While taxes are an inevitable part of financial life, strategies exist to minimize contributions to the IRS.
Individual Retirement Accounts (IRAs) provide a vital avenue for tax-conscious individuals to safeguard their income
A standout option is capitalizing on the generous limits of 401(k) plans. Those below 50 years can stash away up to $22,500, while those 50 and older can invest $30,000. In contrast, Individual Retirement Accounts cap at $6,500 for the under-50s and $7,500 for the over-50s.
Despite the challenge of maxing out 401(k) contributions for many, even modest deposits serve to reduce taxable income. For example, if you’re in the 22% tax bracket and can allocate $5,000, you effectively trim your 2023 tax bill by $1,100. Individual Retirement Accounts offer a flexible advantage: contributions for 2023 can be made up until mid-April 2024. This accommodates scenarios like year-end bonuses payable in January.
401(k) contributions must be completed by December 31 to be counted
Hence, the present moment is opportune for boosting 401(k) allocations. Modifying contributions is a straightforward process, often achievable online. Keep in mind that changes might take a few pay cycles to actualize.
Employer matching to 401(k) accounts is a common perk, yet these contributions don’t factor into the aforementioned limits. If you’re nearing the $22,500 threshold and have an additional $500 in employer matches on the horizon, it’s advisable to maximize your contributions.
Paying taxes is a certainty, but savvy financial planning, particularly in maximizing 401(k) contributions, can yield substantial benefits during tax season. Choosing the right credit or debit card is equally pivotal. A top pick, favored by our experts, boasts a 0% intro APR for 15 months, and an impressive cash back rate of up to 5%, all sans an annual fee. It’s a choice our experts stand behind personally.