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Yahoo
01-07-2025
- Business
- Yahoo
How to use tax-advantaged accounts to grow your wealth
Schwab Center for Financial Research managing director of financial planning, Rob Williams, joins Mind Your Money with Brad Smith to share some tax-efficient strategies to maximize your retirement savings. To watch more expert insights and analysis on the latest market action, check out more Mind Your Money here. Joining us now to discuss tax efficient strategies that you should make to make sure that you're taking advantage of is Rob Williams, who is the Schwab Center for Financial Research managing director of financial planning. Rob, good to have you here with us. Within Schwabs Good to be here, Brad. certainly, within Schwab's 2025 wealth management mid-year outlook, you talk about tapping the full range of tax advantaged investment accounts that might be available to you. We're talking IRAs, 401Ks, Roth accounts, and HSAs. Uh let's just start perhaps with how a traditional IRA can help your tax bill. Sure. Well, one of the things I want to start with is we can't control markets. They're volatile, they go up and down, but we we do have some control over taxes. And these tax advantaged accounts are are really one of those vehicles we have to to do that and IRA is one and one of the advantages is pretty much everyone has access to one. So if you have earned income and you don't exceed certain thresholds, you can uh contribute to an IRA up to $7,000, $8,000 a year if you're over age 50. And that money can grow tax deferred. It's it's pre-tax. It's it's it's tax exempt and tax deferred. So, you know, it depends on your income level, but that's really one of the first tools that many of us have, almost all of us have access to it, and it gives us those tax advantages of of saving and really building wealth over time. Rob, what are some of the tax efficient strategies that you should be considering mid-year within your 401K? Well, continue to contribute. That's the first. We mentioned IRAs as we started with it, but anyone who has a 401k, the contribution limits to that are higher. You're going to get an employer match that's required by law can be up to six 50 cents on the dollar for 6% of your contributions. And it's really earmarked for retirement. So that's free money from your employer, get the match, continue. I don't like to use the word autopilot, but you can take it from your paycheck, continue to start small, but continue to build. So mid year is a good time to look at what your contribution rates are, think about whether you can, you know, can increase them. You may look at your asset allocations and things too, but you know, even that is something you maybe do once a year. So make sure you're contributing. Can you afford more? Continue to increase. You'll thank yourself later as your balances continue to grow. Now, we talked about and started to talk about an IRA. What about a Roth IRA? Right. Roth IRAs are great. I love them. They uh they're one of the ways to sort of bite the bullet up front and meaning that unlike a traditional IRA or a 401k, you pay tax up front on those, on that income, then you contribute it to the Roth, whether it's a Roth IRA or a Roth 401k. Then after that, any growth in that fund and an IRA, the Roth or your withdrawals are tax-free. So we're all watching the tax rates, you know, watching what's going on in Washington. But whatever happens in the future, you're avoiding and and sort of saying I'm not going to have to pay tax, you know, on those savings and any of the earnings in the future. That's really a powerful tool and it's one of the other accounts you have in your toolkit. So make sure you have a tax aware account strategy. And then finally, we got to talk about this an HSA. I mean, you know, there are so many different strategies that we've heard about this over the year, but a health savings account, what's the mid-year check-in strategy for folks? Well, I said Roths are my favorite and and I and now you mentioned HSA, so I'm going to change it. They're one of my You can't do that, Rob. Can't do that. Yeah, okay. They're a lot of favorites and there's a lot of things on the on the menu, but HSAs, I mean, they're you can get them through an employer if you're in a high deductible plan, but here's the key, they're triple tax exempt. So you can contribute money up to the limits aren't high, but they're they're reasonable, invest in that account, and then any withdrawals you take for retirement or for health care expenses at any point in the future. You can grow that money as tax exempt too. So at all three points, there's no taxes. And and here's a nice kicker too. After age 65, they you have earnings or taxed if you take it out for retirement, but becomes a bit like an IRA account. So I think of them sort of is that wild card account to use um to help manage health care costs, but also, you know, build those assets to be flexible once you get to retirement. Okay, I lied, that's not my last question. Just put all of this together for us though. What can people do today in regards to their tax advantage accounts to put them in a better position for the back half of the year and for longer run savings? Well, have a hierarchy. That's four or five different accounts I mentioned. I mean, the first is to save, use those vehicles, even if you start small. Second, use your 401k first and and the in the health savings account, you know, those are really powerful ones, get the match from your employer. Some health savings accounts offer that as well. Then after that, you have more choices in terms of where to go from there, contribute more to your 401k, considering a Roth or an IRA. Those are all things you can, you know, think about on your own or or work with a financial planner or a tax professional to help you work through that hierarchy. The key is to to be on it, time's on your side. You know, we want to make sure we we build wealth and and we keep it after tax. That's really the the name of the game. Rob, great to see you. Thanks so much for joining us here on Yahoo Finance. Thank you. Sign in to access your portfolio
Yahoo
11-06-2025
- Business
- Yahoo
Should you take bond moves with 'grain of salt' around inflation?
