>> timothy? >> happy thanksgiving, everyone. happy thanksgiving, mel. energy transfer. happy for that one, too. yield, portfolio of assets. >> nice vest. >> thank you for watching "fast money." happy thanksgiving, everybody, out there, enjoy your loved ones, be safe. stay where be safe. stay where you are. "mad 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. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people make friends. i'm just trying to help you make some money. my job is not just to entertain, but to teach you. so call me at 1-800-743-cnbc newsom. or tweet me @jimcramer. there is a gaping hole in the american education system, although i hesitate to call it a

system. when you go to high school, they teach you chemistry. they teach you geometry. history class, english classes, you can graduate from college speaking three languages with a deep understanding of quantum physics or ancient philosophy. >> hallelujah! >> but you know the one thing they almost never teach you in middle school or high school, to say nothing of college? financial literacy. and i'm not talking about economics here. you can be an econ major and still learn nothing about financial planning or retirement readiness, let alone investing. money is just not talked about. frankly, it's become the third rail of american education. you're a thousand times more likely to read marxist das capital than read anything about planning a budget or picking stocks. that's why i'm on a constant mission to teach you how to manage your money. which is what we do every day in the cnbc investing club with a charitable trust of constant examples. when it comes to managing your

money, nothing is more important than retirement. sooner or later your going to stop working. hopefully sooner than later, unless you really love your job. even if you don't own individual stocks still have some money in a 401(k) plan. now decades ago, corporate pensions started going the way of the do do, and now the 401(k) is the main way americans save for retirement. they're offered by your employer, and they're among the greatest tax the evered vehicles out there, along with the ira. the inflation reduction act for that matter. i mean the individual retirement account. for those of you who are about to change the channel because the whole idea of saving for retirement puts you to sleep, hear me out, darn it! you need to know this stuff. your future self will thank you for getting your retirement funds in order. and while you may think you know everything you need know about these tax favored accounts, the truth is there is a lot the so-called experts don't tell you or don't want you to know. for example, the wisdom says you

absolutely have to invest in your 401(k). you would have to be a fool not to. many advise you to max out your 401(k) contributions every year if you can afford. to right now the maximum contribution is over 20 grand with room for an additional 7 grand if you're over 50. but it tends to raise gradually over time. usually a little faster than inflation. in 2004 it was 13,000. by 202222,500. either way, a serious chunk of change, eve coming from your pretax income. however, sometimes i think it would be the wrong approach. i'm not going to sing the praises of the noble 401(k) plan or tell you it's the key to your financial salvation, because 401(k) plans can be a real mixed bag. sure, they have a couple of really great features, but they also have a lot of bad ones. and those problematic features will eat away at your returns. [ booing ] sometimes through fees that are almost totally hidden from you. i do not like that. so let me lay out the good, the bad and the ugly of 401(k) plans, then i'll tell you whether it makes sense for you

to contribute more money to your own 401(k). maybe there is a better way for you to invest for retirement. first, the good. the best thing about the 401(k) is that it's tax deferred. that's right. it's a tax deferred investment vehicle. in plain english, that means you pay no taxes on what you put in it, and you never pay a penny of capital gains taxes on the profits you make within your 401(k), which allows your gains to compound year after year, decade after decade, totally tax-free, until you decide to start making withdrawals. i'm a huge believer in the power of come pounding. some people call it the eighth wonder of the world. suppose you're 30 years old and start investing. if you choose your investments wisely, you should be able to generate an average return of 7% a year, at least historically. and that's being conservative. over the course of the next 30 years, you'll be contributing $150,000, that's pretax income to your 401(k) plan. because that money is able to compound year after year without any capital gains taxes, by the time you're 60, those 150$150,0

of contributions should be worth over five $511,000. >> hallelujah! >> without the tax paper status, that would be roughly $110,000 lower. what a huge break. you only pay taxes on your 401(k) money once, when you decide to withdraw it. at that point, your withdrawals are taxed to your income. and since you're likely to be retired by then, most of you will end up paying a lower rate than what you get hit with if you got taxed on that money while you were still in the workforce. that's huge reason to like the 401(k). the other one, many employers match or partially match your 401(k) contributions. for every dollar you invest in your 401(k) plan, your employer might throw in 50 cents up to a point. that's free money for you. it's also untaxed. if your employer even partially matches your contributions, you should absolutely take advantage by putting money in your 401(k). i'm note saying take the money and run, but definitely take the money. of course, your 401(k) doesn't have any kind of employer match,

