Pre-tax or Roth 401k?

So you’ve decided to enroll in your company’s 401k plan or have decided start your own IRA (Individual Retirement Account) with a bank. So what’s next? Your next move may seem daunting. I’m here to break them down for you.

Your first step is to decide on how much money you want to send to the account at regular intervals. For example, if your employer pays you semi-monthly (2x a month, 24x a year) you can contribute (your decided amount) every pay period. If you have your 401k in a bank, you can choose how frequently you want payments to be made.

Now, stay with me, you often can choose between flat dollar amounts ($20, $50, etc.,) or a percentage (1%, 5%, 10%, etc.,). This is dependent on your current budget and retirement goals (see here for understanding how to get this amount). Keep in mind, the IRS limits an individual’s total annual contribution to $23,500 in 2025 (or if you are over the age of 50 you can add an additional $7,500 as catch up).

If you have 24 pay periods in a year (semi-monthly payroll), this amount would be $979 (and 16 cents if you care). For those with 26 pay periods in a year (bi-weekly payroll) this amount would be $903 (and 84 cents).

Log on to your account, your employer sponsored plan (meaning, the account is monitored, accessible, and funded through your employer and paycheck) will have sent you a letter regarding the opening of your account, website, and contact information if you need any help.

I would highly recommend calling a rep to walk you through logging on and navigating the site. Some questions I recommend asking are: where is my personal information located, where can I find my contribution, fund options, and payment information.

Once you have decided on an amount, you need to navigate to the page to add that amount to your account. Typically, they will ask how you want the money to be sent to the account: Pre-tax or Roth.

Simply defined, Pre-Tax essentially means the money goes in as you decided at this moment, grows at a rate, and then when you retire (at 60 years old, 65, 72) you will be taxed on the distribution (amount withdrawn or taken out whether it’s the whole amount or partial amounts) at a rate aligned with your tax bracket at the time of your retirement.

What is a tax bracket??

The IRS sets tax brackets based on your income. The higher you make, the higher you get taxed. If you have ever wondered why your raise surprisingly didn’t result in a larger take home pay, this is why.

Now, I can’t tell you which type of contribution to make. But I can ask you questions for your individual, unique, personal financial situation. Use the connect button at the top of my site to reach out!

I’ve Enrolled in Medical Insurance, Now What?

Does anyone really know the ins and outs of their medical benefit plan? Probably not.

That’s okay. But it would be good to take a few moments to do two simple steps after enrolling.

First, you will need your ID Card and your insurance company’s member/customer services phone number.

PRO TIP: Save it in your phone as a contact [Insurance Company Name Customer Service] and if you have the space to put a description that isn’t part of the name (on iPhone's it is below in the notes section) I would HIGHLY recommend putting your ID number which is listed on your ID Card, your company’s plan number or group number which is sometimes used to identify you over the phone and anything else they ask you to verify who you are when you call.

If you want to know what you will be billed for before you receive the bill,

If you want to know what is free/covered in full or what you have to pay out-of-pocket,

If you want to save money on expenses,

Use this document, keep it with your benefits guide, bring it to your appointments, save it as a photo on your phone, etc.,

I also recommend setting a time with your Benefit's HR person at your company to ask them to explain your chosen plan to you because they often know waaaay more than you could ever know about the ins and outs of the plan.

Medical Insurance Plan Hacks

So you got your first job and have enrolled in your own medical insurance…or maybe you turned 26 and aren’t covered under your parents any longer….what does this even mean??

First, just know, you being here right now shows me you are interested in hacking the insurance game maximizing your medical benefit through your employer. You want to know what you don’t already know or know what to ask.

I’m here to help and I’m so excited to do so!

I’ve created a (completely free) little homework worksheet (below) for you to go into the year strong. But first, you will need your employer’s benefit guide and your ID Card on hand. You will want to do this right after receiving your ID card and after reviewing the guide.

---

Turn your ID Card to the back and call the customer service line (or if it doesn’t have it, google your insurance company ((Anthem Blue Cross, Aetna, Kaiser, Cigna, etc.,) "and the words “customer service”).

You are going to call them and say, “I just enrolled in my employer sponsored medical plan through you and I want to ask a few questions about my coverage. I’m new to the [HMO, HSA, PPO] plan concept and want to learn so tell me anything and everything you think would be helpful.”

A few things to note: you may have been assigned a Primary Care Physician (PCP, your doctor) or you may not have. If you have, you will need to establish care before being referred to anything specialized (immunology, allergy, ortho, etc,).

