least a year i'm looking to collect on 1% of the stock price. 1%. >> time for the final call carter >> mike? >> ge, the money puts into earnings. >> thanks for joining us >> i love being in '08 andexpir. i'm melissa lee. thanks for watching. don't go anywhere. "mad money" is up next my mission is simple, to make you money i'm here to level the playing field for all investors. there is 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 cramerica other people want to make friends. i'm just trying to make you some money. my job ask not just to entertain you, but to educate and teach you. so call me at 1-800-743-cnbc or, of course, tweet me at #madtweets anybody who has a high school diploma has taken a course in

chemistry, geometry and a host of history classes, and you can graduate from college speaking three languages and have a deep understanding of quantum physics. but you know the one thing they almost never teach you in high school let alone touch with a ten-foot pole in college financial literacy and i'm not talking about economics here you can be an econ major and still learn nothing about personal financial planning or retirement readiness or even how to balance a darn checkbook, let alone how to invest your money wisely money is just not talked about in education it's like the third rail of the whole educational system and that's why i'm on a constant mission to teach you about every aspect of managing your money so you'll be able to become a better investor both when it comes to retirement and playing around with your discretionary mad money portfolio. >> hallelujah! >> which is big reason why i wrote "get rich carefully" to begin with really even if you don't own individual stocks directly, you probably

have some kind of sfoesh to the stock market probably a 401(k) plan where you keep the bulk of your retirement funds, which is why i want to take a moment to talk about retirement for those of you who have been living in a cave for the last 20 years, 401(k)s are the main way americans save they're offered by employer and they're among the great tax-deferred investment vehicles out there. along with the ira, the individual retirement amount for those of you who are about to fall asleep or change the channel because the whole idea of saving for retirement puts you to sleep -- [ buzzer ] -- hear me out, because you need to know this stuff i'm going to tell you some things that you won't hear from the so-called experts. this show is different at this point it's pretty much become conventional wisdom that you have to invest in your 401(k), that only an idiot would not contribute to a 401(k) plan. a lot of idiots tell you to max that out if you make neff money fob feasible, from 17,500, 2014, 18,000, 2015

either way, that's a chunk of change and those that comes from your pretax income i am not someone who is going to sing the praises of the falc 40s the key to financial salvation 401(k) plans can be a real mixed bag. [ booing ] with a couple of really great features and a lot of bad ones too. those will eat away at your returns year after year sometimes through fees that are totally hidden from you. so let me lay out the good, the bad and the ugly of 401(k) plans and then i'm going to tell you whether it makes sense to contribute more money to your own 401(k) or maybe you can put that cash somewhere else the best thing about a 401(k) is it's a tax-deferred investment vehicle you. pay no taxes on what you put in and then you never pay a penny of capital gains talkses which allows your money to compound year after year, compounding being fantastic, decade after decade, totally tax-free until

you decide to start making withdrawals. readers of my books know that i'm a huge believer in the power of compounding so let me give you an example here suppose you're 30 years old and you start investing $5,000 a year to your 401(k). remember, you're not paying any income tax pretax income if you choose your investments wisely you should be able to generate perhaps as much as a 7% concern. you'll be contributing $150,000 to your 401(k) plan over the next 30 years. because the money is able to compound year to year without any capital gains taxes, by the time you're 60, that $5,000 a year pretax income could be worth over $511,000. if you had to pay taxes on dividends and capital gains, believe me, that number would be a lot lower, perhaps as much as $110,000 lower that's how important compounding, and the tax-deferred nature of the thing. you only ever have to pay taxes on your 401(k) money once. that's when you decide to withdraw it. a at that point your withdrawal

taxes as ordinary income since you'll likely be retired then, most will end up paying a lower rate than if you had been taxed on the money when you first earned it when you were getting the higher tax levels. that's one reason to like 401(k) plans. many, but not employers will match or partially match your 401(k) contributions for every dollar you invest, your employer might throw in, say, 50 cents up to a certain point. that is free money, and you never want to walkway from free money, especially again when it's also untaxed. but if you don't get free money from your employer for contributing to a 401(k), then i think it's a much less compelling option, frankly, because as i said before, there are a lot of things about a 401(k) plan that can be really bad, which is why if, again, you don't get a match from your employer, i believe it's a better idea to save for a retirement via the individual retirement account, or ira which has the same exact tax protected status as a 401(k) you can only contribute 5,000 or 6500 if you're over 50

