final trade. gobble that up. >> big short interest in that pilgrim's pride, perfect ppc. part of the song. >> yes. >> my country z. >> 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. hey, i'm cramer! welcome to "mad money." welcome to crammerica. my job is to educate you and teach so call me or tweet me at jimcrimer. tonight i want to talk to you about the big picture, about building wealth in general and not just owning stocks in particular. because stocks are just one part, absolutely the most important one, but still just

one part of building real wealth. there are some people, call them the 1% if you will, who can make enough money from their ordinary day to day income to become truly rich. what a great thing. but for vast majority of americans, that paycheck is not enough. you need to augment it, work with it. if you keep watching, i'm going to tell you how to do that, not just for the next year or two years but for the rest of your life. now, usually i come here and tell you what i think of the market, what themes i think are best, stocks that best fit those themes but the truth is before you start investing in stocks there are a lot of other things you have to do if you want the payoff from those investments to mean something later on in life when you most need the money. you may not want to hear this, but it's absolutely fruitless to think you can get rich in stocks if you haven't laid down a foundation for building long-term wealth beforehand. what do i mean by that? simple. i can make a fortune in the market but if you're hemorrhaging money everywhere else, a healthy portfolio won't

do anything for you. at best it will keep you afloat when, if you'd planned things better, it might have let you become wealthy. there are three absolute necessity, three things you must take care of before you consider owning a stock. i don't address these subjects normally, i assume you have this stuff taken care of but sometimes i feel like i'm being remiss in not mentioning them more often. we don't teach financial literacy in high school in this country. very few colleges will teach you a thing about how to manage your finances. you might learn about the theoretical foundations of marxism, that doesn't mean i can't give you a primer, especially because i know from your requests and phone calls and twitter that you crave this education. you ask for it everyday. so i'm done ignoring it, ends tonight. what are the three things you must do before you can own stocks? first, i know will sound boring and you've heard it a million times, just sucks the life out of the fun of everything but i need to say it and you need to hear it. you have to, have to, have to

pay off that credit card debt. i like to be as entertaining and popular as possible but i have to nag you. i'm not a zealot that believes your credit card should be cut up into pieces and turned into a mosaic, i've seen them done in handbags or that credit cards are evil and should be burned in effigy. but i acknowledge the facts. if you have credit card debt you are paying an extraordinarily high interest rate to that debt on the company. we're taking rates that may make a loan shark, that's right, you're paying a loan shark. it would make a loan shark blanch. tony soprano would give you better terms. but to be fair to the credit card industry they won't break your kneecaps if you can't play them back but they will financially kneecap you with penalties and late fees they can destroy whatever you've been able to build up from your paycheck and other investments. like many aspects of personal finance, i have a one time or another unfortunately brushed up against the down side of credit cards. in twine college and law school i owed a huge amount of money to

various creditors, juf enough to make it so i had little left to live on. initially ended up live withing in my car. i'm a saver, i still managed to put a few bucks away into a rerequirement account i created investing with peter lynch. his first book "one up on wall street" remains the seminal teblgs ftext for understanding the market. it's on amazon. once i knew where i was going to live, even though i was in hock to a bunch of companies i owed money to before i startedlying in my 1978 ford fairmont, the credit card issuing companies found me and i took a bunch of them down. i pretty much from everyone who offer med plastic. i figured you could fay minimal and keep straying everybody out. the credit issuers never seemed to mind. i remembered had four of them going each month, paying the minimum and i gotten a offer from a card in puerto rico for one more and i said "what the heck, why not?" when i added up the minimum payments and charges i realized that amounted to my biggest

