There are a variety of savings options and knowing the benefits of each, as well as how they can all work together, will help you maximize your savings toward your retirement goal.
1. Contribute the Maximum to your IRA Each Year
You still have time to maximize your IRA contributions for the previous year (2022) if you haven’t already. The deadline to contribute for 2022 is April 18, 2023. Contribution limits for 2022 in Traditional or Roth IRAs are $6000 for anyone under 50 years old and $7000 for those over.
On Jan 1st of each year you can begin making contributions for the current year, 2023. The contribution limits for 2023 have increased to $6500 for anyone under 50 and $7500 for those over. It’s a great strategy to first maximize your contributions for the previous year, 2022, before making contributions for 2023.
2. Open or Contribute to Employment-Based Retirement Accounts
Most employers offer a retirement plan such as a 401(k) or 403(b) and match up to a certain percentage of your contributions. It’s usually advantageous to contribute as much as your employer will match. I’m available to review your investment options and advise you on the optimal investment selection within your plan.
If you are self-employed and want more tax advantages, you can open a SEP IRA or Solo 401(k). The 2023 contribution limit for these accounts is $66,000 and how much you can contribute is based on a percentage of your earnings. SEP IRAs are very easy to set up and manage for anyone that is self-employed, whether you have employees or not. Solo 401(k)s are a little more complicated to set up and you or your spouse must be the only employees. One advantage of a Solo 401(k) vs a SEP IRA is that it allows you to have a Roth account with no income limit restriction for making contributions. We can advise, open, and actively manage either of these accounts for self-employed entrepreneurs.
3. Roll Over Previous Employer Sponsored Retirement Plans 401(k) ,403(b), SEP IRA, or Solo 401(k)
Rolling over and consolidating any previous employer sponsored retirement plans is a great way to simplify your finances and invest more efficiently. Rolling over an account into an IRA that we actively manage is quick and easy, and it’s a great way to work toward your retirement goals even when personal savings are tight.
4. Individual or Joint Brokerage Account
Having a taxable account should also be part of your savings and retirement strategy. Taxable accounts have none of the contribution or distribution rules of a retirement account, which allows for greater flexibility for saving and spending your money. Capital gains are taxed in these accounts and I manage these accounts to maximize the advantages of lower taxes through long-term capital gains.
I’m always here to answer your questions, to help you maximize your savings, and develop a strategy toward your retirement goals. Please reach out anytime.
Photograph by: Fabian Blank on Unsplash