Understanding Your Workplace Retirement Accounts with Delyanne Barros – EP 275

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Only a few people fully understand their workplace retirement accounts: 401(k), 403(b), and 457(b). Retirement accounts can be quite intimidating to be dealt with but each of them is very similar and important. Together with our good friend, Delyanne Barros, let’s talk about the differences between these accounts and what you should do with yours, how yours differs from another one, and having multiple accounts. 

The better and kinder we are to ourselves both now and in the future, the more kind we’re able to be to those around us.

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Delyanne Barros is an investing coach and the founder of Delyanne The Money Coach LLC. She has been named one of the most influential voices of money by Time and she was also the host of Diversifying, the first personal finance podcast produced by CNN.

Differences between 401(k), 403(b), 457(b), and other plans

Despite the awful names, it’s worth noting to know these workplace retirement account names were plucked from the section out from the IRS code. These retirement accounts are applied to different groups of employees. The 401(k) account usually applies to people in the private sector. 403(b) for non-profit, while 457(b) is for government employees– these are mostly the distinguishing factors about these three but there’s more to unravel and discuss. 

Why do we need an account like this?

Investing for the future can be difficult for most people because it’s hard to picture themselves as a little old lady but Delyanne visualizes herself at the age of 60 or 70 years old all the time. This makes it palpable, real and reminds herself that her 60 or 70 year old self is a real person that’s going to exist someday. Delyanne wants her to live and have a nice life and have a dignified retirement. Have some love for that person–you’re building your future for that person which is you.

Choosing a retirement plan

When an employer is offering a retirement plan, first look at which account is matched to the one being offered because it’s not always both– prioritize this. Look at the fees and investments being offered– how much are they charging in fees because that is how they will eat away your profit. Also, knowing how these different accounts interact with each other is important.

Employer doesn't offer a retirement plan. Now, what?

If your company can’t offer a retirement plan, maybe they can’t afford to have employees, so, think about that first. Having a retirement plan is a necessity and if they don’t offer that, you’re immediately cutting yourself off right there. Of course, there are still other accounts you can use like the Roth IRA, the brokerage account and if you do start a side hustle, you can open a solo 401(k). However, that avenue is not available to everyone.

Biggest ESP mistake we've ever made

  • Delyanne: Ignore the plan. Missed out on employee match for 3 years during prime time investing period
  • Jill: Never being employed by a company/org that provided this (ouch!)
  • Jen: Not investing the rollover for a whole year

Bill of The Week

Thank you Delyanne for sharing your bill about canceling your AmEx credit card because it’s not widely accepted in Europe!

Thanks so Much for Listening!

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