expense after my rent. i wanted to default on them but feared the consequences. i ended up restructuring my non-credit card debt with a collection agency. these guys are like a posse. they found me soon after i skipped on them and their easier payment plan found me just enough breathing room to get by until i went back to law school where i got a scholarship with room and board. i was able to get legal work with alan dershowitz, worked on the claus von bulow trial. almost every penny went to those darn credit card companies. there was still nothing left for me. in the end after school i got lucky, i landed a job in sales and trading at goldman sachs and was able to pay off the bills quickly. what a relief. in the end, i couldn't stop mack opening the mail. not everyone will be as fortunate as i was snagging a job out of the credit card wilderness, but i am realistic and nowhere of i speak there's no way you can make enough money to save in any meaningful way let alone pay rent and put a

meal on the table. let me put to it you there way. even if you're a great nova scotiaor, it won't matter as long as you're burdened by credit card debt. even with good credit, let alone the credit i had, you could be paying 15% annual interest and if your credit isn't so hot, you might be talking about 20%, to 30%. if your stock portfolio wracks up a 20% return, that's a darn good year. but if you have a big balance on your credit cards, pretty much all of your gains will be sucked down the drain by the interest rates. there's nothing you can do about it. so this is a sine qua non of investing. if you go into credit card debt, stocks will be a hobby. they can't be the wealth generate magazine they should be because the wealth will be canceled out by the wealth destroying powers of credit card debt. >> the house of pain. >> i know i parole sound like your parents, but your parents are right. i said there's three things you need before you can buy stocks. what are the other two? the second is health insurance. don't invest a penny in the

market before you have health insurance. you might think the affordable care act makes it a non-issue but now you have to buy health care insurance or pay a fine and still have no insurance. the penalties aren't big but they get bigger over time so there isn't any choice. don't be a moron. even if you object to obamacare politically, it's idiotic to pay a fine and get nothing rather than pony up and at least get health insurance. plus there are subsidies to make the cost more bearable if you're on the lower end of the income spectrum. honestly, though, you shouldn't need legislation to make you get insurance, medical emergencies are the single biggest cause of bankruptcy in this country. i know what's like to be without insurance. i had no health care plan and had to drive hours to get to a farm worker's clinic to see a doctor and even then i couldn't get the care i needed. i know you think it couldn't happen to you and the younger demo of the audience could feel invulnerable but you're not. you don't want to be expose to the risk of not owning health insurance, one illness, a couple hospital visit they can crush

the capital you spent years building in and away from the market. sure you can get coverage if you have a pre-existing condition but it's a heck of a lot cheaper to buy insurance before you get sick and you'll need health care eventually at some point, everybody does. last but not least, but you start investing in stocks, you need disability insurance. the rationale for both health insurance and disability insurance is simple. without these two kinds, you can get wiped out in a second. all the precious gains you've wracked up in the stock market will be for nothing. you'll either to use the money to pay your hospital bills or support yourself while unemployed or injured because you didn't have health or disability insurance. in short you have to pay off your credit card debt, get health and disability insurance, the twloost are offered by many employers so you have no excuse for not getting them if you also think you can afford to own stocks. these are more than just items on a personal to do list. they are essential elements in your strategy for capital preservation. remember, we talk about capital

fresh united nations, that's where you grow your investments using money to make more money. we always acknowledge capital preservation comes first because you need that to protect your money in the present if you want to grow it in the future. here's the bottom line. paying off your credit card debt and getting health and disability insurance the most important elements of capital preservation, without them, investing doesn't make any sense. why bother? with heavy credit card debt and without health care and disability, building wealth can be futile. even if you are one of the best investors in the world. so take care of these issues starting tomorrow then we can create the portfolio that makes the most sense for you. zaidi in connecticut. >> caller: hey, jim cramer, zade in connecticut. i quit my job two years ago, i'm 67 years old and i have $400, now a 401(k) that i've been trading myself in small cap which i haven't done recently but s&p, i had good returns the

