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April 22, 2019

Simple Millionaire Investing Strategies with the 401k, IRA and 529 – with Andy Wang


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We all know it’s important to invest for the future. But with endless investing options like the 401k, the IRA, the 529, the 457, the 403b, it's no wonder we're confused on where to start. I mean, what kind of names are these anyway!?

Our guest today is going to help us make sense of all this investing madness. Andy Wang is here with us today. He is a Managing Partner at Runnymede Capital Management and the host of the Inspired Money Podcast. He has been named among the INVESTOPEDIA 100: Most Influential Advisors, Top 100 Most Social Financial Advisors by Brightscope, and has appeared on Reuters TV, The Huffington Post, Barron's, and Forbes.

Outside of his financial advising world, Andy is a father of three and loves playing the Hawaiin guitar.

Andy Hill: What are your thoughts on paying off that debt versus investing?

Andy Wang: Well, I think when it comes to investing, there's no right or wrong approach. And it's not one size fits all. And I was thinking about this because you have three kids, and it's sort of like parenting too. It's like, you try to do all this research and figure out how can you be the best parent, but then each kid is different. So you don't know.

And I think that investing and paying off debt is a little bit similar in that way, that you don't just open up a book and say, “This is the strategy that fits everybody,” because it matters, what's your cash flow? What kind of debt do you have? And are you going to sleep well at night, if you have debt or not have debt?

So everybody's different in that way. It requires taking a look at yourself in addition to just looking at the numbers.

What are the reasons people aren't investing for their retirement right now?

There are many reasons. I would say one of the biggest ones is that people just say, that they don't have enough money to invest. Month-to-month you're just trying to pay your bills and if you're struggling to pay your monthly bills it's just not within your realm of thinking. “How can I invest? How can I plan for my future?”

I think that your story is inspiring because you're teaching your listeners that it is doable. I think in most cases, you've got your income and you've got your expenditures. All of us have room on the expenditure side to make some choices. And there are definitely places that we can trim. Most of us can anyway.

Related Article: 15 Ways to Save More Money When You're Living Paycheck to Paycheck

What are the benefits of the 401k?

I love the 401k because that's usually the easiest for everybody. And it's great because the money that you put into your 401k, you're kind of getting a double tax break. The money that you put in doesn't count towards your gross income. So whatever money you put in, it's like the government doesn't see that right now. It lowers the amount of income that you're paying taxes on and you're also able to grow that money tax-deferred so you don't pay taxes until you take money out.

And then the other thing is that it's automatic. So you're setting what percentage of your paycheck are you putting into the 401k plan and I think that's one of the best parts because it becomes automatic. You don't have to think about it. You can put it on autopilot, and in most cases, that's money that you don't miss once you set it and you can forget it.

And of course, the most obvious thing is that if you are fortunate enough to work for a company that gives you a company match then you've got to at least contribute up to the company match because, otherwise, you're leaving money on the table. That's guaranteed money that is going to end up in your retirement account.

What's the difference between a 401k and a 403b or 457?

For most plan participants, those who are using and utilizing the retirement plan, the numbers aren't that important. It's like the 401k is the most popular. It's just a retirement savings plan. It can be a profit-sharing plan. It comes in different flavors.

The 403b typically is offered by a nonprofit. So it depends on what type of company or entity that you work for.

And the 457 is if you're working for a local government or municipality. There are slight differences in the tax law. But to the participant, it doesn't really matter. The key is, if you have a retirement plan offered to you, you should be taking advantage of it.

What is compound interest and why will it help us become millionaires?

Compounding is magic.

It's like your money has two best friends. It's compounding and it is time. The more time that you have and if you're able to compound and grow your money. That's how you're going to reach a million dollars plus in 30 or 40 years. So the idea is a simple one.

It's not just a straight line matter of if you contribute a thousand dollars if you make 4% you've got $40. Each year, you're making interest on your interest and that's where the magic happens. So yeah, compound interest is powerful.

If you're investing in stocks and bonds, then hopefully you've got compound growth. There's the risk and there's variability, but if you can grow your money at 7% every year on average, that's going to be very powerful. And we've seen very, very low-interest rates. Things are getting better now than they were five years ago. There was a point where it was close to 0% interest rate. At least now you could get 1-2% pretty risk-free.

But if you can invest in the stock market at 5-10%, that's where you're going to see the magic because of compound growth. The growth on the growth.

How does someone choose between a Traditional IRA and a Roth IRA?

There are pros and cons to each. I love the 401(k) because it's offered to most people. It's automatic. It has a pretty high-contribution limit so you can contribute a lot annually. If you have extra, then yes. Then you have the choice of investing or opening up an IRA account. And you have some more flexibility there because you're not limited to an investment menu of fund choices and ETFs, hopefully.

With the IRA, you can invest in anything you want, practically. You can own individual stocks, individual bonds, mutual funds or ETFs. The world is your oyster.

So for the Traditional and Roth, it’s like, do you want to pay your tax now or do you want to pay your tax later? And I think that the longer your investment horizon the younger you are, it makes a lot of sense to participate in the Roth. You pay your taxes now and you grow your money tax-free so that 30 or 40 years from now, that money has compounded and your tax was already paid. So when you take that money out, you don't have the liability of having to pay taxes.

With the regular IRA, because it's tax-deferred, you don't pay the taxes going in. You're growing tax-free, but when you take the money out, you have to pay the taxes, so, therefore, that money is not 100% yours. It's like the government owns a little bit of that money and it's a little bit like having a mortgage because you're looking at that pot of money and you say, “Well, that's my money, but it's not all mine.”

Related Podcast: Strategies for Becoming a Young Multi-Millionaire

You have 3 kids. How are you preparing for their future college costs?

At our house, we have 529 accounts for the kids that we can contribute to. I'm fortunate that the grandparents will also contribute some money into the 529 plans. And the 529s are great because they're pretty easy to monitor and they're easy to implement and I like that there is a tax benefit. I look at them as if it's an IRA account because as long as you're using that money for qualified educational expenses, you're not paying any tax. And that's a good thing.

If tuitions were not so high and increasing much faster than inflation, then maybe you're worried about, “What if I'm putting in too much money because the money that I don't use for educational expense I have to pay a 10% penalty on?” Sadly, that is not a concern, because I feel like no matter how much money you have in there, it's not going to be enough.

So yeah, I'm just worried about how can I sock away more in there. Then I just hope that the markets are favorable for the longest period of time so that it's compounding at a good growth rate.


Marriage, Kids and Money, Andy Hill

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Guest Resources – Andy Wang

Website: Runnymede

Podcast: Inspired Money

Recommended Book: One Up on Wall Street by Peter Lynch

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Marriage, Kids and Money, Andy Hill

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Andy Hill

Andy Hill, AFC® is the award-winning family finance coach behind Marriage Kids and Money - a platform dedicated to helping families build wealth and happiness. With millions of podcast downloads and video views, Andy’s message of family financial empowerment has resonated with listeners, readers and viewers across the world. When he's not "talking money", Andy enjoys being a Soccer Dad, singing karaoke with his wife and relaxing on his hammock.


  • A good point I hadn’t thought of until reading this… as you near retirement the Roth doesn’t help so much since you are paying taxes at a high rate and not so many years until you income drops

    • If you’ve invested into the Roth early, you wouldn’t have to worry about your taxes in retirement. But … who knows where our incomes will be in our 60’s, right?!

      That’s why I like a little bit of both … traditional and Roth.


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