Maximize Your 401(k) Contributions: New IRS Limits for 2024

Saving for retirement is crucial for a secure future. Social Security benefits can only provide limited financial assistance compared to your pre-retirement earnings. Therefore, the onus is on you to build a reliable nest egg to enjoy the golden years. If you have access to a 401(k) or similar retirement plan through your employer, you would have strived to contribute the maximum limit allowed this year. But, do not worry if you haven’t hit that target. The IRS has announced new 401(k) contribution limits for 2024, giving you an opportunity to increase your contributions further.

Save More with Increased Contribution Limits

The IRS has declared a small increase in maximum contributions to most retirement plans for 2024. Specifically, anyone under the age of 50 can contribute up to $23,000 next year, an increase of $500 from the current contribution limit. This trend follows a history of moderate annual increases in 401(k) limits. Older individuals aged 50 and over will still have the ability to contribute the existing catch-up provision of $7,500, thereby reaching a maximum contribution limit of $30,500. These increased limits provide the ideal opportunity for those who want to take full advantage of tax-efficient investing.

Tax Breaks on Maximum Contributions

Although contributing the maximum limit to a 401(k) can be difficult, it’s worth the effort as it can provide a great tax benefit. Investing in a 401(k) account can help reduce taxpayers’ liability to an extent. Contributions toward a 401(k) plan reduce your taxable income, which means that you’ll pay fewer taxes overall. If you can afford to contribute the maximum limit for 2024, it’s worth doing so.

Plan for Long-Term Savings Goals

It’s never too early to plan for retirement, and many people in their 20s and 30s ignore it, thinking there’s enough time. But, contributing early to a 401(k) account can make a substantial difference in long-term savings. According to the National Institute on Retirement Security, workers over 55 have an average retirement savings of $120,000, which is meager compared to the estimated $1.5 million required for a comfortable retirement. So, encourage your kids to start contributing early and take full advantage of the new 401(k) limits for 2024.

Maximize Your Retirement Contributions

You may currently contribute to a 401(k) account and have other retirement accounts, including an IRA or Roth IRA. If you can afford it, consider contributing to those accounts alongside your 401(k). In essence, you can use the benefits of each account to your advantage. For instance, some 401(k) plans offer a higher limit on contributions, but they are subject to some restrictions. In contrast, there are no restrictions when investing in Roth IRAs, nor are they tax-deductible, but they offer tax-free distributions in retirement.

Seek Professional Financial Advice

With increased 401(k) contribution limits and changes in tax laws, talking to a financial advisor is crucial. Seeking professional guidance can help you build a financial plan and achieve your savings goals. The advisor will help you estimate what your retirement needs will be and work with you to develop a sensible savings plan. Professional guidance can sometimes be seen as expensive, but making the right investment decisions and planning early ultimately save you more in the long run.

Building a bigger retirement fund, giving you greater financial freedom is a great goal to aim for. The new 401(k) contribution limits for 2024 offer an opportunity for people under the age of 50 to save more than ever before. Contributing the maximum amount to your 401(k) is beneficial. However, it is valuable to examine other retirement accounts you might have. With the right advice and some careful planning, spread across a few different investment accounts, investing for retirement can undoubtedly be worthwhile. Take advantage of these new limits and make the most out of your investments.