![]() 2 These traditional accounts also offer tax-deferred compounding. With traditional IRAs or 401(k)s, contributions reduce your taxable income in the current year, as long as you are eligible, though withdrawals are taxable. Harness the power of tax-advantaged accountsĮven if you're on track with your retirement savings, tax-advantaged accounts are attractive long-term investment vehicles and tax-efficient planning tools. If your plan qualifies, you may be able to contribute an additional 10%.)ģ. (The SECURE 2.0 Act of 2022 introduced new contribution limits for some plans starting in 2024. Participants in a SIMPLE IRA or 401(k), designed for self-employed individuals and small businesses, can take advantage of a $3,500 catch-up contribution, bringing their total contribution potential to $19,0.Individuals earning $145,000 or less, adjusted for inflation going forward, will be exempt from the Roth requirement.) (The SECURE 2.0 Act of 2022 introduced new requirements for high earners: Starting in 2024, if you earn more than $145,000 in the prior calendar year, all catch-up contributions at age 50 or older will need to be made to a Roth account in after-tax dollars. That means you can contribute up to $30,000 in 2023. If you participate in a 401(k), Roth 401(k), 403(b), or similar workplace retirement savings plan, the catch-up opportunity is even greater: up to $7,500 a year.For a traditional or Roth IRA, the annual catch-up amount is $1,000, which boosts your total contribution potential to IRAs to $7,500 in 2023.Once you reach age 50, catch-up provisions in the tax code allow you to increase your tax-advantaged savings in several types of retirement accounts. Ready to start catching up with your retirement savings? Here's how: 1 And the impact can be even greater for a 401(k) or similar plan, where the catch-up contribution opportunity is larger. ![]() For example, if you turn 50 this year and put an extra $1,000 into your IRA at the beginning of each year for the next 20 years, and it earns an average return of 7% a year, you could have almost $44,000 more in your account than someone who didn't take advantage of the catch-up. ![]() Taking advantage of catch-up contributions can deliver a significant boost to your retirement saving. The tax code provides "catch-up" savings opportunities so that people age 50 and older can increase their tax-advantaged contributions to IRAs, 401(k)s, and HSAs (starting at age 55). So it's important to ensure you have the money to live the life you've planned.įortunately, the federal government recognizes that people approaching retirement age often need to pick up the pace to ensure they have saved enough for retirement. The prospect of retiring is getting closer, and there's a lot of living ahead. People who have hit "the big five-oh" know better. The notion that turning age 50 means starting to slow down is likely a young person's opinion.
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