i want to be long. >> it's a good thing you'll be here with your hand on the till steering us towards the horizon. >> thanks for watching fast. have a great long weekend. mad money with long weekend, ma money with jim cramer starts right now. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. >> i'm kramer, welcome to "mad money", welcome to cramerica. i'm just trying to help you make some money. my job isn't just to entertain but to enter but call me at 1- 800-743-cnbc. there is a gaping hole in the american education system.

i hesitate to even call it the system. but when you go to high school, the teacher chemistry and geometry and physics you have history places, and you can graduate from college, speaking three languages, with a deep understanding of quantum physics or agent philosophy. but you know the one thing they almost never to do in middle school or high school, financial literacy. and i'm not talking economics here, you can be an econ major and still learn nothing about financial planning or retirement readiness. money is just not talked about. become the third rail of american education, and you are 1000 times more likely than you read anything about planning a bunch of picking stocks and that is why i want to be a constant mission. which is what we do every day in the investing club. and finding a constant source of examples. and when it comes to managing

your money, nothing is more important than retirement, sooner or later, you'll stop working, unless you really love your job, so i'm betting most of you, even if you don't know any, still have some money in a 401(k). corporate pension started going away, now the 401(k) is the main way that americans save for retirement, they're offered buy your employer and among he greatest tax-deferred investments out there, along with the i.r.a. i'm not even talking about the reduction inflation reduction act. for those of you who were about to change the channel, and the whole idea of saving for retirement budget asleep, hear me out, darn it! you need to know this stuff, your future self will help you get an order, and while you may think you know everything about you about these tax favored accounts, the truth is, there's a lot that so-called experts don't tell you or don't want you to know. for example, you must absolutely invest in your

401(k), you would be a fool not to. and you max out your 401(k) contributions every year, if you can afford to, right now the maximum contributions are 20 grand with room for an additional seven grand if you're over 50 but it tends to rise gradually over time. usually a little faster than inflation and a 2004 it was $30,000 buy 2023 either way, a serious chunk of change even with these contributions coming from pre-tax cut. however -- sometimes i think it would be the wrong approach. i'm not going to sing praises of the noble 401(k) plan. i'll tell you it's to get your salvation because 401(k) plans can be a mixed bag. have a couple great features but they have a lot of bad ones and those problematic features will need away agile returns. -- sometimes the fees are hidden from you. i do not like that. so let me

lay out the good and the bad and ugly of 401(k) plans. i will tell you whether it makes sense for you to contribute more money to your own 401(k) or maybe a better way for you to invest in your retirement, first the good. the best thing about the 401(k) is that it is tax-deferred a tax-deferred investment. that means you pay no taxes on what you put in and that he never pay a penny on the profits you make within your 401(k) but you lost your gains year after year, decade after decade, totally tax-free until you decide to start making with drawls, regular viewers know i'm a huge believer in the power of compounding, the eighth wonder of the world. and suppose you are 30 years old and you start investing $5000 and your 401(k), if you choose your investments wisely, you should generate an average return of 7% per year, at least historically, that is being conservative, so over the course of the next 30 years, you will contribute $150,000, that is pretax income, because that money is able to count on compound without any capital

gains taxes, those are contributions, that should be worth over $511,000. without the tax favored tatus, and that would be $110,000 lower, what a huge break, you ever pay taxes on that money once, when you decide to withdraw, at that point he withdraws and sends you will likely be retired buy then, most of you will end up paying a lower rate than what you get hit with if you got taxed with that money while you are still in the workforce. that is one reason to like the 401(k). the other one, many match the 401(k) contributions, for every dollar you invest in the plan, $.50 up to a certain point, that is free money for you, and so if your employer matches your contributions, you should absolutely take advantage buy putting money in your 401(k), i'm not saying take the money