then it's a much less compelling option, because as i said before, 401(k) plans can have a lot of problems. without the match, sometimes you're better saving for retirement with an ira. the same exact tax favored status as a 401(k). now you can only contribute 6500 a year to your ira or 750023 you're over 50. they rolled out in 1975. while they raised the limit since then, the increase has not kept pace with inflation. if it had, it would be more than $8500. i want a person to go to $10,000, and i'm going make my mission to fight for you to get that. still, there are ways to better yourself. when you change jobs, you can roll over your money from your 401(k) into an ira. that's exactly what you should do every time you switch employers or find yourself out of work. what makes the ira a better option? first, the fees. when you invest within a mutual fund within a 401(k) you have to pay the mutual fund's fees. but your 401(k) administrator, the company your company hires

to run the plans will also charge you its own fees. on average, they take more than 2%. i find that extortionnate. most management funds will charge less than 2%, and they're actively managing your money. if you ever looked at your statement and wondered why the heck your 401(k) holdings aren't increasing in value like they should be? believe me, these fees are probably the reason. second, 401(k) plans vary widely from company to company. some give you a terrific range of choices and even let you pick individual stocks. but others are more limited, only give you a choice of a couple of dozen different mutual funds. so for those of you who can't pick your own stocks in your 401(k), one rule, before you contribute money to your 401(k) plan you have to make sure it gives you the option to put your cash in something that's actually worth investing. i spend so much time teaching this, in how to pick stocks in the seib investing club, because i believe it works. you should be skeptical of a 401(k) that doesn't give you the

option to pick your own stocks. if you can't, pick a low index fund. however, if your 401(k) doesn't even offer that, or it charges ex-sosh important fees go with a self-directed ira like fidelity so you have control over your money. the bottom line, if the company you work for matches your 401(k) contributions up to a certain point, take them for all their worth. but other than that, the ira is the superior way to go, especially if your 401(k) plan doesn't give you any good investment options. let's take calls. let's go to ian in illinois. ian? >> caller: jimmy chill, how are you doing, my friend? >> very strong. how with you, ian? >> caller: oh, glad to hear it. i'm doing well. >> thank you. good. >> caller: my goal is to get out of my nine to five as soon as possible and retire, and i'm wondering how younger investors should think about the balance between growth stocks versus dividend stocks. >> all right. this is a great question. i believe you should not bet against yourself.

a younger person should be almost entirely in stocks. now i have been on the extreme on this. but over the course of the last 40 years that i've been teaching, that's been the right way to go. so let's forget about the bonds until you get to at least the mid-50s. and then start adding them slowly. you're a stock guy. you don't want to bet against your life. let's go to michelle in new hampshire. michelle? >> caller: hey, jim. i could use your advice. >> of course. >> caller: my portfolio is doing fine before inflation, before the interest rate hike, and now it's almost all red. and i just need some tips on how to manage the investments in the done markets. >> okay. what we want to do is we want to say that we're going to ride through down markets. and what we do is we put cash away regardless. we are not going to look at the day to day, month to month, for it comes to retirement, even year to year. yes, we want to have the right stocks, but we're not going to stop contributing, because historically, the rain does go away. and if you only invest when it's

good, you're going to end up with not good prices. carl in washington, carl? >> caller: hey, jim. thanks for having me on. >> of course. >> caller: my question is for the novice investor, what tools and methods would you recommend? obviously besides the obvious p/e ratio, how do i evaluate companies for a good investment? >> sure. all right. what we do with the investing club, and i know you can say i'm talking my book, but it's really about exactly that. we show you what the many different ways are to evaluate stocks, and also to pick the ones that are most suitable for you. we can't do that. that's up to you. but we value and price earnings, we evaluate them on book, future earnings, and we also kind of overall value them against other stocks in their same peer group and in the market in general. okay, if the company you work for matches your 401(k) contributions up to a certain point, take them for all they're worth. but other than that, the ira is

the superior way to go. especially if your 401(k) plan doesn't give you any good investment options. on "mad" tonight, school's in session. tonight's lesson, financial literacy. i'm taking you through all my top tips to help you develop a strong financial foundation. you're not going to miss this one, so stay with cramer. . don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madmentions. send jim an email at madmoney@cnbc.com. or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

