogy but I tried so you put in up to the match then when it comes time to pick the investments if you're sorry we put the money into the match and then you put it hopefully into the Roth option that's why I was trying to say and that's all post tax then when it comes time to choose the investments you're going to look for those code words there right look at the returns and if you don't want to do the homework just simply pick a target date fund they're available in every 401k now by the way we help all of our customers with their 401k fine-tune it make sure it's invested correctly not only that makes sure it's invested correctly compared to their accounts that we have with us that's all I have for you I thought I'd just go over the very very basics of a 401k I hope I didn't confuse you I feel like I might have in there a little bit don't bash me too hard if I did I'll try harder next time enjoy the rest of your day and hopefully we'll talk to you soon why should you choose jazz wealth as your retirement or long term investing service our portfolios are managed by us not some faceless mutual fund manager our private classes will teach you everything about investing and getting your dough straight best of all our fiduciary standard means your best interests comes before ours