when you change jobs, you can roll all your money from a 401(k) into an ira that's exactly what you should do every time you're out of work 401(k) plans vary widely from company to company some let you pick individual stocks but many more give you a 401(k) plan with limited options. sometimes you'll only get to choose between a dozen, maybe a couple dozen at most different mutual funds so for those of you who can't pick your own stocks in your 401(k), my number one rule is before you contribute money to your 401(k) plan, you have to make sure it gives you the option to put your cash into something that's actually worst investing. in i'll make this very simple. if you can't pick your own stocks in a 401(k), when you want a nice low expense index fund that mimics the s&p 500 if your 401(k) doesn't even offer, that shame on your company. go with a self-directed ira from a full service discount program. i talk about fidelity, so you can have control over your money. one more negative. within a 401(k) when you invest

in a mutual funds, you have to pay that mutual fund's fees. this is really important but your 401(k) administrator, the company -- the people your employer hires to run these plans, they will also charge fees [ booing ] meaning that all the money 401(k) saves you on taxes, a great deal of that actually can be clawed back by these fees you. ever look at your statement and wonder why the heck your 401(k) holdings aren't increasing the way they should be, fees are probably the reason. here is my bottom line on retirement investing the company you work for offers an employer match for your 401(k) contributions, then you want to put money into your 401(k) until that match is maxed out. no reason to pass up on free money. after, that put any additional retirement savings into an ire rachet but if there is no employer match or if there is an employer match but your 401(k) doesn't give you any options worst investing, in you would do better to skip the 401(k) and go straight to an ira immediately deborah in california, deborah

>> caller: hi, jim thanks for taking my call. >> quite welcome >> caller: i have a two-part question regarding the value of listening to a company's earnings conference call. >> okay. >> caller: the first part is, how can we decide what we want to do, in other words, what action we want to take based on the earnings report since the stock frequently behave in a contradictory fashion to the report for example, a company can report good earnings, but guide lower on the revenue and earnings going forward, and the stock will go up the second you might think should it go down, right the second part of my question is i'm on the west coast, so the calls frequently are at 7:00, 8:00 a.m. eastern time so for me the value of listening to the call is diminished because i'm not going get up at 4:00 or 5:00 a.m >> right. >> caller: to listen to it

so i'm not going stich any action on that. >> here is the solution to this, deborah. you have no gun to your head unlike the hedge funds, you can listen at your leisure i'm not trying to get anybody into a quarter, to buy a stock ahead of a quarter if i can avoid it take a longer term view in the comfort of your home, go listen to the call or read it go. yahoo finance, get some of the research, street.com, cnbc, get some research. match the expectations with what was said take a longer term view. that's the advantage of the individual investor. you don't have to play that day. doug in nevada, doug >> caller: boo-yah, mr. k. >> okay. >> caller: yeah, my question is i have a 401, fairly substantial. would it be visible for me to change that to a self-directed ira? >> okay, well, what matters is

the match. if you have -- if the employer is matching, no. you want to get the max. you want to get the max match so to speak and then after that, yes but if it's six and a half or one-half dozen of the other and the funds aren't that good that you're allowed to be in your 401(k), then yes, i want you to choose a self-directed ire rachet let me help you take control of your financial future when it comes to retirement, if your company matches your contribution to 401(k), then max that out that's really important. but if you don't get an employer match, go straight to the ira. on "mad" tonight, you just got your diploma, so now what? don't miss my investing advice for recent college grads investing individual stocks? that's fine. i'll help you put your money behind the next best thing let's chart your course. why don't you stick with cramer. >> don't miss a second of "mad money. follow tui

follow @jimcramer on twitter have a question? send jim an e-mail to madmoney.cnbc.com. or give us a call at 1-800-743-cnbc miss something head to madmoney.cnbc.com. all week, cramer sits down with some of the market's most infuneral players. join "mad" padre for must-see interviews you can't afford to miss ♪ hawaii is in the middle of the pacific ocean. we're the most isolated population on the planet. ♪

hawaii is the first state in the u.s. to have 100% renewable energy goal. we're a very small electric utility. but, if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution using smart sensors on their network that lets us collect near real time data on our power grid. (colton) this technology is helping us integrate rooftop solar, which is a very important element of getting us to our renewable energy goals. ♪ (shelee) if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

