If you’re looking to max out your retirement savings, the contribution limits have been bumped up by $500 for most retirement savings plans in 2024,
Contribution maximums will increase from $22,500 to $23,000 for 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, the IRS says. For those that don’t rely on an employer-sponsored plan, the contribution limit on individual retirement accounts will also increase by $500 in 2024, from $6,500 to $7,000.The amount you can contribute to a Roth IRA phases out based on your adjusted gross income: In 2024, that range will increase to between $146,000 and $161,000 for single individuals and heads of households, up from between $138,000 and $153,000 in 2023.
Contributions to traditional IRAs and 401(k)s are made with pre-tax income, which lowers your overall taxable income for a given year. That also means you aren’t taxed on contributions, or earnings, until you make a withdrawal. headtopics.com
One advantage of 401(k)s: they have much higher annual contribution limits than IRAs, although the investment choices tend to be more limited. Roth IRAs, on the other hand, are taxed upfront, so any money invested grows tax-free over time. If you’re in a lower tax bracket now than you anticipate being in during retirement, choosing a Roth can help reduce your overall tax burden.
While there are other differences between the accounts to consider, they’re generally all good long-term investment accounts since they offer tax advantages and the contributions will grow and compound over time. headtopics.com
However, if your 401(k) offers employer matching, you might want to start there. Employer matching is when your company matches a portion of your contributions, up to a certain limit — often 50% on the first 6% of your salary.
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