NerdWallet's Smart Money Podcast
401(k) vs. Brokerage Account: Which Is Better for Retirement Savings? Plus, the National Debt Explained
Thu, 03 Apr 2025
Learn about the U.S. national debt and how it impacts economics and what options to explore if your employer-offered 401k plan seems limiting. What exactly does it mean when you read about the enormous national debt in the United States? What options do you have if you’re not happy with the 401k plan offered by your employer? Hosts Sean Pyles and Elizabeth Ayoola dig into investing options with NerdWallet personal finance lead writer June Sham. But first, NerdWallet senior news writer Anna Helhoski joins the show to break down what exactly is the national debt, who does the U.S. owe, and why it matters to everyday Americans. Next, Sean, Elizabeth and June answer a listener’s question about whether it’s worth it to invest in their employee-offered 401k plan even if it feels limiting. The Nerds explain the pros and cons of a 401k as well as alternative options to explore, including a brokerage account or an IRA, and why you don’t have to limit yourself to just one type of account. NerdWallet’s list of best IRA accounts: https://www.nerdwallet.com/best/investing/ira-accounts Choose the best retirement plan: https://www.nerdwallet.com/article/investing/best-retirement-plans-for-you In their conversation, the Nerds discuss: national debt, what is the national debt, how much is the US in debt, US debt ceiling explained, difference between debt and deficit, publicly held debt, intragovernmental debt, who owns the US debt, debt to GDP ratio, US debt crisis, what happens if the US defaults, national debt impact on economy, foreign holders of US debt, Congressional Budget Office debt projections, US budget deficit, treasury securities explained, debt ceiling vs national debt, federal spending and tax revenue, 401k vs brokerage account, should I invest in a 401k without a match, 401k managed by insurance company, 401k fees and disclosure rules, retirement investment options, Roth IRA vs 401k, traditional 401k benefits, taxable brokerage account vs 401k, 401k contribution limits 2025, early 401k withdrawal penalties, required minimum distributions 401k, investment fees and expense ratios, choosing a Roth IRA provider, best retirement account for long-term growth, retirement planning tips, comparing retirement accounts, 401k rollover options, best Roth IRA accounts 2025. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [email protected]. Like what you hear? Please leave us a review and tell a friend.
Chapter 1: What is the U.S. national debt and why does it matter?
Confession time. How much debt are you carrying right now? If you don't want to share the details, can you at least confirm it's not trillions of dollars? Well, the U.S. government cannot say that. It's currently more than $36.2 trillion in the hole. And today, we're going to hear how that happened, how serious it is, and what it means to our personal finances.
Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. Sean will join us in the later half of this episode where we're answering a listener's question about investing in their 401k accounts and whether it's cool that an insurance company is in charge of managing it.
But first, our weekly money news roundup where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague, Anna Helhofsky, is here to talk about the large financial hole the country is in and what it means for all of us. Hey, Anna. Hey, Elizabeth. We're going to be answering two listener questions today.
And this first one is asking for a bit of an explainer. They wrote, Hi, nerds. Could you attempt to explain how we got into trillions of dollars of national debt? When was the last time we were in a surplus? Who exactly are we in debt to? Thanks. So, Ana, where do we even begin with this subject? It's really hard to wrap my brain around that figure I mentioned earlier, $36.2 trillion.
How does the government rack up that kind of debt?
It's kind of unbelievable, but let's start with what the national debt is, and then I'll explain how we got to where we are now. So the national debt is the sum total of all the money the United States government has borrowed but has not yet repaid. Like you and me, the government earns and spends money. But of course, its earning and spending is pretty different than ours.
The majority of the federal government's earnings are made through tax revenue, and it spends money on programs and services for U.S. citizens. And like most debts, it has to pay the interest, too. As you mentioned, the total national debt right now is $36.2 trillion. But that's the kind of number that is so enormous that it practically loses its meaning. It feels too big to comprehend. Exactly.
And when you break down that number by how much money it owes per citizen, it's around $106,000. That's maybe a little bit easier to wrap your head around, but it's not the way that economists prefer to think about the national debt. Instead, they compare the total debt against economic growth, also known as gross domestic product, to find out what the nation's ability to repay our debt is.
In other words, our debt-to-GDP ratio. At the end of fiscal year 2024, the U.S. had a debt-to-GDP ratio of 123%, which means the debt we owe is roughly 123% of our annual growth.
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Chapter 2: How did the U.S. accumulate $36.2 trillion in national debt?
Even though we've talked about a number of accounts today, you don't need to pick one over the others. Instead, remember that all three accounts serve different purposes and goals and all can be part of a solid financial plan.
All right. Well, Jun Xiao, thank you so much for joining us on Smart Money.
Thanks so much for having me again.
And that's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com.
You can follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.
And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it might not apply to your specific circumstances. This episode was produced by Tess Vigeland. Hillary Georgie helped with editing. Nick Karasimi mixed our audio. And a big thank you to NerdWallet's editors for all their help.
And with that said, until next time, turn to the nerds.
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