♪ if everyone in this country went insane and decided to turn american into cramerican with me as your king or grand poobah, you better believe i'd be making changes and making changes pronto but because this is a show about money, i'm going to stick to the financial elements of the cramer regime the fact it is drives me nuts that we don't really teach our young people about how to handle money. and i'm talk early too, not just college. would it be so crazy if you had

to take a class in personal finance before you graduate from high school? i think should it be mandatory like those awkward health classes that can get a little graphic at time. sadly i don't have influence over education policy, but i do control what we talk about on the show so can i just take a moment to speak some words that we all believe but very rarely get to say in conversation? look, money is important it's really important. and caring about the state of your finances does not make you some kind of superficial bourgeois monster. let's say you have a really lousy credit score and you want to get married congratulations. you just inflicted your horrible credit on your new spouse. now neither you nor your partner will be able to qualify for a loan to buy a car or home or perhaps even get darn credit card these things matter in life. they say money can't buy happiness, but ivan found that piece of cliche conventional wisdom to be dubious at best, since being broke is indeed a major buzz kills, as i know

firsthand from the time i spent living in my 1978 ford fairmount. i sure wish i had an expert to guide me through all this stuff way back then. so 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's the only way you're going to be able to achieve financial freedom. by freedom, what i mean is living a life where you're not totally 100% dependent on your paycheck i'm always thrilled when i see members of the younger demographic who are taking an active hand in managing their own money. too many people start saving and investing way too late that makes their lives a lot more difficult than they need to be but i also know many young people feel like they have all the time in the world. many more start investing before they're truly ready. when they are in fact better things for them to be doing stuff with their money so we got to really drill down this it's why i'm going to give you three lessons, and a caveat for all of those who were recently out of college let's start with the caveat.

before you can start investing you need to pay off your credit card debt. this is something i mentioned before it's especially true for younger people particularly since credit card companies have gotten really aggressive about offering credit to college students. no matter how much money you rack up in the stock market, if you're carrying a balance on your credit cards, then it's going to eat into your returns i know this myself firsthand and long-term the interest on the credit cards will probably be greater than the profits you can make from investing, at least on a percentage basis. so just pay your darn credit card balance in full every month. automate it with your credit card company if you're worried you'll be tempted not. to i can't defeat that credit card debt no matter how many great stock ideas have i on the show let me get to any three lessons for young investors. first, this is for all young people who recently graduated or actually everyone out there. you need to seay money but i recognize that not everyone has an inherent predisposition to save you can't all be natural cheep scapes and i acknowledge telling you to

safe over and over again won't necessary di live do any good. the stock market is a great way to trick yourself into saving a part of your paycheck that i don't might otherwise spend. investing in stocks can be alo of fun well try that on the show. we try to do some entertainment within the teaching, where as leaving money in a savings account feels kind of joyless for a lot of people, not to mention that the returns are so small that they're basically, yes, indeed, i'll use the word meaningless. if you investigate in the market, it will be a lot easier to resist the temptation to spend the money on things you might not need, because it will be sitting in stocks that you'll like enough to sell the stocks to get your money back, and there is a natural predilection to not sell once you buy not only is this a terrific way to trick yourself into saving, but also has the added advantage to being the smartest place to put your money from the financial perspective right now. yes, traditional saving vehicles like money market funds, you see the savings rates? check them every week. cds, they give you hardly any return at all. it's a waste when the cash could

be make you a lot more money by owning stocks in a brokerage account and working with your money. get your hands dirty with your money. second lesson for young investors. this is a much more targeted piece of advice. while you're still young, you can afford to take a lot more risks than say an old fogey like myself when you're in your 20s you can get away with riskier strategies like owning speculative stocks where the potential upside could be huge, but so is the potential downside or playing with options and generally being a lot more aggressive with your money why is that? it's not because young people are naturally better speculators, not at all. it's simply because when you make a mistake in your 20s with your money, you were your whole rest of your life to fix it. you can afford to buy more high risk stocks and end up losing your money in your young because you have 40 odd years to earn back your losses you to take the risk older investors, you have to be more cautious. the closer you get to retirement the more conservative, more bonds, high yielding stocks,

fewer speculative stocks but if you're in your 20s, you should invest like a young person, not an old person. forget about bonds, people, imbegging you. there is no reason for someone in their 20 to have bond sfoesh when that could be invested in stocks which will make you a higher return year after year. i want you to take this to heart, especially since i suspect the most recent college grads most likely to invest in the stock market interest most responsible, the most prudent about their money. prudence is great when you're putting together a budget to live with within your means or deciding how much of your paycheck to save every month but for young investors, being too prudent is actually being reckless 20 somethings, live a little, at least in your stock portfolios take semi-risk play around with some speculative names. maybe tiny biotech companies with a lot of potential. even if they blow up on you and go all the way to zero, you have your whole life to make the money back final lesson for young investors, it's never too early