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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 would the 18th premier of jimmy cramer look like? for those of you didn't get that reference, google. this show is all about money. let's stick to the more mainstream elements of the cramerica regime. for starters, it drives me nuts we don't teach our young people how to handle their money. would it be so crazy if you had to take a class on personal finance? i think it should be mandatory. like the classes where they show you how to dissect a frog. come on. take a moment to speak some words that we all believe but rarely hear in polite conversation. money is important. it's really important. caring about the state of your finances does not make you seem like a superbourgeois. you get married. you just inflicted your horrible credit on your spouse.

neither you or your partner will be able to qualify for a car or a loan or perhaps get a darn credit card. these things matter in life. they say money can't by happiness. i found that piece of cliche to be dubious at best. hey, listen, being broke is a major buzz kill. as i know for the firsthand i spent living in my ford fairmont for six months in california. i wish i had this stuff to guide me, although i still put money away from my retirement when i lived any my car. what the heck should young people do with their money? first, foremost, and always, you need to invest. that's the only way you're going to be able to achieve financial freedom. and by freedom, i mean living a life where you're not totally dependent on the next paycheck. teaching you how to do this is one of the reasons i put so much time in creating the cnbc investing club. i see younger members taking an active in making their own many. to many, people start saving and

investing too late and making their lives more difficult than they need to be as they get older. also, many young people feel they have all the time in the world, and many more start investing before they're really truly ready, when they are in fact better things for them to do with their money. and that's why i have three lessons and a caveat for all those recently out of college. you, listen. let's start with the caveat. before you can start investing, you need to pay off the darn credit card. this is especially true for younger people, because banks 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, it's going to eat your returns. and long-term, the interest in the credit cards will probably be greater than the profits you could make from investing, at least on a percentage basis. so just pay your darn credit card balance in few. but in full each month. automate with your credit card company if you'll be worried that you'll be tempted not. to that's what i did. see, when i got out of law school, i had max down on half a dozen credit cards.

i took a job at goldman sachs, a firm everyone wanted the work at, and made good money out of the chute, but not enough to pay all that interest and afford the biggest boom box in the world, of course my first priority. so i paid down the debt present toe and got my boom box three months later. i'll never forget how proud i was as i worked the way from 46th street to my studio, 42nd. even if you're hitting it out of the park with your paycheck, because i was, they are the house. they win. you lose. now let's get to my few lessons for young investors. first, this advice is for everyone out there, regardless of age or education level, but it especially applies to fresh college grads. you need to save money. i recognize that not everyone has an inherent predisposition to save, and nobody likes being nagged. the stock market a great way to trick yourself into saving a part of your paycheck you might spend. investing in stocks can be fun if you take my -- let's say if

you join the club, you'll get this. leaving money in a savings account or certificate of deposit feels totally joyless for many people, even when they're giving you decent interest. plus, if you invest your savings in the market, it will be a lot easier to resist the temptation on spending the money on things you don't need because you'll have to sell your favorite stocks to get your money back. it's a way to keep your money in and not out. second for young investors, this is a much nor targeted piece of advice. while you're still young, you can afford to take a lot more risks. when you're in your 20s, you can get a away with more reckless strategies, where the upside is huge but so is the potential downside. or you can play with option. i'm find with that. what stopping you? it's simply because when you a mistake with your money in your 20s, you have the whole rest of your life to fix it. losing money is less of a problem when you've got 40 odd

