Key Retirement Savings Opportunities Before the Year Ends
As 2024 quickly comes to a close, there’s still time to take advantage of tax-saving strategies for this year. One of the most impactful ways to reduce your tax burden is through retirement savings. Whether you’re contributing to an employer-sponsored plan or an individual retirement account (IRA), there are several opportunities to save on taxes and boost your retirement nest egg.
Employer-Sponsored Retirement Plans
If you have access to a retirement plan through your employer, such as a 401(k), Simple IRA, 403(b), or 457 plan, there’s still time to make contributions that could lower your taxable income for 2024. The deadline to contribute to these plans is typically the last paycheck of the year, so be sure to check with your HR department to ensure your contributions are made before year-end.
Contribution Limits for 2024 For Employer-Sponsored Retirement Plans
Here are the maximum contribution limits for some common employer-sponsored plans in 2024:
- 401(k), 403(b), and most 457 plans: $ 23,000. If you are age 50 or older, you can contribute an additional ‘catchup’ contribution of $ 7,500 for a total of $30,500.
- SIMPLE IRA: $ 16,000. If you are age 50 or older, you can contribute an additional ‘catchup’ contribution of $ 3,500 for a total of $ 19,500.
- SEP IRA: You can contribute up to 25% of your total compensation, or a maximum of $ 69,000, whichever is lower.
Note: If you participate in more than one type of employer-sponsored retirement plan, be mindful of the combined contribution limits. For example, if you contributed to both a 401(k) and a SIMPLE IRA in 2024, the maximum you could contribute would be the greater of the limits for each plan (in this example, the 401(k) maximum would be the combined limit, since it is higher).
IRA Contributions
Another valuable tax-saving strategy is contributing to an Individual Retirement Account (IRA). You can contribute to a Traditional IRA to reduce your taxable income in 2024, or you can contribute to a Roth IRA to benefit from tax-free withdrawals in retirement.
Traditional IRA Contributions
If you’re covered by an employer-sponsored retirement plan (such as a 401(k)), your ability to deduct contributions to a Traditional IRA may be limited based on your filing status and Adjusted Gross Income (AGI).
For more details, refer to the IRS page on IRA Deduction Limits:
Here if you are covered by an employer-sponsored retirement plan
Here if you are not covered by an employer-sponsored retirement plan
Roth IRA Contributions
Roth IRAs, on the other hand, do not offer immediate tax deductions. However, they provide the benefit of tax-free growth and tax-free qualified withdrawals in retirement. Contributions to a Roth IRA are also subject to income limits. For 2024, refer to this IRS page on Roth IRA contribution limits.
Growing your Roth IRAs not only provide you with tax benefits in the future, but it can also provide additional future advantages:
- Beneficiaries inheriting a decedent’s Roth IRA will not pay taxes on these funds. However, if the beneficiary inherits a Traditional IRA, distributions from that IRA are taxable.
- Medicare premiums are based on the taxpayer’s modified adjusted gross income. Distributions from a Traditional IRA is considered taxable income and would increase a taxpayer’s AGI, potentially increasing the taxpayers Medicare premiums. Distributions from a Roth IRA will not impact the taxpayer’s Medicare premiums.
Deadline for IRA Contributions
You have until April 15, 2025 to make a 2024 IRA contribution.
Key Takeaways
- Employer-Sponsored Plans: Maximize contributions before your last paycheck of 2024.
- IRA Contributions: Contribute to a Traditional IRA by April 15, 2025, to lower your 2024 tax bill, or fund a Roth IRA to enjoy tax-free withdrawals in retirement.
- Tax Deduction Opportunities: Remember that Traditional IRA contributions can be deducted depending on your income and filing status. Roth IRAs offer tax-free growth but don’t provide an immediate deduction.
Final Thoughts
The end of the year is a great time to evaluate your tax situation and maximize your retirement contributions. By contributing to employer-sponsored retirement plans and IRAs, you can potentially reduce your taxable income and set yourself up for a more secure financial future. Always check the latest contribution limits. If you are unsure about the best strategy for your situation, please do not hesitate to reach out to us. We are here to help you evaluate your options and create a plan tailored to your financial goals. Whether it is maximizing retirement contributions, understanding tax-savings opportunities, or planning for the future, our team is ready to assist you. Contact us today to get started!
This material is presented solely for information purposes and has been gathered from sources believed to be reliable, however, Landing Point cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Nothing in this presentation is intended to serve as personalized investment, tax, or insurance advice, as such advice depends on your individual facts and circumstances. Advisory services are only offered to clients or prospective clients where Landing Point and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Landing Point unless a client service agreement is in place.