to start investing for retirement use your 401(k). especially roth ira, which is ideal for young investors. here is the bottom line for young people just out of college, investing is a great way to trick yourself into saving money you might otherwise spend that money. beyond that, remember that when you're young, you can afford to take a lot more risks in your portfolio, and it's never too soon to start contributing to your 401(k) or ira especially if that ira is a roth let's go to mike in tennessee. mike, mike, mike >> caller: hey, jim. how are you doing? love your show. >> thank you. >> caller: we watch it all the time >> thank you. >> caller: my question is a few episodes ago you said that you did not like buying a stock if the peg ratio got above 2. >> right. >> i'm wondering whether or not you use peg ratios as a sell signal, and if you do, how high will you let it go before you pull the trigger and sell a stock? >> when it's more than two times the growth rate, i do get nervous. now, there are some stocks that

don't trade on earnings, and you've got to be careful like a cold stocks, there is a bunch of cold stocks i talk about all the time but the typical stock, if it trades lower than two times that rate of growth, i'm fine wit but it is a red flag once it gets higher. a penny saved is a penny earned? investing is a great way to trick yourself into saving money. it's never too soon to contribute to your ira or 401(k) i've got a lot more tonight on this deep dive into the process and cons of index funds. hey, which way do i come out don't miss my take and then income is a big factor in choosing your retirement path. i'm going to put you in the right direction right here right now. plus, i wouldn't wish debt on my worst enemy. i'm going to help protect your family from this worst burden. don't go anywhere. stay with cramer the schedule is grueling, but cramer has burned the midnight oil, and he is ready to run the gauntlet to find you a raging bull market powerful executives, scores of

tough questions, all week cramer sits down with some of the market's most influential c-suite players. join "mad money" on air and online for must-see introduce you can't afford the miss. hi i'm joan lunden.

today's senior living communities have never been better, with amazing amenities like movie theaters, exercise rooms and swimming pools, public cafes, bars and bistros even pet care services. and there's never been an easier way to get great advice.

a place for mom is a free service that pairs you with a local advisor to help you sort through your options and find a perfect place. a place for mom. you know your family we know senior living. together we'll make the right choice. ♪ we live in a world where you have more choices about where to invest your money than ever before a virtual infinity of etfs, mutual funds, you name it, but more choice isn't always better. sometimes having more options just makes it impossible to decide which ones are right and which ones are wrong for you and you've never had more options when it comes to picking exchange-traded funds and mutual funds than you do right now. they're everywhere at this point, there are so many different kinds of etfs that it can make your head spin. as a side note, i hate the way many of the sector-based etfs,

the ones that let you buy and sell an entire group like the banks, the home builders, i hate the way they've been warping the way the whole statement trades that's something you can find about more in "get rich carefully. if you're into these etfs, i urge you to find out carefully about them they can all advertise the companies that run these funds, they want your money. one of the biggest miss zwriex can make as an individual investor is to give it to them with a few significant exceptions unfortunately, this is also one of the most common money mistakes out there in fact, most people in this country simply equate investing with putting their money in mutual funds some 80 million people basically half the households in america have exposure to mutual funds. many of you don't have a choice. a lot of 401(k) plans don't let you pick individual stocks they just give you a menu of mutual funds to choose from, which is one major reason i think that all else being equal, an individual retirement occasional or ira is a better way to invest for retirement for you.

what exactly is so bad about most mutual funds? why am i railing against something that's an institution in this country? simple if you're investing in mutual funds, you're most like, well, to put it delicately, you're getting hosed. now, i don't want to paint with too broad a brush here there are some worthwhile mutual funds, and i'll tell you how to find them in a minute but first, you need to understand the problem with the mutual fund model. my main beef here is that with actively managed mutual funds, mutual funds where there are people deciding which stocks or other securities to buy and sell, we've got some problems. unlike hedge funds, mutual fund managers don't get paid for delivery of performance. they collect fees from their investors, people like you, and the amount of money they make depends entirely on the size of their assets under management, aum, we call it, which means their biggest incentive is not necessarily to do well, something that good performance can help with, but what they're really being paid to do is bring in more money from more

