Having 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 im not talking about economics here. Totally different kind of class. You could be an econmajor and still learn nothing is about Retirement Readiness or how to balance a darn checkbook, let alone how to invest your money wisely. Money, its just not talked about. Its like the third rail of american education. Thats why im on a Constant Mission to teach you about every aspect of managing your money so you can be a better investor both when it comes to investing and your discessionary mad money portfolio. Which is why i wrote get rich carefully. You probably have some kind of 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 plans are the main way that people save for retirement. Theyre offered by your employer and among the great tax Deferred Investment vehicles out there. Along with the ira, im not talking about the Irish Republican Army here. I mean the individual retirement account. Wait, for those of you about to fall asleep, [ bell ] or change the channel because the whole idea of saving for retirement puts you to sleep, hear me out. You need to know this stuff. Im going to tell you some things that wont hear from the socalled experts. At this point its pretty much become the 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 experts will even tell you to max out your 401 k if you make enough money for than to feasible. For 2014 the maximum 401 k contribution is 17,500. Remember that comes from your pretax income. However, i am not one of those people who thinks you should max out on your 401 k . I am not someone who is going to sing the praises of the 401 k and tell you its the key to your financial salvation. Because the truth is, 401 k plans, they can be a real mixed bag. A couple of great features and a lot of bad ones too. And those bad features will eat away at your returns so year after year, sometimes through fees that are almost totally hidden from you, it is an outrage. So let melee out the good, the bad, and yes the ugly of 401 k plans and then ill tell you if it makes more sense to contribute to your own 401 k plan or put it to use somewhere else. The good, the best thing is you pay no taxes on what you put in. And then you never pay a penny of Capital Gains profits on your 401 k which allows it to compound year after year, totally tax free until you decide to stat making withdraws. And that is fabulous. Regular viewers of this show and readers of my books know im a huge believer in what we call the power of compounding. Let me give you an example here. Suppose youre 30 years old and you start investing 5,000 a year to your 401 k . Remember youre not paying income tax on the 5,000 income. You should historically at least should be able to generate an average return of at least 7 . Its been what its been. Over the course of the next 30 years, youll be contributing 150,000 to your 401 k plan. But because that money is able to compound year after year without any Capital Gains taxes, by the time youre 60 that 5,000 pretax income that you have been investing will be worth over 511,000. Lets say could be worth, but thats what the history tables say. If you had to pay taxes on dividends an Capital Gains, believe me it would be a lot lower. Perhaps as much as 110,000 lower. Thats an advantage. You only pay taxes once when you decide to withdraw it. At that time theyre taxed akdz ordinary income. Since youre likely retired by then, most of you end up paying a lower tax rate than when you first earned it thats one major reason to like 401 k plans. The second reason, many but not all employers will match or partially match your 401 k contributions. In other words, for every dollar you invest your employer may throw in 50 cents up to a certain point. Thats free money. You almost never want to walk away from free money, also when its untaxed. But if you dont get free money for contributing to your 401 k i think its a much less compelling option. As said before, there are a lot of things about 401 k plans that could be really bad. Which is why if again you dont get a match from your employer, i believe its better idea to save for retirement in the individual retirement account or ira. Which has the same exact tax favored status as the 401 k . You can only contribute 5,500 or 6,500 if youre over 50 like me. When you change jobs you can roll over all your money into the ira and thats exactly what you should do every time. Every time, to switch employers. Why do i think the ira is the better option . First of all, 401 k plans vary widely from company to company. Some of them give you terrific range of choices and let you pick individual stocks. But those are a rarity. Many more Companies Give you 401 k plans with limited options. Sometimes you only get to choose between a couple dozen different mutual funds, some of them not being so hot. So for those of you who cant pick your own stocks to your 401 k , before you contribute to your 401 k plan, make sure it gives you the option to put your cash into something worth investing in. Ill make it real simple here. If you cant pick your own stocks in the 401 k , then you want a low index fund that mimics the s p 500. However, if your 401 k doesnt even offer that, then go with a selfdirected ira from the full Service Discount broker Like Fidelity or merrill edge so you can have control over your money. One more negative. Within the 401 k when you invest in the mutual funds you have to pay the fees, but your 401 k administrator, the company your Company Hires to run the plans will also charge its own fees. Meaning for all the money 401 k