and run but definitely take the money. your 401(k) doesn't have any employer match but it is a much less compelling option because i said before, 401(k) plans can have a lot of problems. sometimes you're better off saving for retirement and just the saving tax favored status, you can only contribute so much to your i.r.a., and that's an outrageously low amount, i.r.a.s are rolled out in 1975, while they raised the contribution limits and then, the increase has not kept place with inflation and event have, it would be more than $8500, and if i want a person, and i want to make it my mission to fight for you, to get that. still, there are ways to better yourself when you change jobs, you can rollover the money into an i.r.a., that is exactly what you should do every time we switch employers or find yourself at work. what makes the i.r.a. a better option, first their rvs, when you invest in a mutual fund, you have to pay the mutual fund fees but your 401(k) administrator, the

company your employer hires to run the plant will also charge you its own fees on average, they take more than 2%. i find that extortionate. most management funds charge less than 2%, and they are actively managing your money if you ever look at your statement and wondered why the heck your 401(k) holdings are increasing in value like they should be, believe me, these fees are probably the reason. second 401(k) plans vary widely , and some of you give you a terrific range of choices and even let you pick individual spots but others are more limited and even give you the choice of a couple dozen different mutual funds, so for those of you that can pick your own stocks your 401(k), and before you contribute money to your 401(k) plan, you have to make sure he gives you the option to put your cash into something that is actually worth investing in. i spent so much time teaching it, now to the investing club, because i believe it works, you should be skeptical over time,

in a plan that doesn't give you that option to buy individual stocks. if you can pick your own stocks, then you want a nice lower expense index fund, however, if your 401(k) doesn't even offer that, it charges fees, then just go with a self- directed i.r.a. from a full-service and you have control of your money. the bottom line on entiat retirement investing of the company you work for matches your 41 contributions up to a certain point, take them for all they are worth, but other than that, and i.r.a. is a superior way to go, especially if your 401(k) plan doesn't give you any good investment options. let's take the calls, let's go to ian in illinois. ian? >> how are you doing my friend? >> very strong, how about you ian? >> glad to hear it, i'm doing well. my goal is to get out of my 9-5 as soon as possible and retire, i'm wondering how younger investors should they get between the balance between growth stocks and dividend stocks.

>> i believe you should not bet against yourself, a younger person should be almost entirely in stocks, now i have been extreme on this but over the course of the last years that i've been teaching, that has been the right way to go, so let's forget about the bonds until you get to at least the mid-50s in and start adding them slowly, you are a stock guy, you do want that against your life, let's go to michelle in new hampshire, michelle? >> kay, jim, i can use your advice. my portfolio has been where interest rate hikes, and now it's almost all red, and i just need some tips on how to manage the investments in the market. >> okay, what we want to do is we want to say that we will ride through the down markets and what we do is put cash away regardless, we are not going to look at the day-to-day and the month and month of it comes to the retirement even the year to year, yes we won't have the right stocks but we won't stop contributing because historically the rain does go

away, and if you only invest when it good you will end up with not good prices. carl? >> a, jim thinks having young, and my question is, for an honest investor what tools and messages would you recommend? obviously besides the obvious ratio, how to light evaluate companies for a good investment? >> well acquainted with the investing club and i know you can see him talking about my book but it's really about exactly that. we show you what many different ways are to evaluate stocks, and also pick the ones that are most suitable for you. we can't do that, that is up to you but we value them, and we evaluate them on future earnings, and we kind of overall value them against other stocks in their same peer group and in the market in general. if the company you work for matches your 401(k) contributions up to a certain

point, take them for all their work and an i.r.a. is a superior way to go, especially if your 401(k) plan doesn't give you any good investment options. and school is in session, cramerica, tonight's lesson is financial literacy, i'm taking you through all of my top tips to help develop a strong financial foundation. you are not going to want to miss this one, so stay with us, kramer. don't miss a second of mad money, follow jim cramer on "x", have a question, send jim and me email to mad money, or give us a call at one 800, 1- 800-743-cnbc. 800-743-cnbc. miss something, had to ( ♪♪ ) constant contact's advanced automation lets you send the right message at the right time, every time. ( ♪♪ ) constant contact. helping the small stand tall.