investors, salespeople for the funds. and that's part of the reason in study after study, year after year, it has been shown that the vast majority of actively managed mutual funds underperformed their benchmarks like the s&p 500 in other words, if you invested in an actively managed fund for large capitalization u.s. stock, then its performance will most likely fall short, fall short of the s&p 500. make matters worse, even though actively managed funds consistently underperform the market, they have some of the highest fees in the business how do you like that they don't do as well as the benchmark and they charge more [ booing ] >> so even if your fund does manage to beat benchmarks, the odds are good any performance could be eaten up by big management fees and you end up with an underperforming investment instead of being in a simple investment fund that mirrors the s&p 500 there are some fabulous funds out there and i'll tell you how to find them another time. but the trouble is when a mutual fund delivers such great results for so long, if the manage sorry

decent person, they'll stop accepting new investments, put their foot down. because at a certain point when a fund gets too big, it gets incredibly difficult to beat the market that's the law of large numbers. as a general rule, if you're going the invest in mutual funds, you don't want to be in an actively managed one. the fees are too high and the evidence that the bulk of them underperform is too staggering to keep going that way you know that i think your best strategy is to manage your own portfolio of individual stocks that's what i talk about night after night on "mad money. but for those of you who don't have the time to research individual companies, or if your 401(k) plan just won't let you own them, let me tell you the smart way to invest mutual funds. you want you can write this down a cheap, low-cost index fund that mirrors the market as a whole, one that mimics the s&p 500. index funds have ultra low fees and an index fund you have a vehicle that will let you participate in the strength of the market without having to spend time picking individual

stocks don't overthink it the whole point of putting your money in a fund is to save you the time and effort required to manage your own portfolio of stocks that's why i think it's insane when people start owning multiple mutual funds. by its very nature nature, a fund should be diversified i know there are a lot of sector-based funds and etfs, but there is no reason for home like you to have them that time would really be much better spent picking individual stocks as for etfs in most cases, the vehicles are for trading, not investing. many etfs rebalance every day and that can take a toll in any kind of long-term performance. they're not set up for long-term performance there are some exceptions, the gld which is the play i like for gold but if you're nato a pro and you're not managing a portfolio of stocks, then you probably shouldn't be fooling around with the etfs either. here is the bottom line. at the end of the day, i think a cheap s&p 500 index fund is the least bad way to passively manage your money.

better than the mass bulk of actively managed mutual funds. but an index fund owns everything, the good, the bad, and the ugly a find you do have the time, i think you can beat the performance of an index fund by picking stocks yourself, which is the entire reason i do this show every night if you don't have time, though, then don't overthink it. one cheap s&p index fund is indees the best way to go. mary in maryland mary >> caller: boo-yah, jim. >> uh-huh. >> caller: jim, i started listening to you a while back, then i started buying stocks on your advice. >> thank you. >> caller: now i'm looking at my portfolio here, and jim, jim, mine eyes have seen the glory. so i want to get a little fancier and perhaps buy some china stocks however, i'm curious about adr

and possible exposure to foreign currency exchange rate can you edu-cramer >> sure. the battle of the republic going on overseas. i don't know if i want that. if you want to own individual stocks and the businesses are good, i don't really care where they are i don't even care about the currency if a business is that great, the stock will go higher. but understand if you're buying an adr and it's a european company, for instance, and the euro is being weakened by central bank issues you will not do well even if the stock does well all things being neutral and you don't have a country or a continent trying to debase their currency, i'm fine with it but if they, are you have to stay away. stay in the good old usa which by the way i think is a real smart way to invest. matthew in new york, math you? >> ba-ba-boo-yah, jim? >> ba-ba-boo-yah back at you >> caller: hey, yeah, i'm 22 years old. recent college grad and new to the workforce, and i just started and maxed out my ire rachet realizing time's on my

side, i want to go for an aggressive allocation for growth to take on risk, but i'm unsure of how to do that exactly. i want to get your suggestions for someone starting out to the retirement investing how would you go do that >> i think you want to have the fastest young growth stocks, and those tend to be found in technology sector, but also, of course, in biotech now don't go too crazy i'll one or two stocks of companies that aren't making money, no more than that but those are the most fertile areas. junior growth stocks, companies that are worth a billion dollars or less. a lot of them that are too small to talk about. one of those too these are all fine you can do those because if you lose money, you got the rest of your life to make it back. sorry, not so much mutual love here picking stocks is still the best way to manage your money but if you don't have time, just please, please, please go with the cheap s&p 500 fund over most actively managed funds

now there is much more "mad money" ahead, including how to find the best path to a healthy retirement depending on your income don't forget the kids, please. protecting your children from student loan debt will put them in a better position to plan for their future plus, i'm responding to your tweets without the 140-character restriction that so hems me in stick with cramer! ♪ you shouldn't be rushed into booking a hotel. with expedia's add-on advantage, booking a flight unlocks discounts on select hotels until the day you leave for your trip. add-on advantage. only when you book with expedia. with a $500,000 life insurance policy. how much do you think it cost him? $100 a month? $75? $50?