save you in tax, a good bit will be clawed back by the fees. It angers me. If you ever looked at your statement and wonder why your 401 k holders arent increasing in value like they should be, probably the fees. Where does this leave us . Heres the bottom line on retirement investing. If the company you work for offers you a match, put money into your 401 k until its maxed out. No reason to pass up free money. Put any additional Retirement Savings in an ira but theres no employer match, you would do much better to skip the 401 k and go straight to the ira. Why dont we go to marty in michigan to start the calls. Marty. Caller hi, im marty from michigan. I have been successfully managing my ira since 2008. I hope to retire in about six years. I want to optimize my portfolio return by investing in individual stocks. Because i have a limited investment time frame, and the market goes both up and down, could you recommend a strategy for my particular circumstances . Okay, because you have a limited time frame, you have to be very careful. That actually makes me want to pull back a little. I would say 50 of your portfolio in stocks that yield with a good Balance Sheet where we have explored the cash flow and we feel good, maybe 4 yield. The rest we have to wait for a pull back because thats just too dicey. Too short a window. If you had a longer time frame, i would say well go buy some high quality dividend stocks and let it run. Lets go to dave in california. Caller bouilloyah, jim, fro westwood, california. I wish i were there. Caller i have a question about reits. Im a longterm investor. Im looking for a good yield. Im thinking of adds to my positions in my reits. Every time they adjust the Interest Rates they seem to get a black eye. Is the next time going to be different though . Its harder to build in the country now, a lot of the companies are really established and they can get credit lines and other builders cant. No, its not to change. It will be like that. Thats why i say to people, please wait for a big break in the Real Estate Investment trust before you pile in. I think thats the right move for you. This is Financial Literacy mad money style. Heres the information you need for Retirement Savings if your employer matches your 401 k contributions, max that out. Otherwise, stick with an ira and stick with cramer. Mad money will be right back. Announcer dont miss a second of mad money. Follow jimcramer on twitter. Have a question . Tweet cramer, madtweets. Send jim an email to madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something . Head to madmoney. Cnbc. Com. Huh. Fifteen minutes could save you fifteen percent or more on car insurance. Mmmhmmm. Everybody knows that. Well, did you know that old macdonald was a really bad speller . Your word is. Cow. Cow. Cow. C. O. W. E. I. E. I. O. [buzzer] dangnabbit. Geico. Fifteen minutes could save you fifteen percent or more. When folks think about wthey think salmon and energy. But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. Shipping and manufacturing. Across the United States, bp supports more than a quarter million jobs. When we set up operation in one part of the country, people in other parts go to work. Thats not a coincidence. Its one more part of our commitment to america. Keep up with cramer all day long. Follow jim cramer on twitter and tweet your questions, mad tweets. If everyone in this country went insane, and decided to turn america into cramerica with me as your grand pooh bah id make some serious changes right thousand. Because this is about money ill stick to the elements of the cramerica regime. It drives me nuts that we dont teach our young people how to handle their money. Would bit so crazy if you had to take a class on personal finance before you graduated from high school . I think it should be mandatory, like those Awkward Health classes where they show how to put a trojan on the banana. That was only vaguely a reference to the iliad. Sadly, i dont have any influence over the education in this country. But i do over what we talk about on this show. Can i speak some words that we all believe but rarely get to see in polite conversation . Look, money is important. Its really important. And caring about the state of your finances does not make you some kind of superficial bourgeois monster. Lets say you got a lousy credit score and you want to get married. Congratulations, you inflicted your horrible score on your spouse. You cant get a house or a car or a credit card. They say money cant buy happiness. I found that conventional wisdom to be somewhat dubious at best. I spent time living in my silver ford fair month. I wish i had an expert to guide me through the money stuff way back when. So let me answer one of the most important questions out there what should the young people do with their money . First, nor foremost, you need to invest it. By freedom, i mean living a life where youre not totally dependent on your paycheck. I have always im always thrilled when i see members of the younger demographic, who are taking an active hand in imaging their money. There are people who put away a little bit of money, maybe its movie money, i didnt care. People start saving and investing to it and making their lives more difficult than they need to be. But i know young people feel like they have all the time in the world. Many more start investing before theyre truly ready. When there are in fact Better Things for them to do with their money. Thats why i had three lessons and caveat for all of those recently out of college. Why dont we start with the caveat . Before