if everyone in this country lost their minds and decided to turn america into cramerica, you better believe i would make some changes. so what were the 18th year of cramerica look like? because this is a show about money, let's stick to the more mainstream elements of the cramerica regine, it drives me nuts that we don't teach our young people to handle money. would it be so crazy if you had to take a class on personal finance? out of high school? and those health classes were the dissect a frog, come on. can i take a moment to speak some words that we all believe but very rarely say in polite conversation, money is important it is really important in caring about your finances do not make you seem like a superficial monster. so you have a lousy credit score and you want to get married congratulations you just inflicted your horrible credit on your spouse. now neither you nor your partner will be able to qualify for a loan to buy a car or a

home or perhaps get a darn credit card these things matter in life, they say money cannot buy happiness, i've always found that conventional wisdom to be dubious at best because listen, being broke is a major buzz kill, as i know firsthand from the time i spent living in my fairmount, for six months in california, i sure wish i had a mentor to guide me. of course i still put money for retirement when i looked in my car, i don't get out of my homeowners. let me answer one of the most important questions out there, what the heck should young people do with their money? first and foremost and always, you need to invest, that is the only way you will be able to achieve financial freedom and buy freedom i mean living a life where you are not depend on the next paycheck. teaching you how to do this is one of the times i put in creating the cnbc investing club, i'm always thrilled to see younger members take an active hand in managing your money. and many people saving and investing today and make in their lives a lot more difficult than need be as they

get older. and many people feel like they have all the time in the world and many more start investing and they are generally ready where they are in fact better things for them to do with their money. and that is why i have a few lessons for all of those that recently out of college, listen, let's start with capping, before you can start investing yet the pay off your credit card. this is especially true because they have gotten aggressive about offering credit to college students, no matter how much money right up if you are caring a balance, and it's going to eat into your returns and long-term, the interest of the right credit cards will be greater than the profits you can make from investing on this percentage basis, so just pay your darn credit card balance in full. now if you are orried that you will be tempted not to, that is what i did. when i got out of law school. i had maxed half a dozen credit

cards. i took a job at goldman sachs and i made good money out of the shoot but not enough to pay all of that interest and be able to afford the biggest boombox in the world what was my first priority, so i pay down the debt pronto and got my dream box a few months later i will never forget how proud i was for that box on my shoulder swinging in the breeze as i worked my way to to my studio, the point is, credit card debt even if you're hitting it out of the park with your paycheck. they are the house and they win and you lose. now let's get to my few lessons, this is advice for everyone out there, regardless of age or education, but it applies to fresh college graduates. you need to save money, i recognize everybody has a predisposition to say but we all can't be natural cheapskates and nobody likes to be night, so i'm sorry, however the stock market is a great way to trick yourself into saving a part of your paycheck you might otherwise go spend, investing in stocks can be fun, well

let's say if you join a club, you will get this, where leaving money in a savings account or a certificate deposit feels joyless, even when they are giving you decent interest and if you invest your savings in the market, it will be a lot easier to resist the temptation to say that money on things you don't need because you will have to save your favorite stocks to get your cash back it's a great way to keep your money in and not out being spent in a way that i don't think is going to ever help you. the second lesson, i'm a more targeted piece of advice, while you're young, you can take a lot more risk and when you're in your 20s you can get away with more reckless strategies like owning more single-digit stocks. but so is the potential downside, or you can play with the options i'm fine with that. what is stopping these young people, it is those where you make a mistake with your money in your 20s, and you have the whole rest of your life to fix it. losing money is less of a problem when you have 40 odd

