We've passed the halfway mark in 2024, but there's still time to crush your retirement goals. You have until the end of the year to set aside funds in a 401(k) at work and until April 15, 2025 (tax filing deadline) to make your contributions to an individual retirement account (IRA).
There's a lot you can do before the deadline to get one step closer to the millionaire mark. Fidelity reported that people are already achieving these milestones, so you won't have to worry about starting from scratch.
If you're serious about making the most of the rest of 2024, here are a few moves you can make now that will pay off later.
Image source: Getty Images.
1. Maximize your contributions
Retirement accounts come with appealing tax advantages, but they also have contribution limits that cap how much you can save each year. For 2024, the IRS allows you to contribute up to $23,000 to your 401(k) at work and up to $7,000 to your IRA. If you're 50 or older, you can make catch-up contributions of an additional $7,500 to your 401(k) and $1,000 to your IRA. If you miss contributions one year, you can't go back and make up for it later, so plan accordingly. Putting your contributions on autopilot can help ensure you're headed in the right direction.
If you don't have enough money to contribute a lot to both accounts, start where you are. Starting early gives you a leg up and allows you to take advantage of the power of compounding. Contribute what you can right now and aim to increase your contributions as your income rises.
2. Keep tabs on your finances
Contributing hundreds or thousands of dollars to both a 401(k) and Roth IRA might sound like a lofty goal, especially when your income is swallowed up by expenses. To make it easier, focus on either increasing your income, slimming down your expenses, or doing a bit of both so you can boost your retirement savings. Here are a few moves to get you started:
- Beef up your emergency fund
- Pay down debt
- Develop profitable skills
- Cut back on unnecessary items
- Evaluate your spending habits
- Create a budget
- Monitor your net worth
3. Don't miss out on employer matches
Workplace retirement plans stand out because of the potential to snag an employer match for your contributions. This is essentially free money that can supercharge your retirement savings over time.
For example, if you earn $100,000 and your employer matches 50% of your contributions up to 6% of your salary, you should aim to contribute at least 6% ($6,000) to get the full match. Your employer would then contribute an additional $3,000, giving you a total of $9,000 in your 401(k) for that year. If you contributed the maximum amount to a 401(k) for about four years and received your full match, your investments could easily help you get over the six-figure mark. Not taking full advantage of this benefit is like leaving money on the table.
4. Diversify your investments
While your 401(k) may be limited to target date funds and other types of mutual funds, your IRA may offer more flexibility depending on where you set it up. You'll be able to invest in a variety of assets such as low-cost index funds, exchange-traded funds, growth stocks, and dividend-paying stocks. Whatever you invest in, it's important to do your research and avoid leaning too heavily on individual stocks that appear to be the next big thing.
Although it may seem easier to hit the million-dollar jackpot in a 401(k) since the contribution limits are higher and your employer may help with a match, you can still reach your goals in an IRA with smart investments. Consider what can happen if your IRA investments yield an 8% or 10% return, and you contribute $7,000 annually, although investment returns aren't guaranteed.
|
$7,000 Invested Annually For: |
Growing at 8% |
Growing at 10% |
|---|---|---|
|
10 years |
$109,518 |
$122,718 |
|
20 years |
$345,960 |
$441,017 |
|
30 years |
$856,421 |
$1,266,604 |
|
40 years |
$1,958,467 |
$3,407,963 |
Data source: Author calculations.
As you can see, amassing a million dollars in a 401(k) or IRA won't happen overnight. You'll need to have a long-term view and be willing to hang in there during tough times. By starting early, being consistent, reviewing your investments, and making the most of your benefits, you'll be well on your way to a millionaire retirement.