we you can start investing you need to pay off your credit card debt. This is something i have mentioned before. Particularly those Credit Card Companies, since those Credit Card Companies have gotten really aggressive about offering credit to college students. I have fire cards when i got out of law school by the way. I had to pay those off immediately. No matter how much money you rack up, if you carry a balance its going to eat into the returns. They will be greater than the profits you can make from investing, at least on the percentage basis. So just pay your credit card balance in full every month. Automate it with your Credit Card Company if youre worried youll be tempted not to. Now lets get to my three lessons for young investors. First this is for all young people who have recently graduated and for everyone out there regardless of age and information level. You need to save money, but not everyone has an inherent predisposition to save. We cant be natural cheap skates and telling you to save over and over again wont do any good. However, the stock market is a great way to trick yourself into saving a part of your paycheck that you might otherwise spend. Investing in stocks can be a lot of fun. We actually talk about like that on mad money. Whereas leaving money in a saving account or a certificate of deposit feels joyless, and the returns are so small that theyre meaningless. Plus, if you invest in the market it will be a lot easier to resist the temptation to spend money on things you dont need. Because it will be sitting in stocks you dont like. So there have you have to sell the stocks to get your cash back. Your natural instinct will not do to that do. Not only is this a terrific way to trick yourself into saving but the smartest place to put your money. Money market funds, cds give you hardly any return at all. Its a waste to keep your money in when you can be owning stocks. Second and last thing for young investors, this is a much more targeted piece of advice. While youre still young, you can afford to take a lot more risks than an old foe by like me. In other words, when youre in the 20s you can get away with getting riskier positions. Like single digit stocks and the potential upside is hurg huge. Or being year aggressive with your money. Why would i suggest something that sounds reckless . Its not because young people are better speculators. But when you make a money mistake in your 20s you have your whole rest of your life to fix it. You can afford to buy more high risk stocks that end up losing money when youre young because you have 40 odd years to earn back the losses. Older investors have to be nor cautious. The closer you get to retirement the more conservative you have to be. More bonds, fewer speculative stocks trading in the single digits, more cash. If youre in your 20s you should invest like a young person. Please forget about bonds no reason for someone whos in their 20s to have Bond Exposure where it can make higher return year after year. Especially where rates are right now. So young people, i want you to take this advice to heart. Especially because i suspect the recent College Grads most likely to invest in the stock market are the most prudent about their money and thats great when putting together a budget to live within your means or deciding how much your paycheck to save every month. For young investors being too prudent is being reckless. I know that sounds odd, but 20 somethings live a little. Especially in the stock portfolios. Take some risk. Forget about bonds for the next decade. Play around with some speculative names. Maybe some Biotech Companies with a lot of potential. Even if they blow up when they go to zero. You have the whole rest of your life to earn that money back. Final lesson for young investors its never too early to start investing for retirement. Use your 401 k or put your money in the roth ira. Heres the bottom line. Investing is great way to trick yourself into saving money you might spend. You can afford to take a lot more risk with your portfolio, and its never too early to start contributing to your 401 k or ira, especially if the ira is a roth. When money talks, it comes to cramer first. Why are you so bullish on the country . We see the huge recovery potential in the United States. We are in control of our destiny this this country and i think we need to get after it. In our industry youre right on the innovation curve or not. Dont bet against us. Well be the winner in this. Watch mad money and be the first to know. Cnbcs top states for business, which woman on real estate and cost of doing business . You have a great quality of life . Which state will top them . All . Tell me about business friend friendly diners. Wore the first settlers. This gets harder every year. We have to be number one. All day tomorrow on cnbc. Fame, lets him loose, hard to swallow fame, puts you there where things are hollow the evolution of luxury continues. The next generation 2015 escalade. Fame for that moment, where right place meets right time. And when i find it i go for it. announcer at scottrade, we share your passion for trading. Thats why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so youre always connected, wherever you are. Because at scottrade, our passion is to power yours. The numbers are impressive. Y to new york state. