The Rachel Cruze Show - How to Invest the Right Way in 2025

Starting point is 00:00:05 The IRS has increased contribution limits for 2025, and since it is a new year, let's bring a fresh start to our money. This is a really perfect time to check in with your investing. So today I'm going to share how to invest the right way in 2025 and stick around because at the end, I'm sharing one thing that I never recommend you invest in. Now, before we get started, make sure to subscribe and maybe share this episode with a friend who loves a great investing tip. So as I mentioned, let's go over some updated numbers so you can be aware. So the IRA limit is $7,000, which is the same limits of contributions that was in 2024. The IRA catch-up limit for people over 50 is an extra $1,000, which was the same in 2024.

Starting point is 00:00:52 The 401K limit has increased, but by only $500. So now it's at $23,500 for 2025. For single taxpayers and married people filing $7,000. separately, the standard deduction is rising to $15,000, which is up $400. Couples filing jointly, standard deduction is now $30,000, which is an $800 increase from 2024. Heads of household will get $2,500 as a standard deduction, and that is a $600 increase from 2024. So some great standard deductions. And when it comes to tax time, you guys, that is something to look into. So instead of itemizing your taxes, maybe you just take that standard

Starting point is 00:01:37 deduction, and you may get more out of that than itemizing. All right, another stat that I saw recently is that 89% of employers offer a company match now, which is great news, because a little over 10 years ago in 2013, it was about 58%. And I always think this is great. This is definitely, you know, a benefit that companies give you. It's not required, but it is a great benefit for people that are investing in retirement, when your employer can match you a certain percentage, it's basically free money going into your retirement. So thank you employers out there who do that because I think it's wonderful. All right, now let's go over specifics for investing this year. So first things first, let's define the why. So why investing is crucial. Number one, it is a great way for

Starting point is 00:02:22 your money to work for you while you're sleeping. Okay, it's one of these things you put money in. And over time, it will start to grow on its own. You don't have to put more money in. And you don't have to put more money in, even though I recommend you do. But it just continues to grow. And I think that it's a wonderful thing because long term, especially if you start early, that growth is going to continue to compound. And when you get to retirement age, you're going to have a lot of money sitting there so that you can retire and live off of that money you save for so you don't have to work into your old age. And the hard thing is a lot of people start this later in life, so they have more catching up to do. But overall, this idea of preparing for your future is key. So much of our money decisions

Starting point is 00:03:01 feels like a day-to-day decision or like even in the next year or two. But when you think really long-term, and for some of you, depending on your age, it could be really long-term with retirement, but it is still so key to plan for your future. And always remember that you are in charge of your future. Yes, there is social security and different other programs out there. But overall, the best bet for you to have a great retirement is up to you. So investing is a great way to do that. Now, before we talk about when and where, when it comes to investing, I do want to tell you about one of our sponsors, delete me. I saw a headline recently that really caught my attention. One third of the U.S. population's background info is now public. So for 115 million of us, data breaches

Starting point is 00:03:42 mean that our info is out there for anyone to find. So this is stuff like our names and addresses and phone numbers and so much more. And this is why I love delete me, because they go in and they find and remove your personal information from hundreds of data broker websites that will buy, sell and trade your personal data. So take control of your online privacy with Delete Me. Individual DeleteMe plans start as low as $9 a month. Sign up today at join DeleteMe.com slash Rachel for 20% off or click the link in the description. All right. Next is to know when you should start investing. So when to start investing is going to depend on where you are financially. So I want you completely out of debt, except for your house, which for some people that's going to take, you know,

Starting point is 00:04:28 18 to 24 months, and when you're on your debt-free journey, I even encourage you to pause retirement investing, even if you're getting that match from your employer, like we talked about, throwing all of your money at getting out of debt as soon as possible is going to be so key because your income is your largest wealth-building tool. Your income that comes in from your job is how you're going to continue to build wealth. But when your income comes in and it goes out 18 different directions in the form of payments, it's harder to build wealth. So getting out of debt is really key. And then making sure you have money saved in the bank, which is a three to six month emergency fund, is also really important because when stuff comes up, not if, but when, and this could be job losses, a move,

Starting point is 00:05:09 medical emergencies, like things that may just come up out of the blue, that you have cash in the bank to take care of those versus having to pull money out of investing in retirement where you're going to have to pay taxes and possibly penalties. Having cash liquid is really important. So that three to six month of expenses, that emergency fund, you could just keep in a high yield savings accounts. And then after those are complete, then you want to start investing. And so you want to invest 15% of your income into retirement. So take your household income and say, okay, 15% of that is going to go into retirement. So now we're going to talk about where that 15% goes and where to invest your money. So when it comes to retirement specifically, there are some

Starting point is 00:05:50 great plans out there that are tax favored. So the Roth IRA, for example, is one. It's one we mentioned earlier that you can invest up to $7,000 in. Now, there's a traditional IRA that you can open up, but you're going to fund that with pre-tax dollars, meaning before you pay taxes, that income that you make, you can take money out of that and fund your IRA. But the catch is when you pull money out of that IRA, when you're 59.5 and you can, you're going to pay taxes on the growth. So if you start early, like in your 20s or 30s, you're going to have a lot of growth, which means you're going to pay a lot of taxes. Versus if you do a Roth IRA, and the Roth IRA, is after tax money.