This checklist walks you through the questions you can ask them and some bonus FAQs that I have received as the Benefits contact in my recent companies.

Hope this helps jump start your journey to understanding your medical benefits! Good luck!

Retirement Planning: From the Start

Have you ever made sourdough bread from a starter before? No? Me neither. BUT we’ve both seen them on instagram. Your retirement account is the sourdough. The more you feed it regularly, the more it will grow. The initial contribution is the starter, your per paycheck contribution is the food.

In a very quick 10 steps, you can analyze your finances easily to actually plan for retirement.

Have you reached an age where your HR office has reached out about your contributing to your retirement but it seems daunting?

It all starts with your paycheck. Below I will show you how to analyze where you are at in life too see how you can potentially have half a million dollars when you retire.

Think about this: when you retire, you may live for 20-30 years. What money will you be living off of?

Here are the 10 steps:

1. Get your last two paychecks, decide on a year you want to retire (60? 75?), get a piece of paper and a pen or a spreadsheet if you prefer

2. Estimate how much money per month and per year you will need to live off of when you retire (typically this is between $3-5k depending on where you live and lifestyle, medical needs, etc.,)

3. Open a retirement calculator online. I like NerdWallet.com because it shows you what you will make and what you should work to have when you retire (a projected amount based off cost of living)

4. Enter the information you know you have: current age, age you want to retire, annual rate, amount you currently have in ALL your accounts (previous companies and current)

   Keep contribution to $0 right now. The amount shown projects what you might have at retirement age (conservative calculation from market trend)

5. Look at your take home pay, how much would 1%, 2%, 10% be from that amount?

6. Enter those amounts into the calculator and see how dramatic the amount changes

   Now look at your budget

7. Calculate your fixed expenses (payments made every month like rent, pet insurance, utilities, car payments and insurance, etc.,)

8. Calculate your needs (groceries, household supplies, etc.). Bonus: Add 15% to this for buffer

   The remaining amount is what you have left to spend on what you want

9. Take the 5% amount of your take home pay and see how much of a dent this puts on your remaining amount

10. Decide if you want to spend money on a pair of sneakers every month or have hundreds of thousands of dollars when you retire.

Example:

Susie Q currently makes $105,000 a year gross pay (not take home).

Step 2: Susie Q estimates she will need $3,500 a month in retirement ($42k annualized).

Steps 3-4: She opens the Nerd Wallet retirement calculator and enters her age of 38. She currently has $52,896 in retirement savings through various jobs which she rolled over into her current one.

Susie wants to retire at age 65 (which you can change if you want to retire earlier or later in the advanced details section).

Her grandparents lived to be roughly 88 years old so she’s estimating living until 90 to be conservative.

Now she goes back and sees what they project: $255,083 (she would actually need $1,904,052 to live on her projection of $3,500 a month). Keep in mind this is with a $0 monthly contribution.

Step 5: Now she looks at her take home pay from her last two pay stubs. Susie Q lives in CA where there are some major taxes so she takes home $3,098. Susie gets paid semi-monthly meaning 24 pay periods in a year so she multiples her take home by 2 to get her monthly take home which is $6,196.

She calculates 1% of = $61.96, 5% = $309.8, 10% = $619.6. 

Step 6: She enters this numeric amount into the calculator and watches the numbers grow. 

$62 a month = $313,030 in retirement

$310 a month = $544,821 in retirement

$620 a month = $834,558 in retirement

Step 7: Susie Q looks at her fixed expenses and pays $1,500 in rent, $250 in utilities, $120 in car insurance, does not pay a car payment, has one student loan refinanced at $312 a month, and $25 on subscriptions. This equals: $1,715 a month.

Step 8: She knows she typically spends $250 on groceries a month, $55 on household replenishments (cleaning products, toilet paper, soap, etc.,), $45 on pet food, $240 on gas. This equals $590 added to Step 7 equals $2,305 a month for needs and fixed expenses. 

Step 9: Taking the net amount from her monthly pay, she subtracts Step 8 amount to get a remainder of: $793 a month for fun and savings. 

Step 10: She calculates 5% of the net amount for the month and realizes that 5% of her net would be about half of her remainder but would result in half a million dollars in retirement. 

If she were to put $155 per paycheck into her retirement account, she would have half a million dollars in retirement. 

Ask yourself: Can I invest this money before it reaches my bank account into my future rather than spending on stuff that I barely use/want now?