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. We live in a world where you have more choices where to invest your money than ever before. A virtual infinity of etfs, but more choice isnt always better. Sometimes having more options just makes it i want possible to decide which are right and which ones are wrong. You never have more options than right now. Theyre like 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 whole groups, has been warning the way that the stock market is trading. I wrote about it in get rich carefully. They can all advertise. The companies that run these funds what do they want . They want your money. And one of the biggest mistakes you can make as an individual investor is to give it to them with a few significant exceptions. Unfortunately this is one of the most common money mistakes out there. In fact, most people in the country equate with putting it in mutual funds. So many more people are basically half of the households have mutual funds. Many of you dont have a choice. A lot of 401 k plans dont let you pick individual stocks. They give you a mean knew to choose from which is one major reason that i think an ira is the better way to invest for retirement. What is so bad about mutual funds . Why am i railing against them . All right. Simple. If youre investing in mutual funds youre most likely well to put it delicately have how about getting hosed. I dont want to paint with two broad of a brush here. There are some worthwhile mutual funds. Ill tell you how to find them in a minute. But first, you need to understand the problem with the business model. My main beef is with actively managed mutual funds, people deciding which stocks or other securities to buy and sell. Unlike hedge funds, Mutual Fund Managers dont get paid for delivering performance. They collect fees from their investors. People like you and the amount of money they make depends entirely on the size of the assets under management. Which mines the biggest incentive is not to do well, something that big performance can help you with, but what theyre being paid to do is bring in more money from you. From more investors. Thats part of the reason why in study after study, year after year its shown that the actively managed mutual funds underperform the benchmarks. In other words, if you invest in the actively managed fund for large cap stocks the performance will most likely fall short of the s p 500. To make matters worse. Even though it consistently underperforms the market, they have the highest fees in the business. Even if your fund does manage to beat the benchmark, the performance will be eaton up by big Management Fees and youll wind up with an underperforming investment versus an index fund that mirrors the s p 500. Of course, some actively managed funds who dlich terrific results. But the trouble is when a mutual fund delivers such Great Results for so long, if the manager is a decent guy or woman theyll stop accepting new investors because when a fund gets too big it becomes incredibly difficult to beat the market. So as a general rule, if youre investing in mutual funds you dont want to be in an actively managed one. The evidence of the bulk that theyll underform, pretty staggering. You know that i think your best strategy is to manage your own portfolio of the individual stocks thats what i talk about night after night. But for those of you who dont have the time to Research Individual companies or your 401 k plan wont let you own one, let me tell you the smart way to invest in mutual funds. You want a cheap low Cost Index Fund that mirrors the market as a whole. One that mimics the s p 500. You have a vehicle that will let you participate in the strength of the market without spending the time picking individual stocks. This may sound like a really simple solution. But dont overthink it. The whole point of putting your money in the fund is to save you from time and effort to manage your own portfolio stocks. Thats why i think its insane when people own multiple mutual funds. I know there are a lot of sector based mutual funds out there. But no reason for home gamers like you to have any exposure to them at all. If youre going to take the time to try individual sectors that time is much better spent by the individual stocks. As for etfs, the vehicles are for trading not investing. Many rebalance every day. That can take a real toll on any long term performance. There are some exceptions out there. I like the etf, a simple way of playing gold. But in general, if youre not a pro, and youre not managing a portfolio of individual stocks, then you probably shouldnt be fooling around with these trading etfs either. Let me give you the bottom line, i think the cheap 500 index fund is the least bad way to actively manage your money. But an index fund owns everything. The good, the bad and the ugly. And if you do have the time, i think you can beat the performance of an index by picking stocks yourself. Which is the entire reason i do this show every night. If you dont have the time though, then dont overthink it. Just get a cheap s p index fund. Its the best way to go. Brendon in south carolina. Brendon . Caller hey, jim. How you doing . A big fan. Appreciate everything you do. Thank you. Whats a up . Caller not much. Im a young investor, im 25. Been investing my 401 k plan for a year. I wanted your recommendation on the percentage break down of the elections between the company stock, mutual funds, blend investment and bonds. Well, i dont like anybody to have more than 20 of theyre money into the stock they work at. Because youre doubling down, think of enron. Of course your company is probably not enron. But we have to protect ourselves from the down side. No bonds, pretty simple. Read my lips, no bonds. Michael in new york . Caller hello, jim, how are you . Booyah from brooklyn. Come