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A few simple moves in 2024 can add six figures to your retirement savings within a few years.
Maxing out retirement accounts may not be the best move for everyone, but it's something I look forward to every year. Retirement accounts, such as a 401(k) and Roth IRA, can come with many benefits that can make your life easier now and during retirement.
For instance, pre-tax contributions to a 401(k) can lower your taxable income. If you earn $100,000 in 2024 and contribute $23,000 to your 401(k), your taxable income drops to $77,000. Also, if you earn that much this year, you can contribute to a Roth IRA and enjoy its benefits. Instead of getting an up-front tax deduction, you'll contribute after-tax dollars to a Roth IRA so you can receive tax-free income during retirement.
Setting retirement goals and achieving them every year makes a significant impact on your financial future and brings you closer to building a healthy nest egg. If you want to up your retirement savings game this year, here's a rundown of what you can do to make that possible.
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Setting goals is a skill, and mastering this skill can pay dividends in every area of your life. If you are able to set clear and intentional retirement goals every year, you'll be on your way to living the retirement you've always dreamed of.
When it comes to retirement goals, it's important to understand how different accounts work and be aware of any limitations, such as contribution limits and income thresholds. For instance, you can contribute up to $23,000 to a 401(k) by the last business day of 2024. You can also contribute the full $7,000 to a Roth IRA for 2024 before the tax filing deadline (April 15) if your income isn't above the threshold -- for example, $146,000 for a single person. If you are 50 and older, those contribution limits will climb.
So, if you want to max out your 401(k) and Roth IRA this year, you can set a goal to contribute up to $30,000 before the deadlines if you are under 50.
Adding five figures to a retirement account can sound ambitious if you're just getting started on your journey. However, there are a few steps you can take this year to make it easier to meet your goals, including:
Your game plan will either increase or decrease the odds of you maxing out your 401(k) and Roth IRA in 2024. Here are a few tips to create a solid retirement contribution plan this year:
If you got a late start on retirement planning, maxing out your 401(k) and Roth IRA can help you catch up and boost your chances of building a millionaire retirement. However, there are certain situations where maxing out your 401(k) and Roth IRA may not make sense. Review your finances and reach out to a professional if needed. Retirement planning is personal, so the more you can customize your plan to fit your needs and goals, the better off you'll be down the line.