actually,duncan got his $500,000 for under $28 a month. less than a dollar a day. his secret? selectquote. in just minutes, a selectquote agent will comparison shop nearly a dozen highly-rated life insurance companies, and give you a choice of your five best rates. duncans wife cassie got a $750,000 policy for under $22 a month. give your family the security it needs at a price you can afford. at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95.

fidelity. open an account today.

♪ let me tell you about whether it makes sense for you to use a regular 401(k) or an ira, or for you to go with a roth, which is a term i'm sure you've heard countless times but may not understand i know i've talked endlessly about the benefits of using an individual retirement account and a 401(k) plan to invest for retirement i'm not going to beat a dead horse here, but this is a subject i get a ton of questions about. should i put my money in a roth account or a regular one so why don't we start with a roth ire rachet i think aside from the earned income tax credit, the roth ira may be the i think the sinkle greatest thing our government has done for low-income families since the end of the war on poverty which at best ended in a draw. poverty possibly winning at

points i've told you how regular ira lets you take regular pretax income invest it, totally tax-free until you decide to withdraw that money when you retire a roth ira works differently with a roth you make contribution was after tax income so norksds unlike a regular ira, putting money into a roth won't decrease your tax bill on the other hand, though, once your money in a roth ira, you will never pay taxes on it again. as long as the cash remains in the account, you don't pay capital gains taxes or dividends. when you withdraw it which you can do without penalty after 59 1/2, you don't pay any income tax on your withdrawals. this is fabulous in other words, a roth, you pay taxes now so you don't have to pay income tax 30 or 40 years from now when you retire there is one more positive point about a roth you can withdraw the money you've invested, not your gains, just the amount you contributed and you won't get hit with a 10% penalty which is what happens when you try to withdraw money

from a regular ira before you hit that magic age of 59 1/2 that's very difficult from a regular ira where you don't pay any taxes on your 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 as ordinary income, which is be a very high rate which means when you're trying to decide between a roth ira and 401(k) or a regular ira and 401(k), you're basically deciding whether it makes more sense to pay income tax now with a roth or wait until you're retire and pay income tax. you have to figure out whether you'll be in a higher tax bracket after you retire order a lower one. it has 20 do with the specifics of your situation, your career and how old you are. a quick rule of thumb. for anyone whose marginal tax rate is 25% or less, which is most of america, i think you ought to go with america better to take the hit up-front than to allow your roth ira to

compound tax-free for the rest of your life for those who don't have time, the smartest thing you do is park your retirement money in a low cost index fund that mirrors the s&p 500. as you get older, you can add some bonds really, until you retire, stocks should make up the majority of your retirement investments. i know i said this before. i'm going keep repeating it because it's so necessary. it's contrary to conventional wisdom i want stocks, not bonds until later. how about a roth or 401(k) this works like a roth 401(k)? you never pay taxes on that money again except because it's a 401(k) plan, it has a much higher contribution limit than an ire rachet for example, the government says the 401(k) contribution for 2015 is $18,000. whereas an ira annual contributions are capped at a mere $5,500. and there is one other big difference unlike a roth ira, a roth 401(k) doesn't have an income cap no matter how much money you earn, you can take advantage of one of these as long as your

employer decides to give you the option of course, all this depends on what you think the future is going to look like i'll admit if you think taxes are headed higher over the course of your lifetime, then a roth 401(k) where you pay taxes now and pay nothing in the future, that is so the way to go, even if you're making a lot of money in the present. but i think that belief is mistaken for those of you young people who only became politically conscious under the obama administration, it may seem there is no way to stop the tide of higher tax, but history says different. and i believe we can close the deficit without substantially raising taxes. it's about as political i'm going get on this show at the end of the day, though, this is both beyond our control and therefore beyond our ability to predict the bottom line, the lower your present income, the lower your taxes. a roth 401(k) or roth ira lets you pay those low rates now and never worry about taxes again for your retirement money. so the less you make, the more likely it is that a roth is for you. it's that simple and when you're saving for retirement, don't worry about what could go catastrophically