over to the place after. Whats up . Caller im going to go. I like mexican food and beer. My question is should ipo shares goes go to large investors before they hit the Public Market . I have noticed after the shares are released theyre already up a few dollars and by the time theyre released to the general public, theyre getting the shares at a much higher price. Well, that is certainly true. Its one of the perks of doing a lot of business. They cant do too much about this in terms of democracy. In the end if you do a lot of business at any company, do you not get a better break . I understand the model. I wish that it didnt that life were more fair, but a person who does a lot of business with a company does get something in return. In this case, its good ipos. Got money on your mind . Too many options to put your money in. Ill help you understand them. You know that i prefer that you do the work and invest smartly in individual stocks but you must put in the time to do that. If you cant, hey, listen, just go with the cheap s p index fund. Better than most actively managed funds out there. Stay with cramer. Jim cramer, youre one of my heroes. I look forward to your show every weeknight. Thank you for helping beginning investors like me. I believe youre spot on. I love it, thank you so much. We watch you every night i. Learned and earned. No matter how good you are at picking stocks if you dont know where to keep your money or how to get the most bang for your buck, then you could be missing out on some terrific gains or costing yourself a fortune. This isnt as fun as picking stocks, you know i like to pick stocks. But over the course of your lifetime it can help you build up more wealth. And the simple truth is i dont want you leaving that money on the table because nobody could be bothered to explain the finer points of retirement investing. With that in mind, let me tell you if it makes sense to use a regular 401 k or ira or to go with the roth. Which is a term im sure you have heard countless times. I know i have talked endlessly about the benefits of using a retirement account and a 401 q plan and i dont want to beat a dead horse here. This is a subject i got a ton of questions about. Should i put my money in a roth account or a regular one . This is what when you go on twitter this is what youll see when theyre not just bashing the heck out of me. Why dont we start with the roth ira which anyone can contribute to so long as they make less than 127,000 a year. 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 kind of ended with a draw. Poverty possibly on points. I have told you all about how a regular ira lets you take pretax income. Invest it. Then your gains can compound year after year. Decade after decade. Totally tax free. Until you start to withdraw money when you retire. But the roth works differently. You make contribution after tax income. Unlike the regular ira putting the money in the roth wont decrease your tax bill. A lot of people want that. They want the tax bill decreased. But on the other hand, once your money is in a roth ira you will never pay taxes on its again. As long as your cash remains in the account, you dont pay Capital Gains tax and when you withdraw it, which you can do without penalty until 59 1 2, you dont pay any tax on your withdraws. So you dont have to pay it when youre retired. Thats one more positive point about the roth. You can draw the amount youve contribute contributed and you dont get hit with the 10 penalty which is what happens when you try to withdraw from the regular ira when you hit that magic age of 59 1 2. Not all that magic. Thats very different from the regular ira, you dont pay any taxes now. You get your gains and your gains dont get taxed within the account. But once you start withdrawing money every penny you take out is taxed as ordinary income. Which means that when youre trying to decide between a roth ira or 401 k or regular 401 k youre deciding if it makes more sense to pay income tax now or wait and pay once youve retired with a regular account. In other words, you have to figure out if youre in the higher tax bracket after youve retired or a lower one. Okay, this is a complicated if not difficult question to answer, right . Really has a lot to do with the specifics of the situation, your career. How old you are. But let me give you the quick rule of thumb that should encompass for a lot of people. For anyone whose marginal tax rate is 25 or less, go with the 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 who dont have the time to pick your own diversified portfolio, five to ten stocks, the smartest thing to do is park your retirement money in the low Cost Index Fund which mirrors the s p 500. As you get older you can add bonds. I know ive said this before, im going to keep repeating it until they take me of the garn air because its so necessary. Yet so contrary to the conventional wisdom. How about a roth 401 k . This works like a roth ira. You make contributions with after tax income. Then you never pay taxes on the money again, except because its a 401 k plan its a much higher contribution limit. 