Follow these 7 Steps to Build Generational Wealth…

Hey, you. Yes, you. Watching this video right now? You can retire as a multimillionaire. A lot of people think the financial world is rigged against them, but it doesn't matter if you don't make a ton of money. It doesn't even matter if you haven't started yet. In this video, I'm going to break down my entire step by step retirement playbook to build real wealth. Seven steps to ensure you retire richer than you ever could have imagined. Starting with step number one. Setting your number. So before we get into the strategies, you need to start with your number. How much do you really want to retire with? And how much do you need? For a lot of us, Figuring out how much you want for retirement can create anxiety and fear about the unknown. How do you know how much you'll need in 20 years, 30 years, 40 years from now? According to a recent study, the average American believes they need $1.46 million in the bank to retire comfortably. But if you're part of Gen Z or Millennials, that number is even higher. They expect they'll need $1.6 million to retire. Do you think anybody knows how much they actually need? No, they just made these numbers up. But how do we get the real numbers? Well, to understand how much you'll actually need, we need to talk about something called the 4% rule. In the 1990s, financial advisor Bill Bangin designed the 4%. 4% rule as an easy to follow number to know the two following things. Number one, how much do you need to cover your costs throughout retirement? And number two, how much do you need to make your money last as long as you do? The 4% rule means you should be able to safely withdraw and live off of 4% of your savings each year for a period of 30 years when you retire. Here's how to use it. First, find out how much you spend every year. This includes everything you might need in a year, including rent or a mortgage, utilities, groceries, gas, etc. For now, I'm going to use the average American's expenses for a year. That's $72,967 according to recent data from the BLS. But I'll use $73,000 just to make it simple. Take your estimated monthly expenses and divide that number by by 4% to figure out how much you'll need to save for retirement. So 73,000 divided by 0.04 means that you need 1.825 million to retire comfortably. Okay, but let's say you want to live a great life let's say you want to spend lavishly when you retire, you want to travel more, how much would you need then? Well, let's bump that annual spending number up to 100,000 this time. 100,000 divided by 0.04 is equals 2.5 million. Now what I really like about this is you can play around with that first number, the annual dollar amount, to design a retirement that you will love. For example, you might own a house, your mortgage might be paid off so you can reduce that number. Or you might want to travel more or bring your kids with you. Who knows? Here's the general calculation for you to use. Average annual expenses divided by 0.04 is equals the amount you need for retirement. Now please remember this is just a guideline. There are lots of caveats, but it's a good back of the napkin number that can give you a rough idea of how much you need to be putting away for retirement. And now that you have your number, that brings me to step number two. Start investing for retirement in your 401k. Now please listen closely because this is one of the most powerful retirement tools at your disposal. So before worrying about anything else, please make sure your 401k is set up. If you have access to a 401k and you have an employer match, I believe you should absolutely be investing money in this account every single month. Now if you don't have access to a 401k through your employer, don't worry. I'll show you later in this video exactly what to do. But for those of you who do have access, here's how a 401k works. Through your employer, you determine a percentage of your salary that you'll set aside out of each paycheck. That percentage is taken out of your paycheck pre tax before you're taxed and sent to your 401k. Meaning it happens automatically. You don't have to do it every month, it just happens. Now, if your company offers a match, that match will be added to your 401k from the employer. And the real beauty with a 401k comes when you invest enough to get the full match from your employer. That is free money and that can help you achieve your retirement even faster. Just look, if you start at age 25 and you earn 8% on your money, you'll have more than 1.6 million with the 401k match when you retire. Or if there's no match, you'll have just over 800,000. A 5% company match. Can double your returns. And each year you invest, the difference grows larger. Take a look. So here's the lesson. Each each month, you should be contributing at least as much as you need to get the full company match. That means if your company offers a 5% match, make sure you contribute enough to get that full 5% match. Now that you're contributing enough to your 401k to get the company match, that brings me to the next step, which everyone should do. Step number three, Pay off debt before investing more. Now why the hell am I talking about paying off debt in a video about retirement? Well, it's a simple answer that a