years of workforce to earn it back than say me. older investors do need to be more cautious. the closer you get to retirement, the more conservative your investment strategy must be. yeah, you got to have some bonds, more higher yielding stocks, utilities. fewer speculative stocks trading in the single digits. but if you're in your 20s, you should invest like a young person. i get too many calls a 4% bond because i'm 22. are you kidding me? you shouldn't own any bonds. young people, take this to heart. the college grads most likely to invest a the ones most prudent about their money. and prunes is great when you're putting together a budget to live within your means or deciding how much of your paycheck to save each month. but for young investors, being too prudent is actually reckless. 20-somethings, live a little. at least in your stock portfolios. take some risks, play around with some speculative companies. maybe buy some tiny biotech companies with a lot of potential. even if they blow up on you and

go to zero, you've got the whole rest of your life to earn that money back. don't forget, stocks do stop at zero. one of the greatest things about them. oh, and that endless canard that you can't save until you pay off your student loans? please. have you looked a how low that is? i chose to invest my money when i got out of law school after paying my credit card debt, i still invested, knowing i could beat the student loan bogey. didn't pay that off in a hurry. i paid some of it off, but please, i'd rather have you invest now and pay later. democrats are going to keep pushing for student loan forgiveness, meaning if you drag things out, you might end up paying less. final for young investors, it's never too early to start investing for retirement. use your 401(k) if your employer will match part of your contributions. as i told you earlier. and especially put some money into a roth ira, which is ideal for younger investors. that i'm going to explain to you later. here is the bottom line. for young people just out of college, investing is a great way the trick yourself into

saving money. you might otherwise spend. beyond that, remember, when you're young, you can afford to take a lot more risks with your portfolio, and it's never too soon to start contributing to your 401(k) or ira, especially an ira that's a roth. "mad money" is back after the break. only sleep number smart beds let you each choose your individual firmness and comfort. your sleep number setting. and actively cools and warms up to 13 degrees on either side. and now, save 50% on the sleep number limited edition smart bed,

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we live in a world where you have more choices about where to invest your money than ever before, a virtual infinity of etf, mutual funds, you name it. but more choice isn't always better. sometimes having more options makes it impossible to decide which ones are right and which ones are wrong. and you've never had more oper options when it comes to picking exchange traded mutual funds and options. they're everywhere. at this point there are so many

different kinds of etfs that it can make your head spin. the companies that run these funds, they want your money. and one of the biggest mistakes you can do 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 into mutual funds. some 80 million people are 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 a major reason why i generally prefer iras. i believe in individual stock picking, which is why i spend so much time teaching you how to do it, both on this show and of course the cnbc investing club. we walk you through the whole process in extreme detail every day. what exactly is so bad about most mutual funds? while am i railing against them? simple. if you're investing in mutual funds, you're most likely getting a bad deal. i don't want to paint with too broad a brush. there are some worthwhile mutual

funds. i'll tell you how to find them in a minute. but first, you need to understand the problem with the mutual fund business model that no one talks about. my main beef here is with actively managed mutual funds. mutual funds where there are people deciding which securities to buy or sell. unlike hedge funds, mutual fund managers don't get paid for delivering performance. they collect fees from their investor, people like you. a and the amount of money they make depends entirely on the size of their assets under management. which means their biggest incentive is not necessarily to deliver good performance, no. what they're really being good at and what they get paid for is to fund raise. and that's part of the reason why in study after study after study, year after year after year it's been shown that the vast majority of actively managed mutual fund managers underperform their benchmarks. in other words, if you invested in actively managed fund for large cap u.s. stocks, then its performance would probably fall short of the s&p 500. to make matters worse, despite consistently underperforming the market, actively managed mutual

funds still have some of the highest fees in the business. so even if your fund does manage to beat its benchmark, the odds are good at any outperformance will be eat under up by big management and you'll end up with an investment fund that mirrors the s&p 500. that's some industry. yeah, it's a fun business, much more sink or swim. at my fund we compound versus 8% for the s&p over the same period. i fret every second about the fees. even chose not to take them during a year where i was only up a couple percent versus the strong performance for the averages. yes, i was that ashame. does a mutual fund manager do that for you? you can read my tell too much autobiography. here is the part where i say not not all managed mutual funds are bad. some of them have fabulous managers who consistently deliver terrific results. but even here there is a major problem. when a mutual fund delivers great results for a long period of time, if the manager is a