wrong 30 or 40 years in the future just worry about making the best choices right now. "mad money" is back after the break. >> that's the sound of shorts getting crushed. >> the best cheesesteaks in philly. >> like the first one. the second is wrong because it's gino's, but that's all right there is no accounting for taste. go ahead >> i want to be in any garden. billions of dollars to moscow for natural grass -- shoot now international chain, as much as i like my cappuccino with skim milk. my old friend jack daniels -- i'm sorry, jack henry, jack henry and associates tony in massachusetts. tony [ crickets ] tony hold it. you know what i'm thinking about taking sheri in maryland sheri? [ cricketing ]

sheri? >> i bet you can't eat just one. oops, no why did i want a crest 3d white smile? dinner date...meeting his parents dinner date. so i used crest. crest 3d white removes...

...95% of surface stains in just 3 days... ...for a whiter smile... that will win them over. crest. healthy, beautiful smiles for life.

♪ lately i've been reading a lot of stories about the crushing burden of student loan debt right now tens of millions of americans owe more than a trillion dollars in student debt that's an incredibly high figure and it's not just that it really stinks to graduate from college or graduate school and immediately realize that it might take decades to pay back those loans. in study after study, kids who graduate with no debt end up being worth a lot more money than their classmates who have outstanding student loans. now i'm a big believer in social mobility, which is why i'm constantly coming out here and teaching you how to use the statement because it's the greatest engine of wealth ever created, and i want to help you use to it make some serious money. so for any of you who are parents or thinking of becoming parents, let me just tellyou right now that there are very few things you can do for your

children that are better than paying for as much as their college education as you can afford with eknow that college graduates have a much easier time getting jobs, especially in our current environment where unemployment is still way too high and we also know that they ultimately make more money of course, if i were to make a kind of abe maslow style hierarchy of financial needs, you can google that, i will tell you it's more important for you to save and invest for retirement, which is why i talked about it earlier in the show for those of you who are parents, how could your own retirement possibly be more important than making sure your kids have the best future possible simple because believe me, if you reach retirement age and you don't have enough money 20 pay for your kids, who do you think is going to support you your kids. you don't want to be a burden on them so take care of yourselves first. however, after you have saved enough for retirement, then it's time to start thinking about college. even if your kid is only a toddler. heck, even if your kid is still a gleam in your eye so to speak, and the best way to save for college, hands down, is through

what's known as a 529 plan now these plans do vary by state, but the general rules are true all across the country. there are two kinds of 529 plans. first, some states let you use a 529 as way to hedge against tuition inflation by buying tuition credits at today's prices that can be used in the future that's not what i'm talking about, though. i want you to use 529 savings plan these are run by the states and the rules differ from state to state, but generally speaking, a 529 doesn't let you manage your own portfolio. you to pick between a mix of different mutual funds, just like with many 401(k) plans. this is really not my favorite way to do things i prefer you to have control of your assets in the selection of which stocks to buy or which actual instruments, okay, but 529s have so much going for them, i'm going swallow this one flaw remember, when you can only choose between funds, go for low cost fund that mirrors the market even the s&p 500 or the something like the vanguard total market fund, which is you'll see in many of these 529

plans. it literally owns all the stocks traded on the stock exchange and the nasdaq its performance will be very similar to the s&p which contains the 500 largest companies. what are the rules let's say you just had your first child. congratulations. [ applause ] if you can afford it start a 529 with your kid as the beneficiary right then and right there maybe wait a couple of days after you just had a maybe anyone who knows i trade big blocks of alcoa throughout the birthing not one of my finest moments contributions are not tax deductible a lot of people think they are they are not so you're paying for this out of after tax income the good part, once your money is in the 529, you don't pay any taxes on your gains. so you let them compound year after year it's a lot like roth except for college, rather than retirement. because of federal gift tax laws, you can only contribute $14,000 a year if you're single, $28,000 if you're married, and

