Start Investing Early—or Start Now

Ric kicked off with the classic Jack and Jill example of compound interest and the math blew me away. Jack started saving $5,000 a year at age 18 and stopped after 8 years, investing only $40,000 total. Jill started at 26 and contributed $5,000 a year for the next 40 years investing $200,000.

Guess what? By age 65, Jack had $2.6 million. Jill? $2.2 million.

That’s the power of time and compound growth. Even if you’re not 18 anymore, the takeaway is clear: the best time to start was yesterday. The second-best time is today.

Max Out Your 401(k and Build Your Cash Reserves

Ric advised a newly married couple to stop limiting their 401(k) contributions to just their employer match. Instead, they should max it out. Why? Because 6% won’t cut it for a secure retirement.

He also recommended building a 12-month emergency fund. Not just the usual 3–6 months 12. And if you’re saving for a house, he said to do that after your emergency fund is fully in place.

Diversify Everything

Ric emphasized portfolio diversification not just across industries, but across geographies and company sizes. You need large-cap and small-cap, dividend and non-dividend, U.S. and international. The goal? Balance. Protection. Growth.

He also reminded us that more than half of the stock market’s historical returns come from dividends, not stock price increases. Reinvesting those dividends is where the real magic happens.

If You’re Struggling in Today’s Job Market… Shift

A 59-year-old man asked Ric about his job struggles despite having two advanced degrees. Ric didn’t sugarcoat it. The economy might be recovering, but personal circumstances vary. His advice? Change your approach. Retrain. Move. Reinvent. Don’t keep doing what’s not working and expect different results.

And yes, he quoted Einstein: “Insanity is doing the same thing over and over again and expecting different results.”

Bad Banker Advice? Ignore It.

One caller shared that his banker recommended pulling out of the stock market and putting his 401(k) into municipal bonds. Ric’s response was brutal but accurate. That banker was giving advice based on gut feelings, not data.

Ric explained: bonds pay interest, but they don’t grow. Stocks, while volatile, have historically built wealth. So when someone tells you to ditch your portfolio without solid reasoning especially during an all-time high in 401(k) balances—you might want to get a second opinion. Or a real advisor.

Behind the Scenes of Big Book Deals

Ric interviewed Bob Barnett, the legal powerhouse behind publishing deals for Barack Obama, Hillary Clinton, and James Patterson. Bob isn’t an agent he’s a lawyer. He doesn’t take commissions, but he negotiates contracts, manages rollouts, and helps high-profile clients navigate publishing.

Bob offered insights into just how tough it is to get published only 1 in 6,000 first novels make it. But he encouraged aspiring writers to start with proposals and sample chapters before committing to full books.

Never Borrow from Your Retirement Plan

Ric ended with a warning: do not borrow from your 401(k).

Why? Because when you take out a loan, you sell your shares (locking in any losses), then repay the loan with taxed income, and then get taxed again when you withdraw the money in retirement.

A $10,000 loan could cost you $100,000 by the time you retire. That’s not a small mistake it’s devastating to your future self.

Final Thoughts

Whether you’re 25 or 65, Ric Edelman’s advice boils down to a few key principles: Start saving. Don’t panic. Diversify your investments. Be wary of bad advice—even from a bank. And never, ever borrow from your future.

Want to retire with confidence? Take action today—and let compounding, consistency, and smart decisions do the heavy lifting.

All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice. Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances

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Common Careers Among Millionaires Surprisingly, the top five careers for millionaires are engineer, accountant, teacher, manager, and attorney—not flashy, high-paying roles, but stable and consistent. According to the largest study of millionaires, 79% did not inherit their wealth. It turns out that habits and decisions with money are far more important than your income level or job title.

The Power of Investing and Compound Interest Investing consistently over time is the true path to building wealth. Compound interest—the idea of earning returns on both your initial investment and the returns it generates—works wonders. For example, if you invest 15% of a $65,000 salary annually from age 35 to 65, you could end up with $1.8 million in retirement savings, with only $290,000 contributed directly. Start at age 22, and that same strategy could grow to $6.9 million, thanks to the magic of compound interest.

Financial Steps to Prepare for Investing Before diving into investments, you need a solid financial foundation. First, become debt-free (excluding your mortgage). Next, build a fully funded emergency fund covering 3 to 6 months of expenses. Only then should you start investing 15% of your income into retirement accounts. Using tools like an investment calculator can help you visualize your money’s growth over time.

Avoiding Lifestyle Creep Brandon shared how he avoided lifestyle creep—the tendency to increase spending as income rises. Instead of buying things that depreciate, he focused on saving and investing. Maintaining a frugal lifestyle and prioritizing financial stability over flashy purchases ensured he remained financially secure, even during tough years.