decent person, they'll stop accepting new investments. once they get too big, it's impossible to generate the gains. if the managers not a great person, they'll keep taking more and more money until the performance starts to suffer. the father of the index fund asked asked me how i could beat the averages so consistently in my hedge fund, i said i limited my investors. i made it like a club. that meant i was never overwhelmed with new money, something that often leads to bad investment problems. bogle praised me and said if everyone did that, they'd have much better records too. maybe that was the real secret to my hedge fund's multi-year outperformance. by the way, if you want to know the other secrets of that success, again, that's what we teach in the investing club. back to actively managed mutual funds. for the most part, they're not wto it. the fees are too high. and the evidence that the bulk of them underperform is staggering. regular viewers know the best tragedy is to pair a low fee index fund with a portfolio of individual stocks that you pick

yourself. that's what i talk about night after night and preach endlessly to club members. but for those of you who don't have the time to research individual companies, or if your 401(k) plans won't let you do it, let me tell you the smart way to invest in mutual funds. ideally you want a cheap low cost index fund that mirrors the market as a whole, one that mimics the 500. ultra low fees and index fund, you will be able to participate in the strength of the market without having to spend the time picking individual stocks. remember, the whole point of putting your money in a mutual fund is to save you the time and effort required to manage your own portfolio stocks. that's why i think it's insane when people start owning multiple mutual funds. by its very nature, a fund should be diversified. i know there are lots of sector based mutual funds out there, but i know there is no reason for home gamers like you to have any exposure to those. if you're going to take the time to try to play individual sectors, that time would be much better spent picking individual

stocks. as for etfs, these vehicles are for trading, not investing. i'm not in favor. many etfs rebalance every day, and that can take a real toll on any time of long-term performance. you can lose a lot of money, even if you're right. of course, there are plenty of exceptions here too, like the gld, which i like that is a simple way to play gold, and i like the mimic the s&p 500. if you're not a pro and you're not managing a portfolio of stocks, you should be very careful about fooling around with most of this stuff. 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 vast bulk of actively managed mutual funds, but an index fund owns everything, the good, the bad and the ugly. and if you do have the time to do your homework, i believe you can beat the performance of an index fund by picking stocks yourself, maybe leaving the bad and the ugly out of it. if don't have the time, stick with the index fund, and/or join

the investing club. we'll help you do the homework. let's go to eric in tennessee, eric? >> caller: hey, jim, this is eric from park city. my question is in regard to fundamental valuation of a stock. if you could only -- if you only had access to four indicators to examine, what measurements would you look at? >> i would look at sales, earnlings, margin, and i would look at the total justable market. all those things if you told me it was xyz corp, i could give you a sense of what i would be thinking provided i had some historical data ahead of me. kate in georgia, kate? >> caller: hi, jim. if you have a diversified portfolio, is it okay to be heavy in a certain sector if it's favored in the investing climate? >> i would tell you that you can do it, but not by much. because you don't know what's going to happen. there are times when oil is -- i'm overweight in oil and i say to myself, i really shouldn't,

and oil spikes. and the first thing i do is try to get it right back down to where it was. i'm uncomfortable being overweighted in any industry. perot's in california. >> caller: thank you for your show. it's been a great learning experience for me. >> thank you. >> caller: navigating the markets with you. >> thank you so much. >> caller: you're awesome. i really appreciate it. i wanted to ask you a question here. i know joe terranova is a huge friend of yours, and i'm huge on fundamental and technical analysis. >> good, good. >> caller: and i use them both to make my investment decisions. so my question is, even though a company is showing strong fundamentals, is it a good idea to incorporate technical analysis as well, for example use -- >> everything should be included.

i'll tell you why. whatever makes decisions, and a lot of big fund managers use those decision, and they use technicals, means that you should include them into your thinking too, even if you think they shouldn't. all available information that is good should go into your decision making, including technical analysis. all right. an index fund owns everything, the good, the bad and the ugly. so if you do have the time to do your own homework, i believe you can beat the performance of an index by picking stocks yourself. much more "mad money" ahead. i'm giving you the lowdown on financial security from college all the way to retirement. and later, my colleague jeff marks will join me to answer some of your more burning questions. so stay with cramer.

