Retirement Savings Strategies: Making the Most of Your Options
As I celebrated my 51st birthday six months ago, I realized I had forgotten to adjust my employer retirement account settings to maximize my contributions for the year. This oversight resulted in me contributing $23,000 to my 403(b) and $23,000 to my 457(b) accounts, missing out on an additional $7,500 that I could have contributed to my 403(b).
Understanding Contribution Limits
It’s essential to understand the contribution limits for each type of retirement account. In my case, I could have contributed up to $30,500 to my 403(b) account, split between the annual limit of $23,000 for all employees under 50 and the additional $7,500 catch-up contribution for those 50 and older. However, not all 457(b) plans have the same rules, and some may allow an additional $7,500 catch-up contribution for people 50 and older.
Exploring Alternative Options
If I want to make up for the missed contributions, I could consider contributing to a traditional IRA. In 2024, the limit is $7,000 for anyone under 50 and a total of $8,000 for those who are 50 and older. Additionally, I could explore other ways to lower my taxable income, such as charitable contributions, contributing to a 529 plan, or utilizing a Flexible Savings Account (FSA) if offered by my employer.
Maximizing Retirement Savings
Having access to multiple retirement savings vehicles is a significant advantage. By understanding the contribution limits and rules for each type of account, I can make the most of my retirement savings opportunities. I’m grateful to have already maxed out my Health Savings Account, and I’m committed to exploring other ways to optimize my retirement strategy.
Seeking Guidance
If you’re unsure about your retirement savings options or have questions about maximizing your contributions, don’t hesitate to reach out to your employer’s human resources department or the investment firm housing your accounts. By taking control of your retirement savings, you can create a more secure financial future.
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