lot of people don't consider when putting money aside for retirement. Any debt you have that has a higher interest rate than 7% is going to compete with the money that you could make investing. So let me give you an example. Let's say you have $20,000 of credit card debt and let's say your APR is 26%. Now, if we assume that you're getting 7 to 8% investing but you're paying 26% on your credit card debt, where do you think more money is going? That's right, to your debt. So whatever your credit card charges, paying off your debt will give you a significant instant return. That is why if you have any high interest debt, you should pay that off as quickly as possible. Now, before I move on to step number four, I noticed that 55% of you watching this video right now are not subscribed. If you like my videos on retirement money money psychology, hit that subscribe button and turn on notifications. It really helps me understand what you want to see more of. All right, once you've created a plan to pay off your high interest debt, that's when you move on to step number four. Invest in a Roth IRA. Now, why would you invest in a Roth IRA versus a 401K? Well, let me tell you the difference. Contributing to your 401k with a company match is an amazing investment. You get four free money, you grow your retirement account faster, it reduces your taxable income. It's all great. Then paying off your high interest debt, make sure that you're actually growing your money instead of having this huge gaping hole in your financial portfolio which is going to 26% interest for credit cards. After you've done those things, that's when it makes sense to invest in a Roth ira. I personally believe that everyone who's eligible for a Roth IRA should have it open and ideally be contributing to it to max it out. Even if you already have a 401k. Why? Well, it's simply one of the best deals I've found for long term investing. See, one of the benefits with a Roth IRA is that you can invest in whatever you want. Your 401k set up through work has set funds that you have to choose from. And honestly, too often those funds are expensive and not particularly great. But a Roth IRA lets you invest in whatever you want. Index funds, which most people should probably be investing in. If you want to do individual stocks, you can. Best of all, you can pick the funds that have low expense ratios. That means they're cheap. That means you keep more money. Now a second difference between a 401k and a Roth IRA has to do with taxes. Now listen, I know your eyes are glazing over. You go, oh God, this guy's going to talk about estate planning. I don't care about that. That's 40 years in the future. Just listen. This is going to save you a lot more money than all the lattes you agonize over every single freaking day. Remember how your 401k uses pre tax dollars, meaning you pay only taxes when you withdraw that money at retirement. A Roth IRA works differently. A Roth ira, you pay taxes on the money now, but then you put the money in and it grows tax free. In other words, with a Roth IRA, you contribute after tax dollars, which means that all of your gains for the next 10, 20, 30, 40 plus years grow tax free. Does anyone understand how important that is? Or it's just me getting really excited? My heart is starting to palpitate. Is it just me? Let me just tell you, even if you don't understand, listen, it means you're paying taxes on a smaller amount of money. Now like let's say you make 100 bucks, 100 bucks you pay taxes on. But as you invest that money, it grows and it grows and it compounds. And I know you don't understand what the hell I'm talking about when I say compound interest, but, but it's a lot of money. And then when you pull that out, you don't pay any taxes on it. It's a lot of money. Let's make an assumption. Let's assume your career goes well, okay? Unless you started following Robert Kiyosaki, in which case you have a very good chance of ending up broke and just repeating this passive income, cash flow, cash flow, cash, whatever. Let's just assume for a minute that your career goes well, okay? We can safely assume that you'll probably be in a higher tax bracket when you retire, meaning that you'll probably have to pay more taxes. And I will personally assume that taxes will go up in America for a variety of geopolitical, socioeconomic reasons. Whatever. As long as your income right now is $146,000 or less, you're allowed to contribute up to $7,000 in a Roth IRA in 2024. That means $7,000 a year you can put aside. You pay that taxes on that money you, and it grows tax free. Please remember, these limits change yearly. So please go on Google and search Roth IRA contribution limits. Okay? But if possible, you want to max it out because you want to give yourself the gift of more money down the road. Now, within your Roth ira, once you send money to it I mentioned, you can invest in a variety of different funds that'll earn money for you. And what could you do? You could invest IN S&P 500 index fund. You, you can invest in index fund for tech or I like something called a target date fund. It's one investment. It's simple. Let me explain. Target date funds are great for people who want their money to grow with the least possible effort. And this, by the way, is