Why does the goal of 20 to 25% invested for retirement not change based on traditional versus Roth accounts? Having a million in Roth could be very different from a million in traditional accounts. Um, what do you think about this?

Question, Jonathan. What the impetus of his question is, he understands the mathematics that if we make some tax rate assumptions, if I'm in a higher tax bracket now and I think I'll be lower later, if I'm at a lower tax bracket now, higher later, Roth

dollars and traditional dollars are not the same. If I have a dollar that's going into Roth, it's actually after-tax money. If I have a dollar that's going in traditional, it's pre-tax money. So I'm not actually saving the same nominal amount of money

when I compare those two things. So what we tell people early on is that when it comes to building for your financial future, when it comes to figuring out how you're going to save, we want to make it as simple as possible so that you can master the behavior. That's why we shoot

for 20 to 25%, because if you can do that, odds are you're going to set yourself up for future financial success. But then, as you begin moving along in your financial journey, we know that personal finance becomes incredibly personal, and what you

will find out, what you will learn as you're moving along in your financial journey, is you may recognize because you've been maxing out Roth and you took advantage of HSA, and you've built up all through your 20s and all through your

30s and as you get into your 40s, you may do the “know your number” course and arrive at the conclusion, “Man, I am well on my way to financial independence. I'm doing the things that I'm supposed to be doing, and because of my account

structure, maybe I don't have to save 25% anymore. Maybe my savings rate for the rest of my career needs to be 16%, 17%, 18%.” That's a decision that you make as you begin to build out your financial plan later on in your financial journey,

not one that you make right at the very beginning. “Oh, if I'm going to do Roth, I'm going to save less, or if I'm going to do pre-tax, I'm going to save less.” If you start making those assessments too early, I think you're going to be selling

yourself short. Jonathan, I'll go ahead and give it to you straight. There are two things going on here: we've got to get the actual behavior right and the good habits—make them as easy as possible—and then keep the bad behaviors minimized as much as possible.

So I always focus on the behavioral side of things first, and then we're going to get into the execution or the fine-tuning later. And that's exactly what we've done with the financial order of operations. So many Americans, and this is something Financial Mutants struggle

with, is that they get into the minutiae of, “How do I execute this to maximize it?” and they leave behind a lot of the behavioral and other things. So that's why, if you'll notice in the financial order of operations, we've got you covered because we are so nerdy, we focus on both.

of these things when we design these steps, one through three all the way to four, is to make sure you're getting the free money, making sure that you're not making desperate decisions because you didn't even have access to emergency reserves. We get to

five and six, these are the "make wealth" phase. You've got to ensure that you're actually getting wealthy through saving and investing, creating your army of dollar bills. So that's why in step five, we've got doing the Roth, the HSA, because those are tax-free growth opportunities.

Step six, with maxing out retirement, this is exactly what you're talking about, is 20 to 25%. If you go to money.com resources, we'll show you why we landed on 20-25%, because if you started, like the majority of Americans do, in your 30s,

it's going to land on about 25% from a behavioral standpoint of what you need to be saving and investing to be successful. If you start in your 20s, it's going to get that much easier. If you wait until your 40s, you're going to have

to save even more. That leads to your question: "Wait a minute, guys, it is different when you're looking at a Roth account versus an after-tax account versus a tax-deferred account where you took the deduction on the front end." You're exactly right, Jonathan. That's why in

step seven, hyper-accumulation, after you've gotten to saving and investing 20 to 25%, you move on to the hyper-accumulation. And this is the first step where we say, "Hey, it's not just about making the wealth and the good behaviors and the habits that got you there, it's

about how you are actually going to use this money in retirement. This is exactly why, if somebody is part of the FIRE movement (formerly known as the FI movement), where you think you're moving on to something else in your 40s or 50s, you're going to need to

structure your accounts differently than somebody who says, "I love my job. I love what I'm doing. I'm going to do this until I'm age 70." That is a completely different goal, and it's going to require a completely different account structure. So that's why we do make those

determinations and those differentiations in Step 7 of hyper-accumulation, where we'll say, "Yeah, without a doubt, you're going to need more of an after-tax bridge account." Or, if you're one of these people, maybe your income is structured in a unique way where

you can do a mega Roth, we're going to need even more in that tax-free account because of the benefits. And I think you can see, look, I just don't want you getting hyper-focused on just the tax savings or that this dollar amount is not the same here because there's

some deferred taxation within there. It's to get you through the behavioral components, and then we'll connect the math as we get into Step 7. And that's why, if you need to, focus on all nine steps of the Financial Order of Operations.

Not All Millionaires Are Created Equal

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Not All Millionaires Are Created Equal

Not All Millionaires Are Created Equal

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