Pay Yourself and Reduce Current Taxes by Fully Funding Your Retirement Accounts
The federal government has been periodically increasing the contribution limits for individual and workplace retirement accounts over time. Using the incentives of lower or deferred taxes, they are hoping that people will put away more money for retirement.
With the start of a new year, now is a good time to review your retirement contributions and make sure you are taking full advantage of the potential incentives offered by the IRS.
IRA and Roth IRA
A traditional Individual Retirement Account (IRA) allows you to save for retirement while deducting your contributions from your taxes. A Roth IRA allows you to pay taxes on the contribution in exchange for being able to withdraw the money tax-free in retirement. Both IRA and Roth IRA have the same contribution limits. There are some exceptions so check with your tax professional for your specific situation.
Workplace Retirement Plans
If you or your spouse have a workplace retirement plan, such as a 401(k), again it's a great opportunity to contribute as much as you can. First, you may save on current taxes. Second, if the plan sponsor (the employer) offers a matching contribution, it's like being offered free money for being a consistent saver.
Health Savings Account
A Health Savings Account (HSA) is a bank account specifically for paying health related expenses. These can be everything from dental care to travel costs for a medical procedure. An HSA is tied to a special, high deductible health insurance plan. The triple advantage of an HSA is that you can deduct your current contributions, pay no tax on potential gains made by investing your excess HSA funds, and you can withdraw any money left over tax free in retirement.
We are ready to help you maximize your allowable contributions and answer any questions you may have as you plan for the new year and how you’ll reach your long-term goals.
2024 CONTRIBUTION LIMITS:
IRA: $7,000 individual limit / 55+ $8,000
401(k): $23,000 individual limit / $55+ $30,500
HSA: $4,150 individual limit / $8,300 family limit / 55+ $5,150
1/2. https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000#:~:text=Highlights%20of%20changes%20for%202024,to%20%247%2C000%2C%20up%20from%20%246%2C500.
3. https://www.healthequity.com/hsa-contribution-limits
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