Better Financial Health in 15 Minutes (or less!)

From Match to Millions: A Practical Guide to 401(k), Vesting, and Roth Strategy

• Stacey Hyde

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Pensions are fading, and the 401(k) is now the primary engine for a real retirement paycheck. We unpack what that shift means for your money, from how much to save to which account type—pre-tax or Roth—gives you the most control over future taxes. We start by challenging the “save to the match” mindset and show why 15% is a more reliable target for long-term security, especially if you didn’t start in your early twenties.

We dig into the fine print that quietly costs people thousands: vesting schedules and small-balance cash-outs when changing jobs. You’ll learn how to time career moves so you keep employer dollars, and how to roll old 401(k)s in minutes instead of paying taxes and penalties on a forced distribution. Then we get practical about investing inside the plan—when a target-date fund is “good enough,” what to check for (fees, glide path, risk), and how to build a simple, low-cost, diversified mix if your default option isn’t pulling its weight.

The conversation peaks with the Roth 401(k), a standout strategy for younger and higher-earning listeners who want tax-free income later. We clear up the biggest myth—there’s no income limit for Roth 401(k) contributions—and walk through how employer money differs from yours at tax time. With current contribution limits of $23,500 under 50 (plus $7,500 catch-up if you’re 50+), we lay out step-up tactics to reach 15% without shocking your budget. By treating your 401(k) like your future paycheck, and combining smart savings, vesting awareness, clean rollovers, and tax-savvy investing, you’ll build a plan that compounds quietly and pays loudly.

If this helped, follow the show, share it with a friend who needs a nudge on their 401(k), and leave a quick review so others can find it. Your future self will thank you.

Envision Financial Planning. 5100 Poplar Avenue, Suite 2428, Memphis, TN 38137. (901) 422-7526. This communication is strictly intended for individuals residing in the United States. Advisory Services offered through Envision Financial Planning, a Registered Investment Adviser.

SPEAKER_00:

Hi, I'm Stacy Heidt, and I'm back with another episode of Better Financial Health in 15 Minutes or Less. And today, this is geared toward primarily younger workers, but it could be geared to anyone. And it really has to do with the 401k landscape and how valuable it is. So workers today, especially those under 40, are really the first generation to really be 100% reliant on their 401. No pensions unless you happen to work for the government or a school teacher or a fireman or policeman. And they really put the onus on the individual to save for retirement. Now, some of the things have come along automatic enrollment. Some places will start out at 3% or maybe 6%. And then you get matching dollars on top of that in most cases. And so that may or may not be all that you need to save for your retirement. Chances are, unless you start really early, like at age 21, you probably should save more than just the dollars that get matched. I know that there's a lot of literature out of there that says you've got to save up to the match. Well, yes, that's smart because if you're not saving up to the match, you are walking away from free money, but you also need to be saving really, I would say 15% of your income. And so if you're putting in six and your employer's putting in three and a half, you're getting nine and a half. Well, you still need to save that other five and a half percent to make sure you have enough. And the key thing is that we see happen a lot is people are more mobile than they ever were before. The good news is vesting schedule. And what vesting means is when does the company's money become your money? And if you are someone who changes jobs a lot, you may have contributed, gotten some match, but maybe you had to stay for three years to be entitled to that match. And if you didn't stay three years, you didn't get that free money. It reverted back to the company. So it's important to pay attention to those timelines. And then the other thing that can catch you is say you worked somewhere for three years, but you know, times were tight, you couldn't put a lot of money in, and it was only it was only$4,000. And so you were automatically cashed out of that money. So instead of that money growing from the time you're 24 to the time you're 65 and being worth$50,000 or more, you cashed out and got$4,000, had to pay taxes plus a 10% penalty on it. So it's not there to help you in your retirement. So those are two key things to pay attention to. The vesting schedule, when does the employer money become your money? And don't leave your 401k behind. It takes a few minutes. You've got to log into your old 401, figure out, request a check payable to your new 401, and roll that in there. Also pay attention to the investment options. Most plans these days offer a target date fund, and there's some really great ones out there from some big mutual fund companies, or they may be specially managed, but some of them they could do better. And if you should go and spend a few minutes, um, if you've got a parent or family friend who does this kind of stuff, have them look at it for you. They may say, no, you'd be better off to build your own model and then rebalance it once a year. So, in a lot of cases, the target date works great. Um, sometimes not quite as good, but it is important to understand that. Don't leave um that behind. And then what I consider the super spectacular option, especially for younger workers, is the Roth 401k. This is the ability to make your contributions with after tax dollars, have them grow tax-deferred, and as long as you follow the rules, 59 and a half, been in Roth at least five years, you avoid all future income taxes on that money, both state and federal. That's huge. So if you're young and you put your money in and say your contributions over your lifetime were 250,000, it's likely to be worth a million and a half to two million dollars, depending on your investment returns. And wow, having$2 million where you don't have Uncle Sam as a co-investor in your retirement is huge. Now, any money that the company puts in on your behalf will always be pre-taxed, so you'll owe a tax on that. But you can, in most cases, and I think a lot of the holdout plans will be adding this feature as of January 1 of next year. Um, you can make Roth 401k contributions. Some people still mistakenly believe that if you earn over a certain amount, you can't make Roth 401k contributions. That's not true. You can't make Roth IRA contributions if your income's over a certain amount. Um, and if you're trying to figure out how to do that, we have a um episode out there on backdoor Roths. But but Roth 401ks do not have income limits. So no matter your income, you can still contribute to a Roth 401. And the limit um if you're under 50 to either pre-tax or Roth or a combination of the two is$23,500. And if you're over$50, you can put in an extra$7,500. So that's a lot of money to put aside and save. You're not gonna be able to get there immediately. But go ahead and start working toward having your contributions total up to 15% and pay attention to those vesting schedules. Because you don't want to treat your 401k like an afterthought. That is your future retirement paycheck. That's what's going to generate it. So it's important that you take some time and pay attention to it. So that's all for today's better financial health in 15 minutes or less. And if you enjoyed this, please share it with a friend who maybe needs to pay a little more attention to their 401k.