♪ no matter how good you are at picking stocks, if you don't know the byzantine rules about what kind of accounts to keep your money in, or how to manage your personal finances, or how do to get the most bang for your buck when it comes to major lifetime expenses, then you can be missing out on terrific gains or losing a fortune to hidden fees. bwi thurgood marshall. >> i admit this isn't as fun as picking stocks, but it can help you build up wealth. the simple truth is i don't want you leaving the money on the table just because nobody could be bothered to explain it to you, say, the finer points of retirement investing. with that in mind, let me explain whether it makes sense for you to use a regular 401(k) or an ira, or for you to go with a roth ira, which is a term i'm sure you've heard countless times. i know you've heard me talk about the benefits of the ira and the 401(k) plan to invest for retirement.

i don't want to beat a dead horse here. ♪ but this is a subject i get a ton of questions about every day. should i put my money in a roth ira or a regular one? let's start with the roth ira, which anyone can contribute to as long as they make less than $153,000 a year. aside from the earned tax credit and all the covid stimulus, 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, which at best ended in a draw with poverty possibly winning in points. if i were the king of the forest, i would make the limits for investing the same for 401(k). that's going to be a theme of mine for the rest of the year. it's ridiculous that they aren't. but the industry doesn't seem to care because they make a lot more money off of 401(k) plans. there is no other reason i can find for why you can contribute roughly three times as much money to an ira -- i'm sorry, to an 401(k) as an ira. three times a 401(k) as ira. we need people -- how about this. you put $10,000 in an ira per

year, much more than the current cap, and even a little higher than what the contribution limit would have been, if you just started in 1975 and adjusted the initial guidelines for inflation. yes, i'm championing $10,000 or bust. >> hallelujah! >> i'm your friend on this. our regular ira lets you take pretax income, invest it, and then your gains can compound year after year, decade after decade, totally tax-free, until you decide to start withdrawing money once you retire. but a roth ira, that works differently. with a roth, you make contributions using after tax income. so in other words, unlike the regular ira, putting money into a roth won't decrease your tax bill, at least not up front. on the other hand, once your money is in a roth ira, you'll never pay taxes on it again. as long as your cash remains in the account, you don't pay capital gains tax. you don't pay dividend tax. and when you withdraw it, which

you can do after age 59 1/2, you don't pay any income tax on your withdrawals, none. basically a roth you pay income tax now so you don't have to pay income tax 30 or 40 years from now when you retire. one more positive about a roth. after five years you can withdraw the money you invested, not your gains, just the amount you contribute and you won't get hit with a 7% penalty, which is what happens when you troy the withdraw money from a regular ira before you hit that magic age of 59 1/2. it's very, very different 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, and it's taxed at ordinary income, which means that when you're trying to decide between a roth ira or a 401(k) and a regular ira or 401(k), 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've retired with a regular account. in short, you're trying to figure out whether you'll be in a higher tax bracket after you

retired or a lower one. obviously this is really a complicated question. it has a lot to do with the specifics of your situation, your career, and simply how old you are. by my rule of thumb, anyone whose marginal tax rate is 22% or less, which is most of america, i think you go with a roth. better to take the hit up-front than allow your roth ira to compound tax-free for the rest of your life. remember, for those of you that don't have the time to pick your own diversified portfolio of five to ten stocks, the smartest thing to do is park your retirement money in a low-cost income fund that mirrors the s&p 500. as you get older, you can add some bonds, but really, until you actually retire, stocks should make up the lion's share of your retirement investments. i know i've said this before, but i'll keep repeating it until they kick me off the air because it's so necessary. it's so contrary to the conventional wisdom. how about a roth 401(k)? this one works just like a roth ira, meaning you make contributions with after-tax income, and then you never pay taxes on that money again,

except because it's a 401(k) plan, it has yes, again, a much higher contribution limit than an ira. there is one other big difference. unlike a roth ira, 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 these decisions depend on what you think the future will look like. if you believe taxes are ultimately headed 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. even if you're making a lot of money in the present. 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 then the lower your tax rate. a roth 401(k) or a roth ira lets you pay those low rates now and never worry about taxes again for your retirement money. so the less money you make, the more likely that a roth is for

you. it's that simple. and when you're saving for retirement, don't worry 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. be prepared for any market with my guidance in the club. >> the way that he breaks things down is super helpful. >> join my exclusive club to find your next investment opportunity. >> join now with a black friday offer for a limited time. go to madmoney.cnbc.com/cramerblack friday.

