Are you imagining a serene retirement on a beach with your favorite tropical drink, only to be interrupted by distressing thoughts that bidding farewell to the workplace is impossible? You’re not alone. According to CNBC, 56% of Americans are not close to feeling comfortable to retire.
Yet 11% of future retirees are maxing out their retirement savings, according to the CNBC money survey. You can do the same with your own financial plan.
Whether you’ve been putting away retirement funds for several years or you’re a newcomer to this journey, keep reading to learn how to max out your retirement savings with these proven five tips.
1. Match Your Employer’s 401(k) Contributions
Beginning your retirement savings plan with your employer is a great start. It’s not unusual for an employer-sponsored 401 (k) to match dollar for dollar or up to a certain percentage.
Have you considered your contribution goals to maximize your 401(k) savings? For the 2023 tax year, individuals under 49 can contribute up to $22,500, and those aged 50 and above can contribute $30,000. But there is a boost for the tax year 2024, $23,000 for ages 49 years and younger. For future retirees 50 years of age and older, $30,500 is the new 2024 tax year limit.
A successful retirement is possible, and you don’t have to do it alone. You can work with one of our BLW Wealth Management experts to create your 401(k) contribution plan with ease.
2. Contribute to an IRA (Individual Retirement Account)
Compound tax-free earnings are the most delightful proven retirement benefit with your very own IRA. Splitting the contributions of all your retirement accounts is helpful when it comes to maxing out your retirement savings. But to ensure no double taxing or penalties, the 2023 tax year IRA contribution is maxed at $6,500 and $7,000 for tax year 2024.
To help with catching up with retirement contributions, if you’re 50 years old and up, you’ll continue to have the option to add $1,000 more per year.
3. Contribute to a Roth IRA
Unlike the traditional IRA that taxes you on each withdrawal during retirement, a Roth IRA is the opposite. Placing after-tax funds into a Roth IRA allows you tax tree withdrawals during retirement. The money in a Roth IRA grows tax-free in compound interest.
The Roth IRA 2023 tax year contribution is maxed at $6,500 and $7,000 for tax year 2024. Those who are at the minimum age of 50 years old will continue to have the option to add $1,000 more per year.
There is no mandatory age to take out funds from your Roth IRA. However, you must wait at least five years before withdrawing any funds to avoid penalties.
4. Take Advantage of a Health Savings Account (HSA)
You are usually paying something medical-related out of pocket, from co-pays, x-rays, glasses, prescriptions, and more. Many employers contribute a large percentage to an HSA benefit that will grow in interest and can be accessible anytime. You can contribute up to $3,850 for yourself and $7,750 for your entire family for 2023. However, in 2024, it will be $4,150 for singles and $8,300 for a family.
With the catch-up option, 55-year-old future retirees can add an additional $1,000 per year. You can maintain several health savings accounts and change jobs or careers while the HSA remains with you.
5. Invest in a Brokerage Account
If you maxed out all of your retirement savings accounts and still need other financial options to meet your retirement goals, a brokerage account is a good option.
Brokerage accounts involve planning to pay capital gains tax. However, investing in mutual funds, stocks, bonds, and exchange-traded funds allows for a diverse and prosperous retirement portfolio.
Let Us Help You Design a Retirement Plan Today
Now that you understand how to max out your retirement savings with these five proven tips, are you ready to design your retirement plan?
Need help putting this into place? Contact the office and the advisors at BLW Wealth Management, an affiliated company (which is just fancy talk for KPN and BLW are owned by the same people) can provide independent, fiduciary advice prioritizing your best interests. Contact us today to craft an optimal retirement plan to maximize your financial freedom before and after retirement.