BEST INVESTMENTS RANKED - 401K, Roth 401K, IRA, Roth IRA, HSA, 529, Brokerage, Real Estate
Channel: Building Your Financial Future
Date: 05/12/2020

In this video I explain various investment options and provide my perspective on which ones are the best. The following are explained: 401K, Roth 401K, IRA, Roth IRA, Health Savings Account, 529 college savings plan, taxable brokerage accounts and real estate investments.

In the video I discuss there are various nuances with Roth IRA withdrawals and have listed them below:
Age 59 and under
You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings in your Roth IRA. 

Withdrawals from a Roth IRA you've had less than five years.
If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in the following situations:

You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
You use the withdrawal to pay for qualified education expenses.
You use the withdrawal for qualified expenses related to a birth or adoption.
You become disabled or pass away.
You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you're unemployed.
The distribution is made in substantially equal periodic payments.1
Withdrawals from a Roth IRA you've had more than five years.
If you're under age 59½ and your Roth IRA has been open five years or more,1 your earnings will not be subject to taxes if you meet one of the following conditions:

You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
You use the withdrawal to pay for qualified education expenses.
You use the withdrawal for qualified expenses related to a birth or adoption.
You become disabled or pass away.
You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you're unemployed.
The distribution is made in substantially equal periodic payments.1
Over age 59½
Withdrawals from a Roth IRA you've had less than five years.
If you haven't met the five-year holding requirement, your earnings will be subject to taxes but not penalties.

Withdrawals from a Roth IRA you've had more than five years.
If you've met the five-year holding requirement, you can withdraw money from a Roth IRA with no taxes or penalties.

Unlike a Traditional IRA, with a Roth IRA there are no RMDs.

For all ages
If you transfer your Traditional or Roth IRA and request that the check be made payable to you, you have up to 60 days to deposit that check into another IRA without taxes or penalties. This is known as a "nontaxable rollover," and you can do this once within a 12-month period.

Highlights of each investment :
Regular 401k
Maximum 2020 employee contribution $19,500 ($6,500 for 50+)
Tax deferred - uses ore tax income will be taxed on withdrawal upon retirement 
Penalty free if withdrawal after age 59.5
Frequently has an employer match component
No income limit 
Investment Options may be limited and could potentially have higher fees
RMD at 72

Roth 401k
similar to 401k except investments are made post tax and withdrawals can be made tax free

IRA
contributions made with after tax money. Potential earnings grow tax deferred and not taxed until you withdraw at 59.5
Max contribution $6,000
No income limit
Penalties on early withdrawal 
Requires minimum withdrawal at 72

Roth IRA
contributions with after tax dollars but earnings are tax free and no taxes or penalties apply on withdrawals after 59.5 and investments are over 5 years
Max limit of 6k as Ira. 
Allows withdrawal of contributions tax free and penalty free at any time
Subject to income limits ($124k for single, $196k for married filing jointly
Various rules apply on withdrawals if under 59.5 and/or holdings less than 5 years 
No minimum withdrawal requirement at any age
No RMD favorable for leaving a legacy

HSA
enroll in a high deductible health plan
Allows pre tax and tax deductible contributions 
Tax free withdrawals if used for qualified medical purposes (deductibles, copayment, coinsurance)
Up to $3,550 for self and $7,100 for family in 2020
Invest contributions for tax free growth
20% penalty on non qualified withdrawals
Portable but few investment options

529 plans
designed to encourage saving for education
Covers k-12 public, private and religious school tuition and college
Covers tuition, room and board, books, supplies and equipment
Doesn’t cover student loans or student loan interest 
Uses post tax income and growth on investments is tax free
10% penalty and income tax if not used for qualified education expenses
May be eligible for a full or partial income tax deduction on contributions by state
Limited investment options

Taxable brokerage accounts
post tax contributions
Most liquid and can be used for anything
Taxed at ordinary income or capital gains depending on holding time
No penalties on withdrawal
Most investing choices