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lately we've heard a lot about the crushing burden of student loans what the government should or shouldn't do to make some of that burden go away. we lived through a years' long moratorium on repayments during the pandemic, which helped supercharge the economy.

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 loan balances, although as i said before, student debt is a heck of a lot cheaper than credit card debt. really, don't sweat the program too much. the problem is there is simply so much darn much of it. and you can't get rid of it in bankruptcy. so for any of you who are parents or are thinking of becoming parents, let me just tell you right now that there are very few things 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, if i were to make a kind of a maslow style hierarchy of financial needs, i'd 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. why prioritize yourself over your children? simple. if you don't have the retirement money, who do you think is going to support you, the kids? if you ever want grandchildren, you'll need a retirement fund. otherwise, your children will spend ages taking care of you instead. however, after you saved enough

for retirement, then it's time to start thinking about college, even if your kid's only a toddler. and the best way to save for college hands-down is through what's known as a 529 plan. now these plans vary by state, but the general rules apply across the country. there is two kinds of 529 plans. first, some states let you use a 529 as a way to hedge against tuition inflation. you can buy tuition college credits at today's prices and then use them in the future. that's note what i'm talking about, though, especially not in a world where major national politicians are talking about making tuition free at public universities. no. i want you the use a 529 savers plan. these are run by states. but generally speaking, a 529 doesn't let you manage your own portfolio. you have to pick between a mix of different mutual funds, just like with many 401(k) plans. this is not my favorite way the do things. i prefer you to have control over your assets. but 529s have so much going for them that i'm willing to swallow this one flaw.

remember, when you can only choose between funds go, for a low-cost fund that mirrors the market. like an s&p 500 index fund. so what are the rules for a 529 plan? let's say you just had your first child. congratulations! if you can afford it, you should start a 529 with your kids as the beneficiary right then and there. that's what i did. maybe wait a couple of days. after all, you just had a baby, although i didn't. traded big blocks throughout the birthing. a mittedly not my finest hour, although the trades worked out financially, if not for me. didn't really help us at home. here is how a 529 works. the contributions are not tax deductible. so you're 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 so much. it's a lot like a roth ira, except for college rather retirement. because of federal gift tax laws, you can contribute $17,000

a year if you're single, or 34,000 if you're married, and you file your taxes jointly that is a heck of a lot of money. oh, and by the way, your kids' grandparents can contribute to the same 529 plan too. if you don't have the money, a grandparent can also start a 529 with your kid as the beneficiary, although for financial reasons it's better to have a parent do it. now let's say for some reason you or your parents are sitting on about a really huge sum of money. one of the cool things about a 529 plan is that you can front-load five years worth of contributions without incurring a federal gift tax, as long as you don't write any plans to the plan's beneficiary over the next five years, which is not hard, because who writes checks to a 7-year-old? a single parent or grandparent could potentially invest $85,000 into a 529 plan right from the start, or if you're married and filing jointly, you can contribute $170,000. >> hallelujah! >> the next five years after, that you won't be able to

contribute anything without getting hit by the gift tax, which is something you don't want. but honestly, once you've dropped that kind of money into a 529, you won't need to make that many contributions. the key is you want the 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. given that you don't pay taxes within the 529, if you can sum up, contrive to contribute $85,000 right after the bat, and you invest that money 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% per year. 8%. by the time your newborn is 18, you should have tripled your money, 85 grand turns into 340 grand. that's enough for an expensive college education and a decent chunk of law school to boot. i know most people can't front load a 529 plan like this, but if you can front load, it's the best strategy. and for grandparents, this may sound kind of grim, but your 529