last few years now i don't know if i should roll it into an ira or -- >> do you like what enough your 401(k)? >> we have a self-direct brokerage and i was in fidelities fbios. >> you should stick with it. you're if good shape. just stick it with. i like what you've got. some people are locked in. mike in new york. mike? >> caller: mr. cramer, how are you doing? >> i'm fine, how are you? >> caller: i'm a retired police officer for two years, i've been in the city pension system for over 20. what is the difference between a 457 plan and a roth ira and what are the benefits or the pros and cons between the two plans? >> i'm going to have to ask you to check with your people at your pension plan because the 457 deferred plan i am not quite sure how that works and i'm not going to be able to cuff something here. it's too important. i am very sorry but that's a

personal decision to you and i don't feel comfortable actually offering advice on that particular situation. before you can think about investing in stocks, make sure you're building a foundation for long-termwell. pay off your credit card debt, get health and disability insurance, then get a portfolio together. you know i want you to be diversified and the same applies for your 401(k). i'll show you how to balance your retirement plan. should you ever tinker with your contribution level?401k isn't t game in town. i'll tell you when to add an i.r.a. "mad money" will be right back.

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tonight we're talking about a subject we don't spend enough time on in the business media -- long-term wealth building. if you're serious about getting rich and, more important, staying that way, i recommend you must do two things, first, go to amazon or your local bookstore, buy the entire jim cramer catalog. now that i've got that crass piece of self-promotion out of the way, the second thing you should do, even if you're in the early 20s and just started working is you've got to start saving now. notice i didn't say "save for retirement." i said "prepare."

because just stuffing your money in the first national bank of sealy, a.k.a., stuffing in your mattress or 501k, great those might be, they might not be enough to prepare for retirement. you should taken a active hand in setting yourself up for retirement. really getting involved with your money, getting your hands dirty, especially with the traditional vehicle for so many retirements, fixed income, or bonds yielding next to nothing. with that minimum reward not worth the risk. that's what i'm here to help you do. young people, don't turn off the tv. you have to do this, too. if there's anything that can make the process sound interesting it's me. you need to learn how to do this sometime. wouldn't you rather learn from a buy the who's been around from ages even though he sometimes traces around like lululemon stink pants, carries koorz handbhan coors handbags?

i promise to give you useful advice you can't find on the internet because so much of these personal finance bromides have been repeated ad nauseam that i think it's not worth calling advice anymore. yes, you should save. but how? individual retirement account? i.r.a.? yes, yes, you should. that's not a bold insight, that's just a fact. but people make careers out of saying "use your i.r.a., use your 401(k), cut up your credit cards" spout brilliant e pifmys like don't spend more money than you make, advice everybody in america knows but there are still people who will condescendfully tell you just that. just those points and assume it's enough to help you get ahead. i say it's not. basic financial responsibility is just a jumping off point. diet and exercise, please. i'm the guy who tells you where to go from there because i didn't make a career out of giving people money advice, i made a career out of using money to make even more money. and i came to this gig later in

life. so how from the perspective of a money manager like me should you go about preparing for retirement? what useful advice can i give you beyond that you should use your 401(k) plan enough one and your i.r.a. which anyone can half v because you don't pay taxes on the money you contribute and you don't pay taxes on the gains inside them, allowing for years after years of tax-free compounding. how about advice on what you should not do with your 401(k)? the conventional wisdom says you should put money in but it leaves you on your own at the beginning of a complex and highly confusing process. what should you not do with your 401(k) contributions? don't use it to buy stock from the company you work for. i'm far from the first foreign say this but company stock is still the most popular 401(k) investment out there. more people put their retirement dough into the their own

employer. i cannot stress how important it is not do that. it must be one part of a much larger pie. why? let me put it in mad money terms. every wednesday on this show we play "am i diversified" you tell me your top five holdings and i tell you if your portfolio is diversified, meaning you have all five eggs in separate basket. when it comes to investing diversification as i tell you in the first gospel according to cramer, jim cramer's real money, it's the only free lunch out there. regular viewers know if you expose too much of your portfolio to the same sector you are running an enormous risk. suppose you had all of your money in tech stocks before the dotcom collapse. many people did. you would have been wiped out. something that soured an entire generation on investing for years. or let's say the beginning of 2013, a little more current. your entire portfolio was in higher yielding dividend stocks. this is a cohort that had been performing well for years because bond yields were so low and the yields kept going lower

