Putting away part of every paycheck for your future is a powerful way to set yourself up for financial success.
If you have a 401(k), 403(b), or 457 plan, you can contribute $22,500 in 2023. If you’ll be at least age 50 by December 31 of 2023, you can make an additional contribution of $7,500, for $30,000 in total.
A Roth 401(k) or 403(b) plan is available too. After-tax dollars fund these accounts (contributions are not deductible), and upon withdrawal in retirement, the original contribution plus earnings are tax-free. Roth 401(k) plans make sense if you expect to be in the same or a higher tax bracket in retirement, since you get no tax deduction for the contribution, and withdrawals will be free of tax to both you and your heirs. In general, it’s a good idea to hold some of your savings in a Roth IRA or Roth 401(k) to allow for cash flow flexibility later on. If you are a small business owner or your company allows in-plan Roth conversions, you can contribute up to $66,000 to a qualified retirement plan in 2023.
Through the miracle of compound interest and wise investment choices, you’ll be amazed at how your account will grow.