exactly the same investment that I recommend to my family and friends. Here's how it works. Target date funds work by diversifying your investments for you based on age. Now, as you get older this, they automatically adjust your asset allocation or your portfolio for you. And they get more conservative over time. That's actually exactly what you want. You don't want to be 75 years old and have 100% of your money in equities, because if the market goes down 15%, that could be quite devastating to you. That's what we saw happening to Granny and grandpa in 2008. We don't want that. All you've got to worry about with a target date fund is putting as much money as possible into to it. That's it. It automatically diversifies over time. Now, you can look at target date funds at any brokerage firm. It could be Vanguard, Fidelity or Schwab. It's totally up to you. They have very low expense ratios. They used to be expensive. They're not anymore. And I just love how simple and easy they are to use. Now, when choosing the target date fund to invest in, all you need to do is look for the year that you plan to retire. So if you plan to retire in, say, 2060, there's a Vanguard 2060 fund or a Fidelity 2060 fund. Again, that 2060 represents the year in which you'll retire. Adjust it for whatever number is right for you. Now, since we are still decades away from that number, this fund is going to invest a little bit more aggressively in equities or stocks. But as time goes on, you get closer to that retirement, it's going to automatically adjust to become a little bit less aggressive, a little bit more conservative. So once you have your Roth IRA open, remember it's time to start investing within that Roth ira. And you want to make it automatic. Let's talk about this. Automating your finances allows you to invest passively instead of constantly having to pick random stuff. And it happens in the background. So many people tell me, I don't have enough money to invest. How am I supposed to do that? Guess what? If you set up Automatic investing to take $100 a month out of your paycheck, or 500 or 1,000, whatever the number is right for you, you will not miss it. There are so many people who read my book and who tell me, I didn't think I had any money. I waited six months using automatic investing, and suddenly I have $3,000, $10,000, $25,000. And it just accumulates over time. That is how you build real wealth. Here's how it works. At the beginning of the month, when you receive your paycheck, the money is immediately sent where it needs to go through the automatic investing systems that you have already set up. You can set this up through whatever Roth IRA account you have. And what you do is you log into your investment accounts and you will find a button that says transfer. Then you simply set up the date, the dollar amount, the frequency for your contributions, and to finish the setup, make sure you remember you don't just need to transfer money to your Roth ira. You also need that money to be invested in something like a target date fund. Remember, a Roth IRA is just an account, but within that account, you've got to invest the money. So it's crucial you go that final step to complete your automatic investing system. All right, Great. Once you've contributed the max amount allowed to your Roth IRA, it's time to move to step five. Grow your investments more by maxing out your 401k. Now, remember, this step should only be done after you've maxed out your 401k, paid off high interest debt, maxed out your Roth IRA. If you still have money left over, go back to your 401k. Now, this step should be done only after you've maxed out your Roth IRA. Why? Because after contributing enough in your 401k to get the full employer match, maxing out your Roth IRA is the next best financial move. Like I mentioned earlier, it lets your money grow tax free, meaning you won't pay taxes on potentially millions of dollars that you earn in this account. This is why you max out your Roth IRA before moving back to contribute to your 401k. Now you likely still have the ability to invest more in a 401k and reap some pretty large tax benefits. Meaning the more you contribute to your 401k, the less of your income gets taxed, effectively lowering your tax rate. Just like a Roth IRA, there are limits to a 401k contribution, but they are much higher. In 2024, the contribution limit for a 401k is $23,000, but again, that number often changes, so make sure you search for 1k contribution limits. Cool thing to note, your employer match is not counted towards your contribution limit. So if you contribute $5,000 and your employer matches $5,000, you can still contribute another $18,000 for a total of $28,000 annually in your 401k. That's a lot of money. So what should you do? Calculate how much you can still contribute to max out your 401k, break it down into monthly contributions and set that up to happen automatically so you never have to do it yourself. Next, take a look at an unlikely tax advantaged account that very few people know about. Step number six. This is truly a secret investing weapon. HSAs. Listen to this. It's going to blow your mind. So far you've set your number, contributed enough to your 401k to get the full company match. If you have it paid off your high