and bond prices going up which meant investors looking for income had no choice but to buy stocks with notoriously big dividends. then in the spring of 2013 we had an interest rate scare. interest rates began to rise violently. the return you could get from bonds increased dramatically and all these high yielding stocks which were trading as bond alternatives got crushed because they had real interest rate competition from the bond market. so if all of the portfolio or even one-third of it was made of up these high yielders you lost a lot of money even though the first half of 2013 was fabulous for the market as a whole. that's the danger of not being diversified. we'll get more interest rate spikes, those of you in those stocks will get hurt again. diversify. apply that logic to your 401(k). do you you want to invest your retirement money in the same company paying your salary? that means you're putting your savings in the same basket as your paycheck. what if you worked for enron or how about the earlier iteration of'sm eastman kodak.

you lose your job, you lose your retirement savings, it's lose-lose. you think it's conjecture? you know, i used to have a radio show called "real money" and i got a giant number of calls telling me to stop bashing enron. why? because the callers had a ton of stock in the company. i then came back and explained perhaps they needed to diversify away from enron. each time i did it i heard about how they got discounts or how such a great company was too terrific to sell or the fact is that it was done so much they couldn't sell. then one day it was gone many people have made this argument before and the company stock is still the number one investment. why? you probably feel like you understand the company you work for and the excuses that you're investing in what you know. i'm telling you, that excuse doesn't cut it. you've got to cut back. just cut it back tomorrow. here's the baht bottom line, diversification comes before everything else when you're

investing. whether it's diverse portfolio or investment in your 401(k). never put more than one-fifth of your retirement money in the stock of the company you work for. just like i advise not putting more than one-fifth of your capital in any one sector. doubling down is okay for no more than that. and, remember, that's what you're doing. you're doubling down. it carries risk beyond being undiversified. stick with cramer if you want to know how to mansion your retirement money so you can build lasting wealth for you and your family. much more mad money ahead. americans are living longer these days and, yes, that should change the way you prepare for retirement. i'll help you fill those golden years with greed. and sometimes your 401(k) company match doesn't cut it. when it makes sense to go above and beyond your contribution. june plus i.r.a. or 401(k). i'm weighing in. stick with cramer.

everybody in this country wants to get rich quick -- except perhaps for hippy types who don't believe in currency and want to live off the grid. but anyone who tells you he's got a way to make obscene amounts of money virtually overnight is either peddling some kind of scheme. how about walter white's meth operation in "breaking bad." i love when bryan cranston came onnen "mad money" and talked

about his product being like apples. he didn't need the fabulous contribution work of sometime partner mr. free. that darn pure blue meth sold itself. spoiler alert, that get rich quick scheme ended real bad. the most reliable way to make your money grow is to do it slowly and prudently which is why we're talking about long-term wealth building. here's a rule that a plies to all forms of investing. i know retirement money is meant to be sacrosanct with little risk taken but it's possible in this era of very low interest rates which seem like it could go on for a long time that you could be too cautious. too prudent and too risk adverse. when you're managing your money, there's a point where all of your prudence can become like recklessness and this is something you particularly see with people who want to save for retirement. i like to say you invest for retirement, don't save. saving makes it sound like you

had to sock the money away into something with a low return, maybe a money market fund or a long-term bond fund. something i believe no one would informs in if they understood the risks of either and somehow you'll you'll be fine. that's not how it works. not these days, not this age. see, there's a counterintuitive element going on. most people put money away for retirement feel like they shouldn't take on too much risk. that their retirement savings are too important to jeopardize by investing them in stocks. i understand why you feel this way. stocks can go down, you can't get your money back. but if you shunt stocks and cling to bonds because you believe there's less chance for down side, that's not being all that intelligent right now. i call it recklessness masters prudence. in fact, investing none of your 401(k) or i.r.a. money is likely to jeopardize your retirement savings in the long run than investing everything in stocks would be. why? okay, when you're investing in retirement you are in a race against time. you need to generate enough