Starting point is 00:06:27 So after you've paid taxes and done all of that, the money that hits your account, that's the money you use to fund the Roth IRA. But it is worth doing that. Again, after you've paid taxes on your income, because the growth is tax-free, and again, it's a lot of growth. Like in some cases, you guys,

Starting point is 00:06:42 hundreds of thousands of dollars of growth that you don't have to pay taxes on, which is amazing. So the Roth IRA is great. Next is the 401K that we talked about, and this is where your employer can match a certain percentage. Now, in the Roth IRA and the 401K, and then I would also say the 403B, which is like a 401K, but that's more for government-type jobs.

Starting point is 00:07:05 So teachers, for instance, or nonprofits will have that side. All of these need to be invested. You're going to take these, kind of look at them as like a high-level umbrella. And then underneath, what the money's actually invested in are mutual funds, which are 90 to 200 stock. So within that, investing in good mutual funds is what's going to be really key. But again, it's protected over this umbrella of retirement with the Roth IRA and the 401k or 403B. Now, some employers, as we keep getting deeper into this, some employers offer a Roth 401K. So meaning you still get all the benefits of a 401K, but you're going to do it with after-tax dollars to put in your 401K.

Starting point is 00:07:44 And the growth in your 401k is also tax-free. If you have a traditional 401k, you will pay taxes on the growth. But if your employer offers a Roth 401K, 401K, it's amazing. and take it all day long because, again, that growth is free. So always remember, Roth means the growth is tax-free. Yay. Traditional, eh, not tax-free, not as great. So always remember those lanes.

Starting point is 00:08:08 And then when you're investing your 15%, remember this formula. Match beats Roth, beats traditional. So you're going to go in and go ahead and go up to your employer's match, if you have a match at your job. And so let's say they match 4%. And so you're going to go up 4%. which means you have 11% left of that 15%. Go ahead and take that 11%.

Starting point is 00:08:29 Go ahead and fill out your Roth IRA, and it's $7,000. Now, if you, if that $7,000, you hit that limit and you have more, more percentage of that 15%, you can go back to your 401K. So that's kind of the formula you want to do because we want to take as much as we can for those tax advantage accounts because they're going to help you long term. Now, one question I get a lot is about diversification. And so always remember this. When you diversify, that just means you're spreading your money around. And so that's why I love mutual funds because there's 90 to 200 stock in a mutual fund, right? So if Apple's having a bad year, well, Ford and Toyota and Southwest and whoever else may be having a great year, right? So overall, you're spreading your money around these different companies, which is fantastic versus putting all your eggs in one basket and really concentrating on one stock. It's more of a gamble, and I don't care for that. So I love mutual funds. All right, one thing I never recommend investing in yet is crypto. Okay, I say yet because this still is an involving investment.

Starting point is 00:09:38 Now, crypto, you know, we usually kind of like poo poo on it because it doesn't have a long-term track record. It's a little bit volatile. It's still just a little bit new. And again, if I'm going to be putting my money in something, I just want it to know that it's going to grow. And when you go and invest in those mutual funds like we talked about, basically the average has been around 11.8% overall. So you're going to have some down years, but overall, you know what the average is. Crypto is all over the place. And I would say this too, it's full of scams. There's so many lawsuits out there in this industry because people are opening up these fraud-type companies and it's not regulated. And that's the double-edged sword. I kind of like that it's not regulated.

Starting point is 00:10:18 I mean, yeah, there's a part of it's like, yeah, let the people run. I don't think that's a terrible thing, actually. But also, you want to make sure that it's proven out and that you're not getting scammed in the process. So I don't suggest investing in crypto. If you do, I would make it a very, very small percentage of your world because it is still pretty volatile. All right, those are the basics when it comes to investing. It can be a little bit complicated, but also, you know, pretty simple, right? The details can be a little tricky. But I also think this is a really important part of your financial picture that you want to get right. So I would consider. connect with a smart vester pro. I'll put a link down below so you can connect with one near you.

Starting point is 00:10:57 But sitting down with someone and looking over your entire financial plan, including your investments, is a really, really smart thing to do. It's a very adult-like thing. You can feel intimidating, but I would have someone in your corner that's looking over everything. I think it's really, really important. Now, for a deeper dive into my investment strategy, check out my annual investment routine right here or click the link below. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - How to Invest the Right Way in 2025

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