Inflation rose by 0.1% month-over-month (below estimates of 0.2%) and 2.4% year-over-year (in line with estimates) in the month of May, according to the latest Consumer Price Index (CPI) report released Wednesday morning. Core CPI — which excludes food and energy prices — also saw its prices ease, rising only 0.1% monthly (vs. 0.3% forecasts) and 2.8% annually (vs. 2.9% forecasts). Schwab Center for Financial Research Fixed Income Strategist Collin Martin joins the Morning Brief team in assessing the inflation print and the bond market's reaction (^TYX, ^TNX, ^FVX) to the economic narratives. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Yahoo
01-06-2025
- Business
- Yahoo
CD vs Treasury bonds: 5 factors to decide what's best for you
Certificates of Deposit (CDs) and Treasury bonds are generally considered some of the safest investments, but which one is best for your money? Schwab Center for Financial Research fixed income strategist Cooper Howard joins Wealth with Brad Smith to outline five factors to take into consideration when deciding between investing in a CD or Treasury bond. To watch more expert insights and analysis on the latest market action, check out more Wealth here.
Yahoo
27-05-2025
- Business
- Yahoo
The 4% rule: How to make your savings last through retirement
Nearly two-thirds of Americans are more worried about running out of money than death, according to Allianz's 2025 annual retirement study. Schwab Center for Financial Research managing director of financial planning, Rob Williams, joins Wealth to outline the 4% retirement rule and how it can help ensure your retirement savings last. To watch more expert insights and analysis on the latest market action, check out more Wealth here. A recent study by Allianz found nearly two in three Americans, or 64%, worry more about running out of money than death. And even with this fear, 62% say that they are not saving as much for retirement as they would like. So, we want to help you get retirement ready by talking about how much money you can spend in retirement without running out. One common method is known as the 4% rule. According to Schwab, the 4% rule says that you should add up all of your investments and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount to withdraw to account for inflation. By following this formula, you should have a very high probability of not outliving your money during a 30-year retirement. But our next guest says that this is not a one-size-fits-all plan. Here with more, we've got Rob Williams, managing director of financial planning at Schwab Center for Financial Research. Rob, good to have you here. So, let's just start with this. Why is 4% a reasonable place to begin? Well, it's a rule that's been around for almost 30 years now, and it was a great place to start because, as you said, Brad, so many people worry about how much to spend in retirement and need a place to start. But a couple things that we've written about, and I think are important, it's a rigid rule. So, it assumes that you increase that dollar amount. So, say, 4% times a million, that's $40,000 each year with inflation for a 30-year retirement and never make any adjustments. It also assumes that you want a very high probability that your money's not going to run out, which is makes sense, but what if you can remain flexible and make some adjustments? And most of all, it's not personalized. It's a fine place to start, but with technology, with modern planning, we can do a lot better if we know a little bit about your situation, and you can remain flexible. So, how do you determine your own personalized spending rate? Well, the first is to determine what your time horizon is because a 30-year retirement, if you're 65, which is what the 4% rule was designed for initially, 65 to 95, that's a 30-year retirement. But let's say you're in your 70s. Well, perhaps you could spend a little bit more than that. The other is, how much confidence do you want to have that you're not going to run out versus legacy goals, so leaving money behind. And if you want very high confidence, you spend less and potentially invest a little bit more conservatively as well. And the last, the one that I think is most important is, how flexible can you be? Can you divide your expenses into your essential expenses and then some discretionary expenses? And most investors and retirees naturally are going to cut back on some of their discretionary spending, say, in a down market. And if you do that, that can really help your savings last. So, how flexible can you be? Those are three questions to ask to help you get to a more personalized spending rate. So, once you've asked yourself all these questions, just take us through the math here. Let's assume 30-year time horizon and a conservative allocation here, then how do you make sure that that plays out correctly, and you don't run out of money? Sure. And this is a simple chart that we've put together, and there's more to it, but in different scenarios. But in this scenario, let's take the conservative example. Conservative at the top means how aggressively you've invested your portfolio. And in this case, based on our research and our numbers, the conservative portfolio is 60 to 70% bonds and the rest in stocks, and the more aggressive portfolios includes more stocks. And what it says is, in this case, you spend 4.1% in the first year of a 30-year retirement, and then, based on our current projections of how we think different asset classes, stocks, bonds, et cetera, will perform, 4.1% would be the highest initial spending rate that first year, as you described, Brad, and then you increase it every year with inflation to have a very high, a 90% probability of lasting through retirement. So, that's what the table means. It's a fine place to start, but for all the reasons I suggested, you can do much better by personalizing it by staying flexible and using a modern retirement income plan. Rob, good to have you here with us. Thanks so much. Good to be here. Thank you. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
27-05-2025
- Business
- Yahoo
The 4% rule: How to make your savings last through retirement
Nearly two-thirds of Americans are more worried about running out of money than death, according to Allianz's 2025 annual retirement study. Schwab Center for Financial Research managing director of financial planning, Rob Williams, joins Wealth to outline the 4% retirement rule and how it can help ensure your retirement savings last. To watch more expert insights and analysis on the latest market action, check out more Wealth here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