money to support yourself for the rest of your life by the time you plan on retiring and the truth is if you are too risk averse meaning if you load up on bonds in your 20s, 30s, and 40s avoiding stocks because of the risk -- and i see plenty of i.r.a. 401(k)s like this -- you will never generate enough money to retire comfortably. the money you have will be safe, but that's all it will be. it's not enough to get a low single digit return, something below 4% from 30 year treasuries. with that low rate you're barely going to outplace inflation. capital preservation should not and is not a financial suicide pact. you have to factor in the need for capital appreciation, using your money to make more money, perhaps a lot more money. let's not forget bonds aren't always the epitome of safety either. there are moments when owning bonds can be risky. in an environment where interest rates are rising by definition, bond prices are going to fall and the faster rates rise the harder the bonds will fall. something that will truly be felt by anyone who puts money in

a long-term bond fund which can lose money if rates shoot up as so many feel will happen if the federal reserve isn't careful and doesn't raise rates with alacrity. i'm not one of them but many say that. so keeping your retirement money in bond means you won't generate enough money to retire when you want there-to-and there are times when bond prices have genuine down side risk. they can drop enough to race two or three years worth of coupon payments in quick fashion as they did in the second quarter of 2013 if you timed it wrong. what else falls under the category of recklessness masked as prudence? how about the most popular 401(k) out there, stable value funds. i know that name sounds reassure, stable value. the truth is, this is just a type of fund that gives you a slightly better return than a money market fund and a slightly worse return than a high quality bond fund, although unlike bonds they have insurance wrappers to protect flauk changes in value. but if the return for nothing but bonds is too major leaguer

to build true wealth in your retirement accounts, the smaller term from stable value funds is even worse, the definition of trying to be so prudent you become actually irresponsible. the goal of the show, my mission statement, is to help you use your money to make even more money, even as i though that requires work and you can't be on autopilot as so many of you are. when you either in your 401(k) or ira or in your discretionary investing account put money into things like treasury bonds or stable value funds, you're effectively taking that money off the table. you're saying this money, i'm not going to use it to generate wealth, i want to keep it safe. but you can't have it both ways. you either cling to safety and when it's time to retire you don't have enough cash or you take risks in stocks when you're younger and go for the higher returns that will enable you to retire healthier and happier. while money can't necessarily buy happiness, being broke is a pretty sure way to be miserable. i'm not saying there's no place for bonds in retirement portfolio. there is as you get older.

you should have some of your cash cordoned off in something approximate ago risk-free zone because you'll use that money shortly but stocks come first as an option until much later in life which is so different from the old days when pensions were bigger, life expectancy was shorter, and interest rates weren't being kept down by a frarve that wants to keep the economy moving and the european economy that's always bordering on recession making their bonds unworthy, sending even more money here, creating absurd demand for bonds with low yields. even corporate bonds have become difficult to invest with as they offer yields that used to be chin zi for government bonds. those who bought the big corporate offerings ever, the long-term bond offerings from apple and verizon might do better in investing in common stocks. 401(k) plans often have limited options. it bothers me but it's true. if you can't pick your own stocks, the best way to invest is to find a cheap index fund that mimics the s&p 500 which is taken to be a good proxy for the stocks that have been proven in study after study to be the best asset class to invest in over

pretty much any 20-year period. as you get older you can and should ache some of that money off the table and put it in high quality bond funds for safety but only some. my rule of thumb is to keep 10% to 20% of your portfolio in bonds when you're in your 30s. no reason to own bonds before you turn 30 at all. in your 40s keep it up to 20% to 30%. in your 50s it's 30% to 40%. from age 60 to when you retire, 40% to 60% bonds. this may sound aggressive but it's the best way to generate the return you need to retire the way you want to and when you want to. once you retire you should still own stocks that can generate more income with that no that much risk. i think they should be about a third of your portfolio at that point. i know that's aggressive but i have to give you what i think is right. this is counter to the conventional wisdom that says you should have more bonds in your retirement savings but the conventional wisdom was coined when people had shorter life

