Retirement 2024: IRS Only Increases 401(k) Contribution Limits $500 — 3 Better Ways To Save
Starting in 2024, the IRS is raising retirement contribution limits to keep up with inflation. Many people might want to add more money to their accounts.
Here are the IRS’ guidelines for retirement contributions in 2024, as reported by CNBC:
- Contribution limits to 401(k) plans in 2024 have increased to $23,000, up from $22,500 for 2023. Catch-up contributions for those age 50 and older will remain unchanged at $7,500.
- The new contribution limits also apply to 403(b) plans, most 457 plans, and Thrift Savings Plans.
- Contribution limits to ROTH IRA plans in 2024 have increased to $7,000, up from $6,500 for 2023. Catch-up contributions will remain unchanged at $1,000.
Even better news, more Americans will now be eligible to contribute to a Roth IRA in 2024. The adjusted gross income phaseout range for Roth IRA eligibility is rising to between $146,000 and $161,000 for single individuals and heads of households, up from between $138,000 and $153,000 in 2023. For married couples filing together, that range will rise to between $230,000 and $240,000 in 2024, up from between $218,000 and $228,000 in 2023.
Saving as much as you can as early as you can is key when it comes to compounding. The earlier you start, the greater your investments and the larger your retirement nest egg. But, there are plenty of other ways to save money, too.
3 Better Ways To Save Money Besides a Retirement Account
If you don’t want to be limited to the contribution limits of retirement accounts, you have other options. Outlined below are some other, better ways to save for a retirement account:
1. Real Estate Investment
Investing in real estate is a smart and sensible way to save for retirement. One form of real estate investing is purchasing REITs (Real Estate Investment Trusts), which is defined as a company that owns, operates, or finances income-generating real estate.
Mark Hebner of Index Fund Advisors in Irvine, California explained that “the best option for investors is to buy into a fund that itself invests in real estate investment trusts (REITs) around the world. REITs are extremely cost-effective, transparent, and liquid. Gaining access to REITs through a mutual fund allows investors to gain global diversification in real estate in a cost-effective way.”
Alternatively, you can purchase an investment property that you live in but rent out for extra income. This is a smart way to lower your monthly housing costs and still maintain a home that’s within your means during retirement. You could purchase property and then sell it later on to make a profit, as well.
2. Invest in a Small Business
A small business investment doesn’t necessarily mean that you’ll need to start your own business. It can mean that you’re an investor or partner, contributing money toward the creation or growth of a business in exchange for an ownership stake, shares or equity.
You can choose to become an entrepreneur and create a business yourself or invest in someone else’s small business. One great reason to invest in a small business for your retirement is that there’s no cap on the return on investment (ROI), which can oftentimes result in larger gains than other types of investments. Whichever path you choose, it’s also important to remember that business investments come with a lot of risk and there’s no guarantee on your returns.
3. Tax Deferred Annuities
Annuities are another smart way to achieve your retirement savings goal. They’re typically offered through insurance companies and provide an opportunity to defer taxes with varied investment opportunities. Annuities are available with a fixed interest rate, an indexed interest (based on the performance of a specific index), and a variable rate (which is tied to the performance of the underlying investments).
One of the best features of an annuity is that the money deposited grows tax-deferred now and isn’t taxable until you withdraw money in retirement. In addition to tax deferral, annuities can provide a guaranteed income stream, ranging from years to a lifetime, depending on which type you purchase. It’s worth noting that there can often be fees associated with annuities, so it’s important to evaluate your financial situation before investing in one.
More From GOBankingRates
- 11 Signs You're Struggling Financially -- and 3 Ways To Get Back on Track
- 11 Uncommon Investments That Can Actually Make You A Lot of Money
- 3 Things You Must Do When Your Savings Reach $50,000
- The 4 Fastest Ways To Destroy Your Credit