years to earn it back hen say like older investors do need to be more cautious of course the more conservative you most of the, yes you have to have some bonds and more higher-yielding stocks and trading in the single digits but if you're in your 20s you should invest like a young person. i have too many calls from people singing 40% bought it because i'm 22, are you kidding me, you should earn any bonds, people should take this advice to heart, the reason that college grads are most likely to invest are also were the ones who are most responsible and prudent about the money, when you're putting together budgets to live within your means, or deciding how much your paycheck can save each month but for young investors being too is actually reckless, twentysomethings, you have a little bit in your stock portfolio, take some risk and play around with speculative companies, maybe some small biotech companies, even if a blowup and go to zero. you have the whole rest of your

life to earn that money back, don't forget stocks started zero, one of the greatest things about it. and the endless thing, please have a look at how low the interest rate is versus credit card that, i chose to invest my money out of law school after paying off my credit card that i still invested knowing that i can beat the student loan boat, and you can pay that off in a hurry. but please, don't be hurried up about i would rather have you invest now and pay later, last, democrats are going to pace push various forms of student loan forgiveness, meaning if you drag these out, you might end up paying less, final lessons before the break it is never too early to start investing for retirement user 401(k), as i told you earlier, and especially put some money into a roth ira, which is ideal for younger investors and i will explain that later. for young people just out of college investing is a great way to trick yourself into

saving money you might otherwise spend, remember that when you're young, you can afford to take a lot more portfolios and is never too soon to start contributing to your 401(k), or your i.r.a., especially an i.r.a., that is a roth. he's you why club members trust me to guide them in any market. >> and jeff and jim, sent us with the newsletter every time they are buying or selling something, they keep us up-to- date. >> unlock access to jim cramer's daily market strategies, stock picks and real-time buy and sell alerts. >> a break down the complex and i feel more informed. >> take the next step buy joining the club today. >> joined a cnbc investing club with jim cramer, go to cnbc.com/club offer. could do ? that partner is ontario, canada. with all the critical minerals to make electric vehicle batteries.

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you have more choices about where you can invest your money. original infinity of mutual funds and you name it. more choices and always better. sometimes having more options makes it impossible to decide which ones are right or wrong. if you've never had more options when it comes to picking exchange traded funds. and mutual funds. they are everywhere. at this point, there are so many different kinds of etfs, that i can ake your head spin. the companies that run these funds want your money. one of the biggest mistakes you can make is to give it to them, with a few significant exceptions, this is one of the most common money mistakes out there, in fact most people in the country should be putting their money into mutual funds, some 80 million people are basically exposure to mutual funds, many of you don't have a choice a lot of 401(k) plans to let you pick individual stocks, they just give you a menu to

choose from. which is a major reason why i prefer i.r.a.s, i believe individual stock picking which is why you spend so much time teaching you how to do it. both on the show and of course the cnbc investing club where we walk you through the whole process in extreme detail every single day. one is about about mutual funds? well it's simple, if you are investing in mutual funds, you are getting a bad deal. now i want to paint the book with two brushes. there are some mutual funds and i will help you find hem in a man. but the problem with the mutual fund business model that nobody talks about. my main beef is with actively managed mutual funds, mutual funds where people decide what securities to buy or sell, unlike hedge funds, mutual fund managers don't get paid for performance, they collect fees from their investors, people like you and the amount of money they make depends entirely on the size of the assets of the management which means their biggest incentive is not necessarily to deliver good performance but what they are good at and what they get

paid for is to fund raise, and that is part of the reason why study after study after study, year after year after year, it has shown the vast majority of actively managed mutual fund managers underperform their benchmarks, and other words of you invest in an actively managed fund for u.s. cap stocks than its performers will fall short of the s&p 500. and to make matters worse, despite consistently underperforming the market, they still have some of the highest fees of the business so even if your fund does manage to beat its benchmark the odds are good that any performance will be eaten up buy big management fees and you'll end up with an investment that makes you less money than a cheap index fund that nears the s&p 500, that is some industry. and that is much more safe or swim. and we compounded 24 percent annual fees. over the same period. and i even chose not to take them where i was only up a

