Description: The article below conveys some necessary information on the topic of 401k. The author tends to give us several useful tips to get 100% return in our 401k because he has been successful as an investor, businessman and author. We can learn the differences between tax evasion and tax avoidance that will benefit us.
It is Matthew Mara here with Morrowind best calm, I want to share with you some of the things that I’ve used as a successful investor, businessman, author and tell you the things that have helped to make me successful.
It certainly has not been an easy road, but I want to share those with you today, I get asked about 401ks quite a bit now, I’m no longer a financial advisor and you should always consult with whoever is over your mutual fund, your RA, your investments and get a qualified licensed individual to do that.
These are going to be my opinions, so one thing we look at in one of my last videos, I talked about why you would ever want a tax return basically when you’re giving your money to the government for a whole year and waiting on three four five six thousand dollars in return.
What you’re doing is giving the money you’re overpaying in taxes to the federal government, state government, when you do your taxes, they give you a refund, they’re giving you your money back, I want to make my taxes as low as possible later.
We’re going to talk about in the video the difference between tax evasion and tax avoidance, one is very illegal and one is a given right that you have, so one of the things I get asked about is 401ks.
It is an easy way to double what you have been doing into your 401k that sounds good, if you could double your money, let’s look here, if you have a matching 401 K, this is important, so you have a matching 401 K and the percentage is not important.
So if your company matches 3% 1% 5%, are you with me? So every year you’re having taxes taken out on you, what you do is at the beginning of the year or any time throughout the year, you can ask for less taxes to be taken out.
Why would you do that? What you’re going to do is that you’re going to take it, let’s do this simple number, let’s say $100 every two paychecks, let’s say you get paid every two weeks and this is going to be once a month that you’re going to make that, you’re going to have this hundred dollars worth of taxes taken out of your paycheck before you get your pay stub.
What you’re going to ask them to do is to take out the minimum legal allowable taxes, you’ll go to your payroll department and do this, you’re going to take out the least amount of taxes that they’ll allow you to do instead of taking that extra money that you are going to be getting in your paycheck that extra hundred dollars instead of spending that money.
What you’re going to do is that if you have a matching 401k, you’re going to take that hundred dollars, if you’re not already maxed out on your matching, if you’re already doing three one or five percent.
This might not work for you, however, you’re only matching three percent, you’re only putting in three percent, but the maximum allowable in your company, they’ll match up to five percent, that’s a good company, so what you do is this extra hundred dollars a month, it might not sound like much.
But instead of that money coming out of your taxes and going to over pay your taxes and at the end of the year, you’re getting that money back which basically the government hasn’t given you any interest on that money.
So you’ve put in a hundred per month times 12 which is $1200, so now what you do is that you’re now putting that $1,200 straight into your 401k which is a tax deferred plan, what that means is that you have doubled your money, so if you had put in $1,200 and then your company here.
Company XYZ is matching that percentage and they’re also putting in $1,200, what that means is 1,200 over 1200, you got a 100% return, he doubled your money, you can see that a lot of people worry about whether they’re going to get into a mutual fund in their mutual fund, in their 401 K where they’re going to be in a bond, a money market, a large cap, small cap, foreign investments, they’re all worried about what they’re going to do, that’s for a different lesson, we’ll talk about that later.
But for now if you’re already putting your money in your 401 K, you probably don’t have a balanced approach for most of you and you’re putting in that 12 extra $1,200 a month that you would be sitting in the government that is not doing you any good and you’re getting a $1,200 return.
That means you’re making 100% on your money, do you understand? A lot of people get confused when we start doing percentages, but basically if you hand me a $1,200 and I hand you back $1,200 in return, so now you have $2,400, you’ve doubled your money, so for every hundred dollars you put in, you’ve now doubled your money, I hope that tip of the day has helped you.