contributions won't count towards your estate tax. to borrow a line from the life of brian, always look on the bright side of death. last thing about saving for college and grad school, any money in a 529 plan that you don't use, you can transfer to another relative. we're talking siblings, parent, even first cousins. by the way, if you save all this money and your ungrateful kid decides not to go to college, you can just withdraw the money from the plan. you can take it. although you'll have to pay taxes on any of your gains along with the 10% penalty. [ booing ] here is the bottom line. paying for your kid's college education isn't as important as providing for yourself in retirement, at least not financially. but if you have children that after you've 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. boo-yah, jim. your integrity makes you the

boo-yah saint of wall street. >> boo-yah, jimmy chill! >> boo-yah, jimmy chill. >> ba-ba-ba-boo-yah, jim! >> quadruple. that's a lot of boo-yahs!

find your next investment opportunity here in the cnbc investing club. >> i joined the investing club because i wanted to get a better understanding of controlling my own money. it works for me. >> unlock our black friday offer for exclusive access to daily club meetings, plus realtime portfolio alerts. >> this is an awesome experience. >> the way that he breaks things down is super helpful. >> join the club and let me teach you the right way to invest. >> join now with a black friday offer for a limited time. go to cnbc.com/cramer black friday. ♪

i always say my favorite part of the show is answering questions from you. bring in jeff marks, my partner in crime to help you answer some of your most burning questions. for those of you who are part of the investing club, jeff will need no introduction. for those of you who aren't members, i hope you -- you got to join already. jeff's insights help me do a great job for all "mad money" viewers, and i think in some ways more important than i said, members of the club. if you like this, be sure to join the club. what's really interesting, just so you know, he and i go at it every day. and we don't agree. if we agree, what would be the point? first up question from gregory in california. hi, jim, i started with investment club two months ago and i should have trusted you. thank you. you have my attention now. thank you. is there an objective way to determine intrinsic value where

do you find it? this is something we disagree on. you are more science. when i think about a company that has intrinsic value, i often think can we do without it? how special is it? what is the total addressable market? do i value the market cap as equal to the opportunity. that's a very -- my own way to look at it. you, on the other hand, i think you're far more analytic and more precise. >> well, there is more than one way to skin a cat. one way you can do it is look at the price-to-earnings multiple of that company versus some of its peers, then compare things like revenue growth, gross margins, free cash flow, and stack them up one against each other. and that could be a way to determine if a stock is cheap or expensive versus the group. >> totally. and i think that when i look at companies and i say that i want to emphasize let's say eli lilly over a bristol, i look at the fact that the growth rate makes it so that i'm not as worried about the price to earnings

ratio. but then i've got you bringing me back to earth to always remind me price to ratio goes sky-high and we are a trust. we must do what's right. hi, jim, i don't want to sound like a pig, but if i'm planning to hold a stock for the long-term, why shouldn't i take profits when i know there is an excellent chance the stock will continue to rise. here is why. you can't become the company. when i look at an eli lilly, which i think has got the biggest pharmaceutical run, i mentioned twice now. sorry, but it's on my mind. we could easily become the eli lilly fund, because it becomes dominant. we could 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's what makes us feel like you've got -- >> i think there is also a difference too between trimming versus selling. if we've learned anything from 2022, even the best companies in the world with the best

products, great balance sheet management, no one was immune to a significant pullback. if you can avoid something like that, then it favors trimming even if it's such a great company. >> jeff perfectly put. now i'd like to say there is always a bull market somewhere, and i promise to try to find it just for you right here on "mad money." i'm jim cramer. see you next time. >> i'm brian sullivan and tonight, oil prices and interest rates flirting with multi-month lows. is it good or bad for stocks in we'll dig in. top ai company says it knows which retailer will be in the black this friday. we'll name names coming up. wishing for a hit. disney's new thanksgiving blockbuster just turned a rather dubious distinction. the detroit lions are good, really good, and we will dive into the numbers and see if they can avoid getting mashed, get it? again on thanksgiving. plus how weight loss drugs like ozempic and mounjaro