couple percent versus a strong performance for the average. yes i was that ashamed. the mutual fund manager ever do that for you? you can always rate added in my tell-all form i told too much autobiography. here's the part where i say not all mutual funds are bad, some of them have value fabulous managers with terrific results but even here's a major problem. when a mutual fund delivers results for a period of time, and the manager is a decent person, they will stop accepting new investments, it's impossible to generate the same kind of gains, so a lot of the high quality funds are out there, but they don't take no money and if the managers are not so great, they will keep taking more and more money until the performance starts december. and the father of the index fund, asked me how i can be so consistent in my hedge fund, i said i limited buy investors and we have nominated to get in. i was never overwhelmed with new money, something that often leads to bad investing

decisions, and i said if everyone did that, they would have much better records, too, maybe that was the real secret to the multiyear performance, buy the way, you want to know the other secret to that success, that is where we teach the investing club, and actively managed mutual funds, they're not worth it, and it is too high and the book of them underperform is just to regular viewers know that your best strategy is to pair a low ee index fund with the portfolio of individual stocks that you pick yourself, that is when i talk about night after night to preach endlessly, but for those of you that don't have the time to research individual companies or if your 401(k) plan just won't let you do it, let me tell you the smart way to invest. ideally, you want a cheap and low cost index fund, that mirrors the market as a hole, and index funds have ultralow fees, where the s&p index fund, you want to participate in the strength of the market without

having to pick individual stocks, remember the whole point of putting your money into a mutual fund is to save you the time and effort required to manage her own portfolio. that is why when people start multiple mutual funds buy its nature, funds should be diversified, there are lots of sector-based mutual funds out there, but there is really no reason for people like you to have any exposure to lows. you are going to take the time to play individual sectors, the time would be much better spent picking individual stocks. as for ets, these vehicles are from trading not investing, i'm not in favor of trading. many etf's should be balanced every day, that can take a real toll on any kind of long-term performance, you can lose a lot of money even if you're right, plenty of exceptions here, too, which i like the etf, and i like the etf's, and in general if you're not up pro or managing the portfolio, you should be very careful, about fooling around. here's the bottom line, and at the end of the day, i think a

cheap s&p 500 index fund is the least badly to pat passively manage your money, better than the vast bulk of mutual funds but an index fund owns the good and the bad and the ugly and you don't have the time to do your homework i believe you can be the performance of an index fund buy picking stocks yourself and leaving the bad and the ugly out of it. and the other time i will stick with the index fund, or join the investing club and we will help you do the homework. let's go to eric in tennessee. eric? >> agent, this is eric from park city. my question is in regards to fundamental evaluation of stocks. if you only had access to for indicators to examine what measurements would you look at? >> i would look at sales and earnings and i would look at the total addressable market to

see how things can e, all of those will give me exactly if you told me it was xyz, i can give you a sense of what i would be taken to provide some historical data. let's go to california, >> hey, jim, i just wanted to thank you, it has been a great learning experience for me, evaluating the markets with you. >> thank you so much. >> you're welcome, i just wanted to ask you a question here. i know joe is a huge friend of yours, and i'm huge on fundamental and technical analysis, and even my investment decisions, so my question is, even though the company is doing strong fundamentally, is it a good idea to incorporate technical analysis as well? >> always, i think everything should be included because whatever makes decisions and a lot of big managers use those decisions and technicals, you should include them into your thinking, even if they think

all of that information that is good, should go into your decision-making, including technical analysis. an index fund owns everything including the bad and the ugly, so if you do have the time to do your homework, i believe you can beat the performance of an index buy picking stocks yourself, and i'm giving you the lowdown financial security, all the way to retirement and later my colleague jeff martz will join me to answer some of your most burning questions, so stay with kramer. experience why i love teaching members in the club. >> jeff and jim sent us a newsletter every time they are buying and selling something, they keep us up-to-date. >> joined the cnbc investing club with jim cramer, go to

cnbc.com/cluboffer. raight out ! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