spans. we're living longer these days and you'll need the extra upside from stocks when you retire because that safe money in bonds will run out. look at it this way, not only stocks once you're retired is a bet against your own longevity. you want to make that bet? you have your first principles of retirement investing. stick with cramer and i'll give you more specific tims for using your array and 401(k). sean in new york. sean? >> caller: hi, jim, thanks for taking my call. my uncle frankie got me hooked on your show and i'm a big fan. >> that's terrific. >> caller: my question is about investing in a roth i.r.a. i'm 25 and graduated from law school and over the past three years i've taken advantage of my pretty much non-existent tax rate and maxed out my roth i.r.a. from a summer job. so my question is i have the money invested in broad stock index funds but i want to know how i can invest more aggressively. >> you know what? you've got to get in an aggressive mutual fund for about a half of that money. someone who's looking at

aggressive growth. in the next ten years, you've got a shot to make a lot of money from that fund. ten years from now, if we're having the same conversation, which i hope we do, you can pull back, but this is your chance to risk that money because you have to rest of your life to make it back. dan in florida. >> caller: hi jim. long time; first time. >> yes. >> jim, i would like to hear your thoughts on a buy-and-hold strategy regarding companies that have had consistent compounded annual growth of over 10% per year for many years. >> i always say to people, okay, how can you buy and hold them if they have consistent growth if next year they're not consistent? and i've seen this time and again complete with technology stocks. i remember a company called digital equipment, it had that same -- exactly what you said, it kept doing it and doing it then one day it disappeared. wang, same thing, doing it and doing it. these are all companies i remember that define that what you just mentioned. and then one day they missed and then they missed and then they

missed and then they missed. can't have that happen. going into your golden years? the best is yet to come. i'll give you advice along the way. more "mad money" ahead taking things up a notch. when it's right to double down on what you put in your retirement plan. the 401(k) gets the hype but there are other ways to make sure you don't have the work until you last breath. i'll lay out your options. plus your tweets just ahead. stick with cramer.

if you're look to build the foundations of long-term prosperity, and if you're watching this show i assume that's important to you, unless you just like the sound effects, the first and most important step is to set yourself up for

retirement. we've been focusing on how to use i.r.a.s and 401(k)s. right now i want to share with you my favorite piece personally of 401(k) advice. this is not some abstract idea. it's a tip based on how i manage my own 401(k). unless you think i'm a clown and an utter stooge, curley or schempp variety, i won't get on the floor to spin, but you know what i'm about to tell you is worth hearing. most people taking advantage of 401(k) contributes on a monthly basis and that's automatic. so every month you end up plowing in one twelfth of your total annual contribution. there are people who will tell you to leave it alone and passively invest your money. like do it over time. i am not one of them. why not? because there will be times when the market takes a hit, a big hit, a nasty hit and i think you want to be able to capitalize on that in your 401(k). why would you contribute the same amount every single month when stock prices can differ radically from one month to the next.

would you want to invest the same amount when it's near the top as the bottom? absolutely not. so here's how you can take advantage. when you have a real long time horizon, stock market pullbacks are opportunities to buy not reasons to weep, moan and tear your hair out. it's simple, wherever you get a 10% decline in the s&p 500, what some people in the profession call a real honest correction, you have to double down in your contribution. that month you put in twice your normal 401(k) contribution, that's right, twice. meaning one-sixth of what you plan to invest in your 401(k) over the course of the entire year instead of one twelfth. if the market stays down, you might want to do the same the next month. beyond that you might want to wait another quarter before you double down again. by that point the year might be over. i do this. this is what i do. it may not sound like it makes a lot of difference but i can tell you it does. if you embrace the one twelfth solution in doubling down when the market declines, mull make more money than you would have

