We often hear that it’s very important to save well for retirement so you don’t become overly dependent on Social Security after your career ends. Even if these benefits are not cut across the board due to huge funding shortfalls, they will only represent about 40% of pre-retirement income, assuming you take home an average wage.
However, many seniors need more alternative income. And that’s where your nest egg comes into play. The bigger it is, the more you can buy yourself financial freedom in retirement.
Now, if you have access to 401(k) plan If you participate in a retirement plan through your job or a similar one, you may be trying to contribute the maximum amount allowed this year. If you’re under 50, it’s $22,500. If you’re 50 or older, that’s $30,000 thanks to a $7,500 catch-up clause.
But next year, you’ll have even more opportunities to put money into your 401(k). And if you can afford to make the most of it, it’s an opportunity you don’t want to miss.
You’ll save even more in 2024.
The IRS has announced that 401(k) limits will increase in 2024. In the new year, you’ll be able to contribute up to $23,000 to 401(k), 403(b), and most 457 plans. If you’re under 50, take advantage of the federal government’s Thrift Savings Plan.
The catch-up contribution limit for 401(k) plan participants age 50 and older remains steady at $7,500. Therefore, older workers can put up to $30,500 into 401(k), 403(b), and most 457 plans, as well as thrift savings plans.
![In 2024, you'll have even more opportunities to put money into your 401(k).](https://www.usatoday.com/gcdn/authoring/images/motleyfool/2023/11/02/USAT/71419139007-man-20s-or-30s-smiling-laptop-gettyimages-1354898581.jpeg?width=660&height=428&fit=crop&format=pjpg&auto=webp)
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What are the benefits of maxing out your 401(k)?
The more money you invest in your 401(k), the more assets you have for retirement. But that’s not the only reason to try to hit the max in 2024.
If you’re saving for retirement in a traditional 401(k), every dollar you contribute to that plan up to the IRS’s allowable limit is income that the IRS can’t tax. Therefore, making the most of it can lead to significant savings.
Even if you’re saving in a Roth instead of a traditional 401(k), you can benefit from maxing it out. Contributions to a Roth 401(k) are made with after-tax dollars, but investment gains are tax-free. And withdrawals after retirement are tax-free.
You have more opportunities to build wealth.
All in all, the 401(k) limit increase in 2024 is a good thing. This gives savers the opportunity to protect more of their income from taxes and accumulate a larger nest egg.
However, it is also important to be realistic and recognize that for many savers, increasing contribution limits is not important. It’s very difficult to max out your 401(k) on average income. However, if you can’t max out your 401(k), try your best to increase your contribution rate each year. Doing so can make a big difference, even if your annual contributions aren’t close to the limits set by his IRS.
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