no matter how good you are and picking stocks, you need to know the rules about what kind of accounts to keep your money in it, or how to manage your personal finances, or how to get the most bang for your buck when it comes to major lifetime expenses. and you can be missing out on some terrific or some losing a fortune to some hidden fees. i admit this kind of stuff isn't as fun as picking stocks but over the course of your lifetime, it really does help you build up some more wealth, and the simple truth is, i do want you leaving the money on the table, just because nobody can be bothered to explain it, to say the finer points of retirement investing, let me explain whether it makes sense for you to use a regular 401(k), or an i.r.a., or for you to go with a roth ira which is a term i'm sure you've heard countless times, now i know we

have talked endlessly about the benefits of using the i.r.a. for short, and a 401(k) to invest in retirement, i don't want to beat a dead horse here -- but this is the kind of questions that i should put my money in a roth ira or a regular one. let's start with a roth ira, as anyone can contribute to i think that aside from the earned income tax credit, and all of the temporary covid tumulus, the roth ira may be the single greatest thing our government has done for low income families since the end of the war on poverty, with poverty on way more points, if i were the king of the forest, i would make the limits the same as the limits for the 401(k), that will be a theme of mine, it's ridiculous that they aren't but the industry doesn't care because the make a lot more money off of 401(k) plans, there is no other reason i can imagine why you contribute three times as much money to an i.r.a. or a 401(k) as an ire 11 a. and

people put in at least 100, how about this, you put $10,000 in the i.r.a. per year, much more than the current cap and a little bit higher than what the contribution limit would have been, if you just started his account in 1975 and adjusting the initial guidelines for inflation, i am championing, or bust i am your friend on this and i will not stop until we get it. i told you all about the regular i.r.a. the budget put pretax income and invested, and then your gains can compound year after year, decade after decade, totally tax-free and you can decide to start withdrawing money once you retire but a roth ira works differently with iraq you can make contributions using after-tax income, so in other words, unlike the regular i.r.a., putting money into a roth won't decrease your tax bill, on the other hand want your money is in a roth ira you will never pay taxes on it again. as long as your cash remains in the account, you won't pay

capital gains taxes. and when you withdrawn, which you can do without penalty. and you don't pay any income tax on your withdrawals. none, basically the rocky to pay taxes now so you don't have to pay any income tax when you retire, there is one more positive point about that after five years, you can ithdraw the money you have invested, not just the amount you have contributed but you won't get hit with a 10% penalty which is what happens when you try to withdrawal when you match that. that is very very different from a regular i.r.a. what you don't pay any taxes or contributions now and your gains don't get taxed within the account but once you start withdrawing the money every penny you take out is taxed and it is taxed at ordinary and, which means that when you're trying to decide between a roth ira or a 401(k), and a regular i.r.a., you need to determine whether it makes more sense to pay income tax now with a roth, or to wait and pay income tax once you have retired. in

short, you're trying to figure out whether you will be in a higher tax bracket or a lower one, obviously this is a really complicated question, and has to do with the specifics of your situation and, how ld you are. my rule of thumb for anyone who has a marginal tax rate which is 22% or less, which is most of america i would go with a roth ira, better to take the hit up front that much a roth ira to compound tax-free. remember for those of you who don't have the time, to pick your own diverse about portfolio. you should park your retirement money in a low cost income fund, that mirrors the s&p 500, as you get older you can add some but really until you retire, stocks should make up the lion share. i know i have said this before. but i will keep repeating it until they take me off the air because it is so necessary and so contrary to conventional wisdom. how about a roth 401(k), this one works just like a roth ira.

