As the year winds down, now’s the perfect moment to review your retirement savings and ensure you're squeezing the most out of your 401(k), 403(b), and 457!
401(k), 403(b), and 457 can be one of the most effective tools for building wealth and securing a comfortable retirement, but to maximize its potential, strategic contributions are essential. Here's how you can make the most of your 401(k) before the deadline:
Why Maximize Your 401(k), 403(b), and 457 Contributions?
Tax Benefits: Contributions to a traditional 401(k) are pre-tax, which reduces your taxable income for the year. The more you contribute, the more you can save on taxes today.
Employer Matching: If your employer offers matching contributions, you could be missing out on free money by not contributing enough to meet the match. Ensure you're at least contributing enough to get the full employer match—it’s an instant return on your investment!
Compound Growth: The earlier and more you contribute, the more time your money has to grow. By increasing your contributions now, you’ll benefit from the compound interest that accumulates over the years.
Strategies to Maximize Your 401(k) Contributions
The 2024 contribution limits for retirement plans have increased. Employees in 401(k), 403(b), 457 plans, and the federal Thrift Savings Plan can now contribute up to $23,000, up from $22,500. IRA contribution limits increased to $7,000, up from $6,500. The IRA catch-up limit for those aged 50 and over remains at $1,000, with annual adjustments under the SECURE 2.0 Act. The catch-up limit for those 50 and older in 401(k), 403(b), and 457 plans stays at $7,500, allowing total contributions of up to $30,500. SIMPLE plan catch-up limits remain at $3,500.
Increase Your Contributions: If you're not on track to reach the maximum contribution limit, consider increasing your contribution percentage for the remaining months. Even a slight increase can make a significant impact.
Take Advantage of Year-End Bonuses: If you receive a year-end bonus, allocate a portion of it toward your 401(k). This can help boost your retirement savings without impacting your regular cash flow.
Plan for the Future: As you prepare for next year, think about setting up automatic contribution increases to ensure you’re steadily growing your retirement savings over time.
Comments