you file your taxes jointly. still, that's a heck of a lot money when you think about it. by the way, your children's grandparents can contribute to the same plan too. and if you don't have the money, a grandparent can start a 529 with your kid as the beneficiary, although for financial aid reasons it's better to have a parent do it. now let's say for some reason you or your parents are sitting on a really huge sum of money. one of the cool things about a 529 plan is you can front load five years of contributions would you tell us incurring the federal gift tax as long as you don't write any checks to the plan's beneficiary over the next five years a single parent or grandparent could potentially invest $70,000 into a 529 right from the start. or if you're married, you can contribute $140,000. for the next five years after that, you won't be able to contribute anything without being hit by the gift tax, which is something you don't want. but honestly, once you dropped that kind of money into a 529, you won't need to make too many more contributions the key here, though, you want to get that money into your kid's 529 as early as possible

that's because the greatest of these plans is all about the power of compounding remember you don't pay taxes within the 529 so if you can contrive to contribute $70,000 right off the bat and invest in a low cost index fund that mirrors the market, the rule of thumb is over time you'll make an average of roughly 8% a year i know the stock market is actually a lot more volatile than that, but just as a thought experiment, if stocks perform like they have historically, you can double your investment in nine years so if you start saving right when your kid is born, by the time he or she is 18, the value of your plan will have doubled and doubled again. if you start with $70,000, 56afe 18 years, barring some kind of catastrophe, enough for a fancy college education and chunk of law school to boot i know a lot of people can't load a 529, especially with the expenses raising a kid but it's worth keeping in mind that front loading is the best strategy for grandparents, this may sound

grim, but your 529 contributions won't account towards your estate tax last thing about saving for college and grad school. any money in a 529 plan you don't use you can transfer to another relative we're talking siblings, parents, even cousins you can withdraw the money from the 529 payment, but you have to pay tax on any of your gains along with a 10% penalty so here is the bottom line no paying for your kid's college education isn't as important financially as providing for yourself in retirement but if you have children, after you've made enough retirement contributions for the year, put money in a 529 college plan should be the next on your agenda it's the best way to protect your kids from the crushing burden of student loan debt. "mad money" is back after the break. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo!

you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. you mighyour joints...ng for your heart... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.

holy cow, we got to get to some of your tweets that you've been sending me @jimcramer mad tweets, including ones that are very nice and smart. here we go kenneth egan tweets i love you, jim. i love you, kenneth egan 23. how is that? it's requitted in my book. some people call me jack tatum no i'm a sweet guy. jw green underscore wants to know the following why care about short-term hit if you have long-term investment strategy amen how many times have i said i like xyz stock it goes down that day, and people want to burn me in

effigy, or they want to burn me in scalding oil. it doesn't have to be that day think a little longer term, particularly a tax break here we have @diago. who wants to know aside from your own, what other books should home investors have under their belts to help them trade/manage better? one up on wall street and beat the street peter lynch. they're available on amazon. one up on wall street and beat the street i use those to learn a great deal and he told me a lot at goldman sachs and moved on but david dark's books are very good up next, @dr. hoy 480 tweets, do you ever sleep or did one of your biotechs provide you with clones to assist winkie face like an ejoji thing no i don't sleep. okay now we've answered that question now a heads-up

btw, which i think stands for by the way, i'm now following the know what you own motto, or kwyo cleaned my portfolio this week yo, lo, you only live once, soy totally agree with you here is @crabo 44 wants me to know i'm in the market because of you, sir. just give all the hate areas big boo-yah. keep teaching us what they want to grow. jim. okay, let me give you little heads up i love the haters. i wouldn't be doing this if it weren't for them. >> would have gotten out years ago. i am a spiteful driven guy to the haters, and everyone in my personal life knows that so haters, you're why i'm in this game. congratulations! and stick with cramer!

before you can achieve a higher standard of craftsmanship you need a higher standard of craftsman. see for yourself at the lexus golden opportunity sales event. experience amazing at your lexus dealer. at crowne plaza, we know business travel isn't just business. there's this. a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly. yes or no?gin. do you want the same tools and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts? $1.50 futures contracts? what about a dedicated service team of trading specialists?

did you say yes? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online. i like to say there is always a bull market somewhere i promise to try to find it just for you, right here on "mad money. i'm jim cramer, and i'll see you next time.

male announcer: the economy is going through tough times. many hard-working americans blame wealthy ceos, out of touch with what's going on in their own companies. but some bosses are willing to take extreme action to make their businesses better. each week, we follow the boss of a major corporation as they go undercover into their own company. this week, the ceo of 7-eleven. this convenience store empire spans five continents. they've turned the local corner market into a global corporate icon. the boss will trade in his executive office and personal putting greens