![]() The 401(k) is a fantastic vehicle for preparing for retirement, and the new legislative changes relative to these accounts provide more opportunity and flexibility than ever to maximize your savings this year. While a 401(k) investment is always imperative, committing to the company until vesting occurs will help you maximize your contributions. Many employment agreements require that employees remain at the company for a certain amount of time until the employee match vests. ![]() The more that you can leverage your automatic contributions, the easier it will be to maximize your 401(k).įinally, ensure that you are in a position to actually take advantage of the employer match. Then, try and divert any funds such as bonuses or incentives, into the fund as well. Each year, you should aim to raise your automatic contribution by 1%, which is an amount that you won’t notice missing from your paycheck but will make a big difference in your retirement fund. Calculate what your monthly contribution needs to be to max out your annual 401(k) investment and begin with whatever amount you can afford. This means that you don't even have to think about your savings when your monthly paycheck hits. This is likely to result in net savings, given the fact that your retirement income will likely be lower than your current income.Īnother great way to do this is to set automatic contributions for your 401(k). ![]() Since contributions are non-taxable income until withdrawn, they are valuable for saving additional money. Therefore, avoiding over-contribution is important to maximize your investments.Īs previously mentioned, one of the most important things you can do to max out your 401(k) contribution is to make the most of your own income and employer inputs.įirst, leverage your contributions for the tax breaks. Specifically, excess contributions will be taxed at 6% per year as long as they remain in the account. Relative to acting as constraints, exceeding your contribution limit results in an excess tax. Essentially, there are two ways to treat investment limits, either as constraints or as opportunities. These legislative changes are important to understand for the sake of understanding your personal investment limits. ![]() For example, the bracket phase-out for married couples filing jointly increased from $198,000-$208,000 in 2021 up to $204,000-$214,000 in 2022, giving a bit more room for investment. However, the income brackets for traditional IRAs, Roth IRAs and Saver's Credits have increased slightly, giving additional taxpayers the opportunity to contribute more to these retirement accounts. There is no change to the IRA contribution limit, which remains at $6,000 for normal taxpayers and $7,000 for taxpayers over 50. ![]()
0 Comments
Leave a Reply. |