interest debt, maxed out your Roth ira. Then if you still have money left over, you've gone back to your 401k to max that out. Now listen up and listen carefully because I'm going to show you a shortcut that can earn you hundreds of thousands of dollars by turning something called a health Savings account or HSA into a supercharged account for growing your money. Now, HSAs let you set aside pre tax money to pay for medical expenses, including deductibles, co payments, coinsurance and a bunch of other health related expenses. But here's the cool thing. You can also invest the money in your HSA. Now HSAs get ignored for three big reasons. First, anything with the word insurance makes me want to die. All right, nobody wants to think about insurance. Nobody ever got excited about waking up saying Let me optimize my insurance. So cool. Second, HSAs are only available to people with high deductible insurance plans. Now, since most of us would rather eat a bag of sand for breakfast than figure out what type of health insurance we have, we just skip it. And third, the rare person who has access to an HSA and even uses it still doesn't understand the intricacies of how to turn that HSA into an opportunity to grow your money. The truth is that an HSA can be an incredibly powerful investment account because you can contribute tax free money, take a tax deduction and then grow it tax free. That's a triple whammy. If you use this account correctly, you will earn hundreds of thousands of dollars. Do you understand something? I talk about this on one page of my book. I will teach you to be rich if you are eligible to do this. That single page from my book just made you hundreds of thousands of dollars more than all the money you will ever spend on coffee or appetizers from one page of this book. This is why getting your financial system right is so important. You do it early, you do it right, and you make it automatic. And you don't have to think about it again. Now, before you get excited about investing through your hsa, you should find out if you're even eligible. If you're not, just move on. If you've already completed every other step in this video and you have a high deductible health plan, you may be ready for an HSA account. So just call up your insurance provider or ask your benefits manager, hey, do I have a high deductible health plan? If they say yes, you do have a high deductible health plan. Ask them if you can pair an HSA with your account, not an fsa, an hsa. On the other hand, if they say no, ask them if you are eligible for a high deductible plan, you may want to consider it. Especially if you're young and generally healthy. You can search around for all different kinds of HSA accounts. The the most important factor for me was the investment options and the fees. In other words, do they have good funds with low fees? A good guideline is they should offer low cost funds, ideally something like a Target date fund or a total Stock market fund. If you have money left to invest, there is a way you can grow your money even more. But before I get to step seven, I want to point out that most people can figure out retirement investing themselves by following the exact steps in this video. But there are some scenarios where it might make sense to talk to a financial planner. One of those is if you want to know exactly how much you're going to have and you want to financially model out different scenarios tax decisions, Social Security withdrawals, insurance and investment scenarios as you get closer to retirement. If that's you, I recommend you speak to our partners at Facet, a service that offers affordable financial planning with a flat fee membership, not a percentage of your assets. Like most financial advisors, they actually helped model out scenarios for this week's podcast guest Rob and Adrian, who are in their early 60s and wondering if they have enough money to retire. Check them out@facet.com ramit or click the link in the description alright, let's get to the last step for retiring as a multimillionaire. Step number seven Invest in a non retirement taxable Investment account Okay, listen up. If you've taken full advantage of your 401k match, you've paid off your high interest debt, you've tapped out your Roth ira, you've gone back to max out the remainder of your 401k, optionally you've invested in HSA. What do you do next? This is what you do if you still have money left to invest. You open up a regular non retirement taxable investment account and you can put as much much as you want into there. The way these accounts work is there is no limit to contributions. You can contribute literally millions of dollars a month if you want to. And for a lot of people who are very wealthy, this is where the bulk of their wealth is. That's a taxable non retirement account. Remember, if you still have money left over, you still have options. You could pay any mortgage debt off early. You could invest in yourself through a coach conferences, an additional degree. There's lots of options. All right, I hope this video helps you on your path to retiring a multimillionaire and creating your rich life. Let me know in the comments if you have any questions about investing now, check out this video popping up on screen to watch more.