How Much Can I Contribute To My 401k? (#305)

Financial Advisors Say The Darndest Things

Understanding 401(k) Contributions and Benefits

In this enlightening episode of Financial Advisors Say The Darndest Things, your host, AB Ridgeway, Certified Private Wealth Advisor, dives deep into the world of 401(k) plans. Many investors are unfamiliar with the nuances of retirement accounts, particularly the differences between an IRA and a 401(k). This episode sheds light on these topics, ensuring that you, as a savvy listener, are well-equipped to make informed decisions about your retirement savings.

Key Takeaways:

1. The Importance of Knowing Your Retirement Accounts: It's crucial to understand the different types of retirement accounts, including 401(k)s, IRAs, Roth IRAs, and 403(b)s. Each account type has distinct rules, benefits, and tax implications.

2. 401(k) Contribution Limits for 2024: For individuals under 50 years old, the maximum contribution limit is $23,000. For those 50 and older, the limit increases to $30,500. These limits are adjusted annually for cost-of-living increases.

3. Tax Implications of 401(k) Withdrawals: Contributions to a 401(k) are made pre-tax, and taxes are only applied when withdrawals are made. All withdrawals from a retirement account are taxed at ordinary income rates, not the more favorable long-term capital gains tax rates.

Quotes from the Episode:

1. "Most investors don't know the difference between an IRA and a 401(k), let alone how much to contribute to one."

2. "All retirement accounts are not created equal. The rules for contributions and withdrawals can vary significantly."

3. "One decision about how you take that money out can destroy your 401(k). I've seen it happen."

Resources Mentioned:

- Episode 303: Maximizing Your 401(k): Understanding Contributions, Withdrawals, and Tax Implications. Dive deeper into the specifics of 401(k) plans and how to make the most out of your retirement savings.

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*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.