The Role of Inheritance in Wealth Building While Jessica inherited $300,000 over her lifetime, it was her disciplined savings and investments that truly built her wealth. Brandon, on the other hand, inherited no money but benefited from using older equipment gifted by his grandfather to start his farming career. Both stories reinforce that inheritance is helpful but not necessary to achieve financial success.

Privacy Concerns and Protecting Your Information A quick note was made about privacy concerns—one-third of the U.S. population’s background information, like names, addresses, and phone numbers, is publicly available. To combat this, Delete Me, a sponsor, offers a service to remove personal information from data broker websites. Plans start at $9 per month, with a 20% discount available through a specific link.

Empowerment and Encouragement to Build Wealth The session wrapped up with a powerful message: anyone can become a millionaire with discipline, smart money management, and consistent investing. You don’t need a huge salary—you just need a plan and the commitment to follow it. Take control of your finances, follow the steps, and watch your wealth grow.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

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When it comes to managing a 401(k) after retirement, there are three main options:

• Leave it in the old company’s plan
• Take a full cash distribution
• Roll it over tax-free into a traditional or Roth IRA

Each option has its pros and cons, and understanding the costs and benefits is key. For example, many 401(k) plans come with hidden fees—recordkeeping costs, administration fees, and internal fund costs. Comparing these fees with those of an IRA is essential to making an informed decision.

IRAs often provide more control and flexibility than 401(k)s. With an IRA, you have access to thousands of investment options compared to the limited choices in most 401(k) plans. Transactions, rebalancing, and withdrawals are also typically easier and more streamlined with an IRA. For many retirees, the ability to consolidate accounts into one IRA makes management simpler and reduces the risk of redundancy, especially for those with multiple 401(k)s from different employers.

Special Considerations for 401(k) Management

There are some unique benefits tied to 401(k)s that are worth understanding. For example:

• After-Tax Contributions: When rolling over a 401(k) to an IRA, it’s important to understand how after-tax contributions and their growth will be handled to avoid unintended tax consequences.
• Net Unrealized Appreciation (NUA): If your 401(k) includes company stock, you may qualify for favorable tax treatment when you take a distribution. This is an area where professional guidance is especially valuable.
• Penalty-Free Distributions at 55: If you retire in the year you turn 55 or later, 401(k) distributions are penalty-free, unlike IRAs, which require you to wait until age 59½. This can be a crucial advantage for early retirees.

Teaching the Next Generation About Investing

While managing your retirement accounts is a top priority, retirement is also a great time to pass along your financial knowledge to the next generation. I often use the concept of compounding to illustrate how small, consistent efforts can lead to massive results over time.

Take this example: Ashlyn starts saving $250 per month at age 20 and stops at 30, while James starts at age 30 and saves the same amount until 65. Despite saving for fewer years, Ashlyn ends up with more money at age 65 due to the power of compounding. This lesson underscores the importance of starting early and being consistent with saving, whether for retirement or other goals.

The Broader Power of Compounding

Compounding doesn’t just apply to finances—it’s a principle you can apply across all areas of life. Small, consistent efforts in skill development, relationships, or career growth can lead to exponential success over time. For example, improving a skill by just 1% every day can make you 37 times better by the end of the year. This principle is a cornerstone of personal and professional growth.

Final Thoughts

Your 401(k) represents a lifetime of hard work and saving, and managing it wisely after retirement can set the stage for a financially secure and fulfilling future. Whether you decide to leave it in your current plan, roll it over to an IRA, or take another approach, understanding your options and their implications is crucial.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

The post What to Do with Your 401(k) After Retirement: Practical Strategies for Success appeared first on ROI TV.

1. Teaching Children and Grandchildren About Investing

Traditional methods of teaching investing, like tracking stock prices in newspapers, often fail to engage young learners. Below I suggest more dynamic approaches, such as:

• Using Stories and Thought Experiments: Examples like the penny doubling scenario effectively demonstrate how small investments can grow exponentially over time.
• Illustrating Real-Life Scenarios: Comparing different saving strategies helps children understand how starting early can lead to greater financial freedom later in life.
• Highlighting Growth Beyond Money: Teach children how compounding applies to personal skills and development, reinforcing the value of continuous improvement.

2. The Magic of Compounding

Use the well-known penny-doubling example to showcase compounding:

• The Scenario: A single penny doubled daily for 31 days grows to over $10 million.
• The Lesson: Starting small and allowing investments to grow over time unlocks extraordinary potential.