17,500 per year versus 5,500 for the ira. And one other big difference. A roth 401 k doesnt have any kind of income cap. No matter how much you earn, you can take advantage of one of these as long as your employer decides to give you the option. Of course this depends on what you think the future will look like. If you believe the taxes are headed higher over your lifetime, a roth 401 k where you pay now is in the future. And for those of you who young people whove actually only become politically conscious under the obama administration, it may seem like theres no way to stop the tide of higher taxes but history says differently. I believe we can close the deficit without substantially raising taxes thats not a political issue, just the math of it. At the end of the day, this is both beyond our control and beyond our ability to predict. The bottom line, the lower your present income, then the lower your taxes. A roth 401 k or roth ira lets you pay the low rates no and never worry about taxes again for the retirement money. The less you make, the roth is for you. Its that simple. When youre saving for retirement dont worry about what could go catastrophically wrong 30 or 40 years in the future. Just worry about making the best choices right now. Stay with cramer. Keep up with cramer all day long. Follow jim cramer on twitter and tweet your questions mad tweets. Tomorrow, housing by the numbers is the slump finally over . Zillow ceo on the state of the sector. Unlock the most valuable hour in tech. Squawk alley. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. Announcer lightning round is sponsored by td ameritrade. Lately i have been reading a lot of stories about the crushing burden of student lope debt. Right, now tens of millions of americans owe tens of millions in student debt and thats an incredibly high figure. Its not that it stinks to graduate from college and then immediately realize it might take decades to pay back those student loans. In study after study kids who graduate with no debt end up being worth a lot more money than those who have outstanding student loans. Im constantly coming out here and telling you how to use the stock market which is the greatest engine of wealth to help you make some serious money. So for any of you who are parents or thinking of becoming parents, let me just tell you right now that there are very few things you could do for your children that are better than paying for as much of their College Education as you can afford. We know that College Graduates have a much easier time getting jobs especially in our current environment where unemployment is stubbornly high. We know that they ultimately do make more money. Of course if i were lets say to make a kind of hierarchy of financial needs, its more important to save and invest for retirement first. Okay . Which is why i talked about it earlier in the show. For those of you who are parents, how could your open retire own retirement than making sure your kids have the best possible future . Its not. Believe me, if your retirement if you reach retirement age and you dont have enough money to pay for your needs, who do you think will have to support you . Its your kids. You dont want to be a burden on them. Take care of yourselves first. Address the retirement issue above all. However, after you have saved enough for retirement in a given year, then its time to start thinking about college. Even if your kid is a toddler or a gleam in your eye. And the best way to save for College Hands down is through whats known as a 529 plan. Now, these plans vary state by state which is a pain in the butt. But the general rules are true all over the country. Theres two kinds of plans. First, some states let you use a 529 as a way to hedge against tuition inflation by buying credits at todays prices to be used in the future. I want you in the 529 savings plan. Again, these are run by the states and the rules differ from state to state. But a 529 doesnt let you manage your portfolio. You have to pick between a mix of different mutual funds. Just like with many 401 k s. I prefer you have control of your assets, but 529s have so much going for them that im willing to swallow this one and be in it anyway. Remember, when you can choose between funds go for the one that mirrors the market, like the s p 500 or the vanguard total return fund. You will see that in the 529s. Literally all the stocks traded on the nyse and the nasdaq, but the performance will be similar to the s p. Which contains the 500, you know . Most of the 500 largest companies. So what are the rules for 529 . Lets say you had your first child, congratulations. If you can afford it, start a 529 with your kid as the beneficiary right there. Anyone who read confessions of a street addict, i traded a big couple of blocks with alcoa during my birthing. The contributions are not tax deductible so youre paying for this out of after tax income. Heres the good part. Once your money is in the 529 plan, they can compound year after year. Its like a roth ira. Because of federal gift tax law yos cut only contribute laws you can only contribute 14,000 if youre single, 28,000 if youre married and file jointly. Still, a exwhat of a lot of money. And by the way, your childs grandparents can contribute to the same plan too. And theyre in the money, a grandparent can start a 529 with your kid as a beneficiary. For Financial Aid reasons its better if a parent does it. Lets say for some reason you and your parents are sitting on a huge sum of money. One of the really great things about a 529 plan is that you can front load five years worth of contributions without inkurring the federal gift tax. As long as you dont write any checks to the plans beneficiary. Lets say a parent or a grandparent can invest right from the start or if youre married you can contribute. You wont be able to contribute anything without getting hit with the gift tax. Honestly, once you drop that kind of money into the 529 you wont need to make many more contributions. The key, you want to get that money into the 529 as