just passively contributed to the same amount. and just to make sure we're clear, i'm talking about investing in a low-cost s&p 500 fund or if you're using an index fund with a brain with a manager who has a long record of consistent outperformance. you probably can't find a mutual fund like that in your 401(k) offerings so it's best to stick with an index fund. i've given up on that. that's what you're dulling down. will this make a huge difference over the course of four or five years? maybe, but over 40 or 50 years it could mean tens or hundreds of thousands of extra dollars just because you took the time to observe what was happening in the market and adjust your 401(k) contributions accordingly. again, actively managing thing, not taking the passive approach that no longer flies in the new world of investing. here's the bottom line, pay attention to the market so when you gate 10% decline in the s&p 500 you can double down and invest twice your normal 401(k) contribution next month.

when you have a long time horizon, you can think of a meaningful decline in stocks as nothing more than a sale no different from a sale at your local department store. that's the right way to manage your retirement portfolio. mad money is back after this.

while we're on the subject of long-term wealth building, i need to tell you about the limits of what many people consider to be the holy grail of retirement savings, your 401(k) plan. not giving you talk 401(k) eyes

dos and don'ts and i'm the first person to admit it can be a vital part of setting yourself up, even a grandiose ostentatiously wealthy one. why not? but i'm not part of the crowd that says you should max out on your 401(k) contributions every year. that means putting in $18,000 which is the limited on contributions for 2014. no, your 401(k) is important but it has its downsides, plenty of them. you will hear people cite high management fees and administrative costs and a problem and they eat away at your retirement capital, no question about it. for my money the worst thick about most 401(k) plans is lack of control of your money. and the lack of choice over what you can invest in. i believe the best way to invest is to buy and diversify portfolio of individual stocks, do home work on each one of them. then you know when it's time to buy more, sell, and sell everything which is very rare, by the way. most 401(k) plans don't give you that option. instead you get to choose between more than a couple dozen different funds, some for stocks, some for bonds and even though you can lobby your

company's human resources department, most of what you have to choose from isn't that grand. i don't know if i would waste my time trying to change those things. that's okay. it's why we have the i.r.a., meaning individual retirement account, not the irish republican army. and i.r.a. doesn't have the high management fees of a 401(k) plan and lets you invest your money the way you want to, making it in most ways a superior vehicle for your retirement investments, your i.r.a. is the same great tax-deferred status as a 40 k, the one big picture different is that with many 401(k) plans your employer will match at least some percentage of your contributions to a certain point. free money, you'd be a fool not to take it. but there's usually a cap on how much the company you work for contributes so here's my rule of thumb for retirement investing. contribute as much money into your 401(k) as needed to get the full company match. then stop there. at that point, don't put another penny into your 401(k) until you've maxed out your i.r.a. contributions.

after you get the full match in your 401(k) you want to put the rest of the money you're saving your retirement into an individual retirement account. if you want to know whether to use a regular i.r.a., a roth or the difference between them, may i suggest you pick up a copy -- not at your local library -- of "stay mad for life." for now we're talking regular i.r.a. contributions are tax deductible and you pay no taxes on your i.r.a. those are allowed to compound year after year tax free until you start withdrawing money. you can only pour $5, 500 into a year in an i.r.a. unless, like me, you're over 50. in that case you can contribute $6,500 a year. i say you should max this out if you can afford to after you've milked your employer dry with your 401(k). if you want to contribute even more money you can go back and put in the your 401(k) but

that's only after you've maxed out your i.r.a. let me give you the bottom line. 401(k) plans have a lot going for them but they're deeply flawed that's why you should contribute as much money to your 401(k) as it takes to get the full match for your employer and all of your retirement savings should go into an individual retirement account. if your 401(k) has no'mlier match, start by contributing to your i.r.a. and keep going until you max it out at 5,500 a year or 6, 500 if you're over 50. "mad money" is back after the break. skrierks

they pile up, we've got to get to work. your tweets you've been sending me at jim cramer #madtweets. our first tweet from -- well, who asks "how do you take advantage of the correlation among not between sorry stocks, bonds, and money markets to steadily grow and i.r.a." this is very easy. depends on your age. if you're a younger person, i don't want to see any bonds in that i.r.a. what are you going to do? compound at 3%? i want to see stock, stock, stock.