many you make contributions and you never pay taxes on that money again. except because it is a 401(k), and, it is a much higher contribution limit and an i.r.a., there is one other big difference. a roth 401(k), doesn't have any kinds of means testing, no matter how much money you earn, you can take advantage of a roth 401(k), as long as your employer decides to give you the option. of course all of the decisions depend on what the future will look like if you believe taxes are heading up and much higher, over the course of your lifetime, then a roth 401(k), where you pay your taxes now and pay nothing in the future is the way to go. either if you're making a lot of money in the present, and at the end of the day though, this is both beyond our control and beyond our ability to predict the bottom line, the lower your present income and the lower your tax rate, a roth 401(k) or a roth ira let you pay those low rates now, and never worry about taxes again for your

retirement money. and the less money you make the more likely that a roth is for you. it is that simple and if you are saving for retirement don't worry about what can go wrong 30 or 40 years in the future. just worry about making the best choices right now. mad money is back after this break. they are sitting a lot of wealth and a lot of savings. >> last call is next on the cnbc. whoo! ♪♪ these guys are intense. we got nothing to worry about. with e*trade from morgan stanley, we're ready for whatever gets served up. dude, you gotta work on your trash talk. i'd rather work on saving for retirement. or college, since you like to get schooled. that's a pretty good burn, right? got him. good game. thanks for coming to our clinic, first one's free. hey you, with the small business...

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that helped supercharge the economy and study after study, kids graduate with no debt and up being with more money than their classmates who have outstanding student loan balance. although, as a said before, student debt is cheaper than credit card debt, so the problem is that simply, there is so much of it, and you can get rid of it and bankruptcy. so for any of you, with parents or you think you will be becoming parents, let me tell you right now hat there are very few things that you can do for your kids future, that are better than paying for as much of their college education as you can afford. of course, to make a style hierarchy of financial needs i can tell you it's more important for you to save and invest for retirement, which is what i talked about earlier in the show, why prioritize are some of your children? civil because of you don't have

the retirement money, you think is going to support you? the kids? if you ever want grandchildren you will want a retirement fund otherwise your children will spend ages taking care of you instead. however if you save now for retirement then it's time to start thinking about college. even if your kid is a toddler, the best way to save for college is what is known as a 529 pine these plans vary buy state of the general rules apply across the country but there are two kinds of 529 plans first some states let you use the 529 as a way to hedge against tuition inflation. you can buy college tuition credits at today's prices and use them in the future, that's not what i'm talking about that, especially not in a world where major politicians are making tuition for universities. i want to use a 529 savings plan. again these are run buy states , but generally speaking, a 529 doesn't let you manage your portfolio, you have to between pick between a mix of mutual funds, like 401(k) plans, this is not my favorite way to do

things, i prefer you to have control of your assets but 529 plans have so much going for them, that i'm not going to disqualify it over this one flock, when you can only choose between funds go for a low cost bond that mirrors the market like an s&p 500 index fund. sort of the rules for a 529 plan, let's say that you just had your first child, congratulations if you can afford it you should start a 529 with your kids is the beneficiary right then and there, that is what i did, will maybe wait a couple of days anybody knows, that the big about maybe not my finest hour, although the trades only work financially, if not it can really help this at home. here's how a 529 works, the contributions are not tax- deductible. so you are paying for this, with after-tax income, once your money is in the 529 plan, you don't pay any taxes on your gains, so they can compound tax- free year after year, which is what i like about it. it is like an i.r.a. but for college and not retirement, because of federal

gift tax laws, you can contribute 70,000 per year if you are single or 34,000 if you are married and you file taxes jointly, that is a heck of a lot of money. and buy the way your kids grandparents who contributes to the same plan, too, and if you don't have the money, a grandparent can also start a 529 plan with your kid is the beneficiary. but it's better to have a parent to do it. now let's say for some reason that you are your parents are sitting on a really huge sum of money. one of the cool things about a 529 plan is that you can frontload five years worth of contributions without incurring a federal gift tax, as long as you don't write any checks to the plants beneficiary over the next five years, which is not hard because who writes checks to a seven-year-old? in other words a single parent or grandparent can potentially invest $85,000 into a 529 plan right from the start or f you

are married and filing jointly you can contribute $170,000. that's five years after that you will be able to contribute anything without getting hit the gift tax which is something you don't want but honestly if you drop that money you will need to make that much more contributions. you want to get that money into your kids 529 as early as possible. that is because the greatest of these plans is all about the power of compounding. given you don't pay taxes within the 529, if you can contribute $85,000 right off the bat and you invest that money and a low cost index fund that mirrors the market the rule of thumb is that over time you will make an average of roughly 8% per year, 8%, then buy the time your newborn is 18, you should have tripled your money 85 grant turned to the 340,000 grand, that is a pretty college education and a decent chunk of law school.

