People who are saving for retirement will be happy to hear that 2025 is here. For people who don’t have much saved for retirement, the future may look bleak. But there is good news: the Internal Revenue Service is changing how much people can put into 401(k)s and other retirement plans. This will help people who are getting close to retirement.
The most you can put into a 401(k) in 2024 is $23,000, or $30,500 if you’re 50 or older. In 2025, though, those limits will go up. What a great chance for workers! But most of them can’t even afford to max out their payments, let alone save more. So, what can you do to make your work more important?
1. Claim as much of your 2024 401(k) match as possible
A lot of companies will match your 401(k), and they say it’s important to be able to max out your plan. With only a few months left in 2024, you don’t have much time to make sure your efforts are the best they can be.
Look at your savings and spending for the last few months of the year, and then talk to your HR staff to find out how much money you still have. Find out how much extra money you can put in to get matched, and then try to add to your plan.
This advice only works if you have a vesting plan, which means that if you leave your job, you won’t lose the money you put into it. If not, you might be better off putting your money in a personal IRA account. This way, you would have more control over the money you put in and the fees that come with it.
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2. Look for opportunities to reduce your fees
When you open a bank account, the fees are a big problem. You usually can’t change the management fees your plan charges, but you can change the investment fees. To get the most out of your money invested, you should keep these fees in check.
If you have a 1% cost ratio, you pay the fund manager $1 a year for every $100 you put into the fund. This is why it’s important to keep them as low as possible. If the fund you’re using doesn’t let you do this, you might want to switch to a cheaper strategy. In these hard times, this will help you save more money.
3. Plan your strategy for 2025
There are only a few months left in 2024, so this may be the most important step. Look at your whole business and figure out which areas you’re not doing enough for and which ones you’re not doing enough for.
Look at your employer-matched accounts, such as 401(k)s, and figure out how much it would cost to get the full match. Then, make a plan for how you can pay for it. A payment spread out over twelve months is easier to keep track of than a big payment at the end of the year.
Check your other accounts, like your Roth 401(k) and IRAs, to see which ones are costing you too much money and which ones you could contribute more to because they offer tax breaks or other benefits. This way, you can get the most out of your money when it’s time to cash it out.
People often put more money into tax-deferred accounts, which makes them seem like a good idea. However, you might want to pay your taxes now so that they aren’t a problem when you leave and need the money.
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