early as possible. The greatness of the plans is all about the power of compounding. Remember, you dont pay taxes within the 529. So if you can somehow contrive to ribt 70,000 right off the bat and you invest in the low Cost Index Fund that mirrors the market the rule of thumb over time, youll make an average of roughly 8 per year. I know this stock market is actually a lot more volatile than that, but just as a thought experiment, if stocks generally perform like 7 or 8 , you can double your investment in nine years. So if you start saving when your kid is born, by the time theyre 18, you will have doubled and doubled again. Started with 70,000, then after 18 years barring a cat chemistry you could have as much as 285,000. Thats enough for a college and a law school too. I know most people cant front load it. But its worth keeping in mind that front loading as much as possible is the best strategy. Oh, for grand parents this may sound grim. But your 529 plan contributions wont count towards your estate tax. Last thing about saving for college and grad school, any money in the plan that you dont use, you can transfer it to another relative. Sibli siblings, relatives, first cousins. If your ungrateful kid decides not to go to college, you can withdraw it from the 529 plan, but you have to pay taxes along with a 10 penalty. So heres the bottom line. Paying for your kids College Education isnt as important as providing for yourself in retirement, if you have enough retirement contributions for the year, putting money in the 529 College Savings plan should be the next item on the agenda. The best way to protect your kids from the crushing burdens of student loan debt. Stick with cramer. Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. A Research Tool on thinkorswim. Seeing the world in reverse, and i loved every minute of it. But then you grow up and theres no going back. But its okay, its just a new kind of adventure. And really, who wants to look backwards when you can look forward . Weve got to get some of the tweets you have been sending me at jim cramer mad treats. My Investment Adviser puts numerous bond funds in the account. Look, if youre an older person, you need that money rather soon for retirement not that risky, but i think the opportunity costs for being in bonds versus stocks that have a higher dividend, well, its a big mistake. I dont like to be loaded down with bonds. They give you very little yield right now. Why dont we take a tweet from m bers no i can, who asked, jim whats your definition of a cheap stock . I like to look at a stock that has a faster growth rate than the s p 500 that sells at a lower price journey multiple than the average stock. That is my definition of cheap. david graham 45, can i invite you do my wedding . Im 100 serious, youre the man. No. This tweet, with stocks at a dividend should i take the money and reallocate or reinvest in if same company . Always reinvest and i dont mean to be curt about the wedding but i like to spend time with my family and you spend your time with your family. The next tweet, who asks, where to put cash portion of the portfolio . We never get fancy with cash. Dont get a longer term cd. Tell your bank, listen, keep it in the cash account. Remember, fdic. Next b. Megan 13 tweets, ceos to have on the show, to count on the show during good and bad times. Get rich carefully, the 21 gun salute ceos are all about. hydroplowtion, the next question. If an algorithm buys a stock, does it still go up . Yeah, they still do. Lets go to chicken hawk 68, who asks the follow, im reading two of your books right now. Is there a book discussing bonds . I tell people to read david darst, guest Morgan Stanley comes on on friday on cnbc. Hes written the best book on bonds. The question from which book are you reading right now or planning to read . Im reading munich the price of peace. Thank you to my daughter emma for giving it to me. Its out of print, i love it. Up next, robert popovich. Do you use any technoindicators to trade . Yes, i do. My friend matt horwean and i are looking at charts. I do off the charts. Im very, very wary of a stock that has a head and shoulders pattern. I like the reverse head and shoulders pattern. I do always check those out before i would ever pull the trigger for my charitable trust. Our next tweet comes from who asked, mad tweets, can a stock be too expensive to be worth buying . Sometimes you have to pay for best of breed. Buy half and let it come down. Stick with cramer. Are you long america . We at ford and the United States are competing with the best companies in the world. Look at the Global Competitiveness of the American Companies by any measure. My lifes story can be your lifes story. You can start with nothing in america and create the american dream. Does the market have you stumped . No fear, cramer is here. Just email him. I like to say theres a bull market somewhere i promise to find it for you right here on the following is a cnbc original production. [ music ] marijuana is the most profitable illegal narcotic. This is a huge business. Uh, in california alone, it is the number one crop. And theres at least 13 gardens within a mile radius of our home. Thirteen gardens right around your house . Mmmhmm. Yes. Wow thousands of growers, millions of users, and a market in the billions. How much money was coming in to your marijuana smuggling operations every year . About 50 million. Its a multibillion dollar business rife with guns, gangs, and plenty of money. Im trish regan. Join me for an unprecedented look inside americas marijuana industry. [ music ]