You’ve likely heard how important it is to save up as much as you can for retirement. After all, you don’t want to end up overly dependent on Social Security once you retire. Even if you get the absolute most out of Social Security benefits, they’ll only replace around 40% of your pre-retirement income. And, many seniors will need more income than that to get by. That’s where your nest egg comes in. The more you save, the better off you are in retirement… Every little bit counts.
If you have access to a 401(k) or a similar retirement account thanks to your job, you may have been striving to contribute the maximum amount allowed this year. If you’re under 50, that would be $22,500. People older than 50 can contribute up to $30,000, thanks to a $75,000 “catch-up” contribution. Next year, however, you’ll have the opportunity to save even more money in your 401(k).
Next year, most workers will be able to save up to $23,000 in their 401(k) retirement plan accounts in 2024. If you can afford to max out that year, that extra $500 is an opportunity you don’t want to pass up. What’s more, the contribution limit to an individual retirement account will also increase by $500, reaching $7,000.
What Does This Mean For You?
The more you contribute to your 401(k), the more retirement income you stand to gain. But, that’s not the only reason to try to max out your account in 2024. If you have a traditional 401(k), every dollar you manage to contribute to that plan is income that the IRS can’t tax. Even if you have a Roth 401(k), there’s still a tax benefit. Although Roth 401(k) contributions are made with after-tax dollars, investment gains get to enjoy tax-free retirement. Aditionally, withdrawals can be taken tax-free.
All of this to say, 401(k) contribution limits rising next year is definitely a good thing. It gives savers the opportunity to save even more, and to shield even more of their income from taxes. However, realistically, this higher cap for 401(k) contributions will only benefit the small percentage of workers who actually do max out their account.
In 2022, only 15% of people enrolled in 401(k) accounts from Vanguard Group saved the maximum amount. So, this change won’t affect many savers. Maxing out a 401(k) account on an average income is difficult. If you can’t max out your account, though, you should still do the best you can to increase your contribution rate next year: Doing this can still go a long way. And if you’re part of the percentage of savers who can afford to max out your 401(k), and want to save up even more for retirement, we have even better news for you…
Consider an Annuity
If you’re interested in the possibility of tax-free sources of income, a fixed indexed annuity (FIA) may be helpful to you. Many pre-retirees choose to “rollover” the money from their employer-issued 401(k) or other plan into an FIA instead. An FIA isn’t a retirement plan account, it’s an insurance product. As a result, it follows different rules. It can, however, be used as a source of retirement income.
Unlike a 401(k), which has no guarantee of lasting your whole life, a fixed indexed annuity can offer you a guaranteed* income stream for life. By rolling over your 401(k) into an annuity, you may be able to ensure a steady, reliable source of retirement income. This can be vital for maintaining a comfortable standard of living without the fear of outliving your savings, a common fear amongst retirees nowadays.
And did we mention that an FIA has no government-issued contribution limit? If you’ve maxed out your other options and want to generate even more interest on your retirement savings, an FIA can help you that way, too.
Diversifying your retirement portfolio is a wise strategy to mitigate risks. By adding a fixed indexed annuity to your retirement strategy, you may be able to create a balance between market-based investments and more conservative, stable options, potentially enhancing the overall performance of your retirement savings. Have you heard of the Rule of 100? It’s a guideline for investing, that states that the older you are, the more conservative you should be with your money. For example, if you’re 65 years old, at least 65% of your retirement savings should be kept in “safe money” options like an annuity When you’re 70, at least 70% should be protected. And so on…
And, did you know that right now, one of our annuity products is offering a limit-time-only, 40% bonus? This means that with the right type of annuity, for every $100k you contribute, an additional $40k could be added to your income and death benefit. Contact us to learn more about this new bonus and these products.
*Backed by the claims-paying ability of the carrier.
Sources: Wall Street Journal, Nasdaq,