as you get older i want to see stocks with dividends. then middle ages you can load up in bonds. we need to make money with our money. we can't do it with the bond market. next. "i'm looking at dividend stocks. when is the best time to purchase and what evaluation do i review?" there's a terrific newsletter at thestreet.com by dave pelt peltier who tells us which stocks are safe and which aren't. that's what i would remember. next. "pay off car, house, or invest." important. car, house, let it run. your mortgage can be very low. honestly you might get a better return from the dividend stocks we talk about and get that mortgage money. a no brainer for me. let's get to our next tweet. this one comes from ctv8er. "what percentage of do people

save and invest from their income a month." i talk about this all the time and my advice is you should take a look at what your discretionary money would be away from just eating, okay? and that's the money that i want to see put away. in other words, movies, that kind of thing. try it. i did it for two years and i cannot believe how much money i was able to save. two years when i got out of law school. up next, we have a treat. "how many stocks is too few/too many to own." stephanie lincoln and i run a portfolio for about 30 stocks from our charitable trust. we can do about 15 each. we are professionals, we know how to do the analysis. that means for you if you're an amateur home gamer, no more than 10. it's too hard. you don't have the time. next. "locked student loans less than 3%, one investment dividend stocks instead of paying them, suggestion?" you are brilliant. that's just what i want. take a look at the master limited partnerships.

some of the higher yield and utilities are also very good and the individual -- the iyr within there, there are some excellent excellent real estate investment trusts. those are perfect for you. our next one. "how much tinkering with the retirement account is too much? are quarterly adjustment changes too much?" first of all, i know a benchmark of too much changing around and that's my fantasy league. don't change 26 times a week. that makes no sense. what you have to do is do the home work. listen, if everything you bought is good, don't make any changes. we only make changes when our thesis isn't panning out and circumstances have changed. not because we want to make changes for the sake of making changes. next. "do you favor any particular financial advisors?" this is really important. the most important advice you'll get from me. i need you to find someone else who has one and recommends that person. why? because i have discovered that

the this industry most people are now too small for the big guys. i have been on fights representing people who have $100,000 and don't get any treatment at all of any sort of personal touch. so you're got to find someone who if your orb who has a good person and use that person. i know that sounds like geez, i'm punting, but it's not because otherwise you're not going to get the personal touch's so needed. all right? stick with cramer.

zapped it, right to our house. and that's how they got it here. so, santa has a transporter? for the big stuff ... and it's a teleporter. cool. the magic of the season is here, at the lexus december to remember sales event. this is the pursuit of perfection.

i like to say there's always a bull market somewhere and i try to find it just for you right here on "man money." i'm jim cramer and i'll see you next time. tonight on "the profit,"

i head to south carolina to get a real taste of good old-fashioned barbecue. norton: if the fat ain't dripping on the coals, it's not barbecue. lemonis: a mom-and-pop operation has quickly grown into a million-dollar business. you're almost doing $1 million a year. you guys aren't mom-and-pop anymore. they are struggling to keep up. norton: we've grown faster than we ever imagined we would grow. we have not caught up with ourselves. lynn: this is overwhelming. lemonis: authentic, down-home cooking never goes out of style. lynn: mom always taught us, whatever we do, we do at our best. lemonis: if i can stabilize this business... we're not charging enough. ...there's big money to be made. this meal was amazing. these ribs are ridiculous. my name is marcus lemonis, and i fix failing businesses. if you don't like money, don't follow my advice.