For all financial management/investment targets, the five most important indicators are income, risk, liquidity, tax arrangements, and other restrictions. There is no investment/investment product in the world that is perfect in all five indicators, such as “high yield/low risk/high liquidity/tax incentives/no investment restrictions”. Any investment/investment product has its own trade-offs around these five indicators.
For all financial management/investment targets, the five most important indicators are income, risk, liquidity, tax arrangements, and other restrictions. There is no investment/investment product in the world that is perfect in all five indicators, such as “high yield/low risk/high liquidity/tax incentives/no investment restrictions”. Any investment/investment product has its own trade-offs around these five indicators.
For the vast majority of the middle and lower middle class (50k-100k), “financial management” is actually almost equivalent to “pension”. A more tragic thing than “dying to soon” may be “living too long”. If you can actually fund your pension in a sufficient amount, then you will hardly have any spare money left – I often feel faintly that this is the perfect result of the ingenious calculation of the American superstructure: the most widely covered group of people in the population, Constantly generate new money to support ourselves and the country, and when we finally leave, there will be no old money left for the next generation to enjoy.
Among them, 3 is a small probability event, and most companies do not have it. 1 It’s best not to count on it. The Social Security account has been unable to make ends meet for N years, similar to the SS Tax you are paying to support the retired elderly.
The big head is 2: personal account.
After joining the company, the company HR will provide you with a benefit plan sponsored by the company, the most important of which is the so-called 401k. This thing is actually a mutual fund, and it can even be your own DIY stock portfolio. The so-called “401k” is actually just the chapter number of the Revenue Code of the Internal Revenue Service (IRS). In the essence of mutual funds, the IRS provides you with a “tax arrangement” that is different from general mutual funds: you do not have to pay capital gains tax every year during the period of investing and holding a 401k account, but, at the age of 59 and a half Before, you could not withdraw the money in this account (there are exceptions, which are skipped here), otherwise you would have to pay capital gains tax and an additional 10% penalty tax.
Its additional advantage is that regular companies will give you a certain percentage of “match”. For example, if you put 3% of your monthly salary in your 401k, the company promises to also put 3% in your 401k account. Behind this is naturally the company’s intention to attract talents, but it is more about the tax planning needs at the company level (irrelevant to the topic, skipped here). In short, if a person does not know what percentage of salary to invest in 401k, at least get the company’s “free” match – if the company says it can match 3%, you also chose 3%, which means Your monthly 401k new investment is 6% of your monthly salary; and if you choose 1%, the company will naturally only give 1%, then your monthly 401k new investment is only 2% of your monthly salary, which is equivalent to starting from The company took 2% less free match.
The limitation of the 401k account is that the benefits of the tax arrangement given to you by the IRS cannot be enjoyed unlimitedly, and can only be enjoyed within a certain limit each year. In 2015, the limit was $18,000 per year.
Another common benefit of being able to choose from companies is “discounted company stock,” as well as various options. To put it simply, for example, if your company’s stock market price is $10 a share, the company allows you to buy company stocks at $8.50 per month, which is equivalent to earning $1.50/share for free at the moment (actually, there may be a restriction period; In addition, why is it a 15% discount, it is the content of corporate taxation, skip it)
In educational institutions, such as universities, “401k” has another name, called “403b” – there is almost no difference between the two except for the name.
If there is no 401k in the company’s welfare plan (common in small companies), you can choose to open your own pension account, called “IRA” (Individual Retirement Account). Its operating mechanism and tax arrangements are not much different from 401k.
Finally, there is another concept that many people may be unfamiliar with: annuity/annuity/annuitize. This concept is actually not difficult to understand. Strictly speaking, 401k is just a “pension”, not “pension insurance” – the money you save yourself will be spent after retirement, and it will be gone when you spend it all. There is no “insurance” part. The so-called annuity can be regarded as a real “pension insurance” – the money you save yourself, and at the same time attach a guarantee agreement with the investment manager: from when I was old, you pay me XXX’s pension every year until until my death. To put it bluntly, the “insurance” function of annuity, which is just the opposite of life insurance, is to hedge against such a risk: Living Too Long/living too long. That is: the money is spent, and the person is not dead… There are two main forms of it: 1) Your 401k/IRA may itself be an annuity, that is, it does not tell you an account balance after retirement, but guarantees your retirement. How much money you get every month until you die; 2) You can buy/convert your 401k/IRA, and of course other assets, into an annuity, which is called “annuity”.
If there is a metaphor: you can think of an “annuity” as your self-funded pension run by a private company.
Summary:
401k/403b/IRA is only a tax arrangement based on the nature of mutual funds. Compared with mutual funds, they can choose to invest with pre-tax income when investing (or after-tax income, but they do not pay taxes when they receive it after retirement, called Roth type), and they do not need to pay capital gains tax during the holding period, but Limited liquidity (59.5 years old), limited investment amount (up to 18,000 per year)
Naturally, similar to mutual funds, you can choose different mutual funds as your 401k’s “baby” according to your own income and risk preferences – if you want, you can even make your own investment portfolio as your 401k’s “Flesh”, although I personally don’t support anyone to commit this kind of nerve. Those who like high risk and high return should prefer stocks; those who like low risk and low return should prefer bonds, which is very simple and straightforward.
“For a middle class with an annual income of 50k to 100k, in addition to providing for the elderly, the only thing left to do is various
kind of insurance. In fact, this should be said before retirement, after all, all kinds of insurance are used for “covering the bottom line”.
What is a “pocket”? For example, if you don’t have medical insurance at all, it doesn’t matter how much money you have saved. If you have a “minor illness”, the money you saved in a year will probably be gone; if you have a “serious illness”, 80% of your family will go bankrupt . Another example is life insurance (here only refers to term life), if you hang up unexpectedly, your husband/wife/child’s life may not be able to maintain, and the mortgaged house may also be taken away, and your domestic rely With your parents in the United States earning retirement income, the economic situation is probably not enough. Another example is some other small insurance, which is still the foundation of “financial management” that cannot be ignored. For example, if there is no disability, if you are injured and unable to work for a long time, the financial impact on your family will be even greater than if you die, because you are still alive, you still have to eat and see a doctor; another example is car insurance, if there is no accident, there will be an accident , especially if the responsibility lies with you and the other party is injured, you have to pay for bankruptcy; another example is housing insurance, almost all houses in the United States are wooden, you know…
