New contribution limits mean more room to save tax-advantaged. Here is what changed and how to use every account you have access to.
Retirement accounts are the most powerful tax-advantaged vehicles available to most taxpayers, and the contribution limits adjust annually. Using every dollar of available room is one of the highest-return moves you can make.
The 401(k) and similar employer plans allow employee contributions well into five figures, with an additional catch-up for those 50 and older. Employer matches and profit-sharing contributions sit on top of your own limit, so the total plan contribution ceiling is substantially higher.
Traditional and Roth IRAs have lower limits but offer flexibility. The choice between traditional (deduct now, tax later) and Roth (tax now, tax-free growth) depends on whether you expect your tax rate in retirement to be higher or lower than today.
The SEP-IRA and Solo 401(k) are the workhorses for the self-employed, with contribution limits tied to a percentage of compensation. For a profitable solo business, these accounts can shelter six figures of income annually.
The strategy is not just to contribute but to contribute early in the year. Money invested in January has twelve more months of compounding than money invested in December — repeated over a career, that timing difference is enormous.
Schedule a private consultation with the TAFS Financial team and turn insight into action.
Schedule a Strategy Call