i know most people cannot frontload a 529 plan like this but if you can frontload it is the best strategy and for grandparents this may sound kind of grim but your 59 plan contributions one count towards your estate tax, from the bottom line, always look on the bright side of doubt. and the last thing about saving for college and grad school, any money and a 529 plan you don't use, you can transfer it to another relative, even siblings are first cousins, buy the way if you save money and is ungrateful kid decides not to go to college you can withdraw the money, you just take it. although you will have to pay taxes on any of your gains over the 10% penalty. -- and here's the bottom line. paying for your kids college education isn't as important as providing for yourself and retirement, at least not financially, but if you have children that after you made enough retirement contributions for the year, putting money in a 529 college savings plan, should be the next item on your agenda. stick with cramer!

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experience why i love teaching members in the club. >> jeff and jim send us a newsletter every day, every time they are buying or selling something, they keep us up-to- date. >> join the cnbc investing club

with jim cramer, go to cnbc.com/cluboffer! ♪ ♪ >> i always in my favorite part of the show is answering questions from you. time to bring in jeff martz, to help me answer some of your most burning questions. for those of you that are a part of the cnbc investing club, jeff will no need no introduction, for those of you who aren't members, i hope that you have to join already. i would say that the insights help me do a great job for all "mad money" viewers and i think in some ways it's more important that some members of the club and if you like this be sure to join the club and what is interesting if that we go at it every day nd we don't agree, if we agreed, what would be the point? first up we are taking questions from gregory in california. i started with the investing club two months ago and i should have trusted you.

you have my attention now. thank you is there an objective way to determine intrinsic value, if so where is the clear information on the subject? again, thanks. this is something that me and you disagree on. i am more art and your more science. when i think about a company that has intrinsic value, i often think about and we do without it? how special is it? what is the addressable market? and do i value the market cap, as equal to the opportunity, that is a very in my own way to look at it. you on the other hand are far more analytic and perspective. >> i think, one way that you could do it is look at the pricing and the earnings of the company versus some of the peers, and then compare things like revenue growth and gross margins and free cash flow, and stock them up against one each other. that can be a way to determine if the stock is cheap or expensive. >> and i think that when i look at companies and i say that i want to emphasize, eli lilly, over a personal, i look at the fact that the growth rate, that i'm not as worried about the

price charging ratio and that i have you bringing me back to earth and sometimes price ratio go sky high and it can create problems and we are in the end, a trust and we must do what is right. next, we have robert who asks, hi jim, i do want to sound like a pig but if i'm planning to hold a stock for the long-term, why should i take profits in a company when i know that there's an excellent chance to stock will continue to rise? here's why, you can't become the company. when i look at eli lilly, which i think has got the biggest pharmaceutical that i mentioned, twice it's on my mind. we could easily become the eli lilly fund because it becomes dominant. we can become the apple fund because it becomes dominant, so what we try to do at all times is make it so that we do not swing from one company. and that is what makes us feel like you have to do some trimming. >> i think there's a difference between trimming and selling.

and if we've learned anything from 2022, it's that even the best companies in the world with the best products and great sheet management no one was immune to a significant pullback so if you an avoid something like that, then, it favors trimming, even if it is such a great company. >> vertically pit, i would like to say, there's always a market, and i'm right now on last call, the moment all you investors have been waiting for. while the stakes cranked up ahead of nvidia's earnings . hollywood reacts to open a and open ai. new streaming rivals may be looking to date. the return of our exclusive insider buying segment. there's been a lot