3. Importance of Starting Early

Starting early is a cornerstone of financial success. Here is a compelling comparison:

• Ashlynn’s Strategy: Saves $250/month from age 20 to 30, for a total of $30,000 invested.
• James’ Strategy: Saves $250/month from age 30 to 65, for a total of $105,000 invested.
• Result: Despite contributing less overall, Ashlynn’s early start allows her investments to grow significantly more due to compounding.

4. Compounding Beyond Investments

Compounding isn’t limited to financial growth:

• Personal Development: Incremental daily improvements can result in being 38 times better at a skill by the end of the year.
• Life Application: Encourage children to apply this principle to learning, health, and relationships for holistic growth.

5. Managing 401(k) Plans in Retirement

When it comes to managing 401(k) plans in retirement, here are three options:

1. Leave the Plan with the Employer:
   • Pros: Low costs, institutional investment options.
   • Cons: Limited control and complexity in managing multiple accounts.
2. Take a Full Cash Distribution:
   • Pros: Immediate access to funds.
   • Cons: Significant tax consequences and loss of future growth.
3. Roll Over to an IRA:
   • Pros: Greater control, flexibility, and broader investment options.
   • Cons: Requires careful planning to avoid penalties or unnecessary taxes.

6. Key Considerations for 401(k) Rollovers

When considering a rollover, keep the following in mind:

• After-Tax Contributions: These can be rolled into a Roth IRA, while the growth is rolled into a traditional IRA.
• Net Unrealized Appreciation (NUA): Favorable tax treatment for company stock gains when distributed to a brokerage account.
• Penalty-Free Withdrawals: Retirees aged 55 or older may access 401(k) funds without incurring the 10% early withdrawal penalty.

7. Importance of Financial Education and Planning

Financial education and planning are critical for long-term wealth management. I encourage families to integrate these strategies into their everyday lives and emphasizes the role of professional guidance in optimizing financial potential.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

Related Articles:

• Teaching Kids About Money: 5 Lessons for Financial Literacy
• The Power of Compounding: How Starting Early Makes a Difference
• Best Strategies for Managing 401(k) Rollovers

The post Teaching Kids About Investing: Harnessing the Power of Compounding for Financial Success appeared first on ROI TV.

1. Retirement Planning Formulas

Starting early is critical in retirement planning. The Rule of 72 is a valuable tool that helps you estimate how long it will take for your investment to double. Simply divide 72 by your expected annual rate of return, and you’ll have a rough estimate of the number of years needed for your money to grow. Additionally, the 4% Rule serves as a guideline for determining how much you can withdraw from your retirement nest egg each year without depleting your funds too quickly. This rule suggests that you can safely withdraw 4% of your retirement savings annually, adjusting for inflation.

2. Compound Interest and Retirement Accumulation

Compound interest is one of the most powerful concepts in retirement savings. It refers to earning interest on both the initial principal and the interest that accumulates over time. The earlier you start saving, the more you can benefit from this growth. However, it’s important to recognize the double-edged sword of compound interest—while it can significantly enhance your savings, high-interest debt can also compound quickly, negatively impacting your financial health. Therefore, aim to increase your savings rate over time to maximize your retirement accumulation.

3. Retirement Spending and Income Strategies

Understanding the retirement smile can help you plan for different phases of retirement. This concept divides retirement into three stages: the go-go years, where you’re most active and spend the most; the slow-go years, where your spending begins to taper off; and the no-go years, where expenses may be at their lowest. This understanding can influence your withdrawal strategy, where the 4% rule can guide you on how much to withdraw each year. Additionally, consider adopting a dynamic spending plan that adjusts based on market conditions and personal needs.

4. Social Security Benefits and Claiming Strategies

Navigating Social Security benefits can be complex. Deciding when to claim benefits is a crucial aspect of retirement planning. Claiming early can reduce your monthly benefits, while delaying them can significantly increase your payout. Understanding the break-even age—the point at which delayed claiming pays off—can aid in making informed decisions. Factor in your life expectancy and income needs to ensure that your choice aligns with your overall financial strategy.

5. Tax Planning Opportunities in Retirement

Tax planning is essential for maximizing your retirement income. With potential tax changes on the horizon, including those expected in 2026, it’s wise to consider Roth IRA conversions. By utilizing lower tax brackets, you can convert traditional IRAs to Roth IRAs, enabling tax-free growth and withdrawals in the future. Effective tax planning can enhance your overall retirement strategy and help you retain more of your hard-earned money.

Conclusion

Retirement planning doesn’t have to be overwhelming. By understanding and applying these essential formulas and strategies—like compound interest, Social Security claiming, and tax planning—you can pave the way to a secure and fulfilling retirement. Start planning today to take control of your financial future!

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Unlocking Retirement Success: Essential Formulas and Strategies for Financial Planning appeared first on ROI TV.