Skip to player
Skip to main content
Skip to footer
Search
Connect
Watch fullscreen
Like
Comments
Bookmark
Share
Add to Playlist
Report
Retirement accounts: 401(k), Roth IRA & HSA explained
The Street
Follow
6/26/2024
Bob Powell, Editor, Retirement Daily, joined TheStreet to break down the different retirement plan options.
Category
🥇
Sports
Transcript
Display full video transcript
00:00
Now, Bob, real quick, walk me through some of the options for retirement savings, because
00:05
a lot of people start scratching their head.
00:07
It's like alphabet soup, 401K, Roth IRA, all these numbers, all these letters.
00:12
But there are tax implications, not just for the money that you're putting in, but when
00:17
you're ready to retire, the money that you're going to take out.
00:21
So can you talk a little bit about how those different plans work, especially when it comes
00:26
to taxes?
00:27
There are three basic types of accounts.
00:30
There would be the taxable account, where you might be investing in stocks and bonds
00:34
and mutual funds.
00:35
And the money that's going in is after tax.
00:37
And then when it comes out, it'll be taxed in some form or fashion, or it'll be taxed
00:41
along the way.
00:42
So if you're investing, say, in a CD, that could be taxed as current interest income,
00:49
as ordinary income.
00:51
It could be maybe if you have stocks in your taxable account and you're buying and selling
00:55
them.
00:56
So you're getting taxable gains as you go along.
00:59
The other type of account that many people are familiar with would be an IRA or a 401K.
01:04
Typically that's money that's going in on a pre-tax basis and then coming out on an
01:09
after-tax basis.
01:10
So you're getting a tax deduction in many respects for putting money into a 401K.
01:15
It grows tax-free.
01:16
And then when you withdraw the money, it gets taxed as ordinary income.
01:20
And then the last type of account that people need to think about would be a Roth IRA, where
01:24
the money is going in on an after-tax basis.
01:27
It grows tax-free.
01:29
And then when you withdraw the money years from now, it is a non-tax or tax-free event.
01:35
And then the last account I should mention, because many employers are now offering this
01:38
to their employees, would be health savings accounts.
01:41
And these are really unique because the money is going in on a pre-tax basis.
01:44
It's growing tax-free.
01:46
And then if it's used for qualified medical expenses, it's tax-free as well on the withdrawal.
01:52
So four different types of accounts.
01:54
And I would recommend that people sort of have money in each of these buckets.
01:58
Because when you get to retirement, one of the things that you want to make sure that
02:01
happens is that you have the ability to create what's called tax-efficient income.
02:06
What's the income that will result in the least amount of taxes based on where the money
02:10
is coming out of, whether it's your Roth or your taxable account or your IRA or your HSA
02:15
for that matter.
02:16
And what typically happens to many people is they save almost exclusively in their 401K.
02:22
And then when they get to retirement, they think they might have a million dollars set
02:25
aside for retirement.
02:27
But what in fact happens is you actually may only have $700,000 set aside because $300,000
02:32
of that money will get taxed as ordinary income as it comes out of the account.
02:37
And if you had saved perhaps, say, in a traditional 401K along with a Roth 401K, then you might
02:42
at least have the option of being able to withdraw some money tax-free in retirement
02:47
as well as money from your traditional 401K and maybe reduce your overall tax burden over
02:52
the course of your retirement, which is ultimately the goal.
Recommended
0:23
|
Up next
Here is the main difference between a 401(k) and a Roth IRA
The Street
4/27/2025
2:04
Ways to diversify saving for retirement
The Street
1/13/2025
3:01
Here are your main options when saving for retirement
The Street
6/12/2024
4:30
How to save for retirement during an inflationary period
The Street
7/22/2024
3:49
How much you need to save for retirement
The Street
7/1/2024
2:19
How to play catch-up with your retirement savings
The Street
7/30/2024
1:46
Avoid these common retirement mistakes
The Street
9/3/2024
2:10
Suze Orman on the top retirement mistakes people make
The Street
4/9/2025
2:06
401(k) “millionaires” hit an all-time high
The Street
5/24/2024
3:21
Here are the secrets to planning for an early retirement
The Street
10/9/2024
3:33
Use Your 401K To Delay Getting Social Security | Kiplinger
Kiplinger
1/26/2024
1:04
Dave Ramsey reveals the 401(k) mistake costing Americans millions
The Street
5/9/2025
3:49
How much you need to save in order to retire
The Street
7/9/2024
1:25
What an interest rate cut means for retirees
The Street
9/18/2024
2:08
Options For A Former Employers 401k Plan
Kiplinger
2/19/2024
3:33
Should You Delay Your Social Security And Use Your 401K?
Kiplinger
4/8/2024
5:22
Will Mamdani’s Proposed Millionaire Tax Save Or Sink New York City?
Forbes
today
0:49
Sam Altman Warns Users Not To Blindly Trust ChatGPT Despite Its Rising Fame
Benzinga
yesterday
0:57
Microsoft Urges Employees to Embrace In-House AI — Performance Reviews May Reflect Usage
Benzinga
yesterday
1:02
Elon Musk Calls Trump-Backed Senate Bill 'Insane,' Warns It Will 'Destroy Millions of Jobs'
Benzinga
yesterday
14:31
WallStreetBets to Wall Street Wisdom: One-on-One with Jaime Rogozinski
Cheddar News
yesterday
0:22
Bezos-Sanchez Wedding Brings in $1.1B for Venice
Cheddar News
yesterday
0:25
China's Largest Coffee Chain Opens First U.S. Locations
Cheddar News
yesterday
16:23
Musk Fires Top Tesla Exec Amid Plunging Tesla Sales in Europe & China
Forbes
yesterday
25:04
He Built A $800 Million Cannabis Business—Now He’s Tackling the Blue-Collar Tech Gap with AI
Forbes
yesterday