If you've had to delay retirement planning or haven't saved enough money, don't stress. There's still time to take control of your finances. You can transform your entire financial life within 12 months and start taking steps toward your goals if you plan ahead.
To get the ball rolling, here are a few action items you should consider adding to your 2024 to-do list.
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Review your retirement goals
As we kick off the year, start thinking about your retirement goals and your current financial status. This will give you a better idea of how much money you will need to save and what retirement moves you will need to make to get on track. Here are a few questions to get you started:
- When would you like to retire?
- What will your retirement lifestyle look like?
- What sources of income will you have after you retire?
- Do you plan to work part-time in retirement?
- What is your health status?
After you've painted a picture of where you want to go, it's time to see where your finances stand today. Gather the information about all of your retirement accounts, look up what your Social Security benefits are forecast to be, based on various ages at which you might start collecting them, and monitor your current income and expenses. Use all this information to determine your 2024 goals and how to maximize your chances of having a comfortable retirement.
Let's say you realize you need to increase your income to reach your retirement goals. You can pick up a side gig, become a consultant in your field of expertise, or look for ways to boost your income at your current job.
Contribute to a retirement plan at work
If you're trying to pump up your retirement portfolio in 2024, your employer-sponsored 401(k) plan could do the trick. The contribution limits for these retirement plans are significantly higher than the limits for traditional and Roth IRAs (individual retirement accounts), so if you'll need to make five-figure annual contributions to your investments to meet your goals, these tax-advantaged accounts offer you a way to do so.
And thanks to the new inflation-adjusted contribution limits, you can tuck away a bit more in your 401(k) this year than you could in 2023. For 2024, the annual employee contribution limit for 401(k) retirement plans is rising by $500 to $23,000. Those 50 and older can contribute up to $30,500.
Your employer may offer matching 401(k) contributions to incentivize retirement savings. If your employer does, that's extra money that can be used to boost your retirement savings. Let's say you end up with an additional $3,000 in your account as a result of your 401(k) company match. The contributions from your employer won't impact your ability to contribute the maximum amount to your 401(k) in 2024.
Fund your individual retirement account
Catch-up contributions can be a game changer for those using employer-sponsored retirement accounts, but they are also available for IRAs. Let's say you want to beef up your retirement savings beyond the options offered by your employer and are eligible to contribute to a Roth IRA. For 2024, the standard annual contribution limit for a Roth IRA is $7,000 for individuals under 50, and $8,000 for those 50 and older. If you have both a traditional and Roth IRA, your combined annual contributions to them cannot exceed those limits.
So if you have the funds to max out your 401(k) and IRA, you'll have a chance to contribute up to $38,500 to the accounts in 2024. The money you contribute to a 401(k) will be tax deferred, while a Roth IRA is funded with after-tax dollars. However, come retirement, you'll have to pay taxes on your 401(k) distributions, but you'll get to enjoy the money you accumulate in a Roth IRA 100% tax-free after you've met the requirements.
Fund your individual retirement account
It's not too late to increase your savings and put yourself in a position to live the retirement you've always dreamed of. If you're still working full-time, check out your employer's retirement plan and any other benefits they may offer. And as long as you're earning money, you'll be able to set aside dollars in an IRA and invest in your favorite assets. If you put in the work in 2024 and commit to consistency, you'll be able to easily add six figures to your retirement portfolio within the next three years.
