🚀 How I build more wealth with multiple retirement accounts
Optimize your investment strategy, legally skip taxes, and build more wealth!
Here’s what’s in today’s newsletter:
📝 Main topic: Contributing to both a workplace retirement plan and an IRA
✅ Things To Do: Your Debt-Free Blueprint--How to Get Out of Debt Fast! Workshop
📚 What I’m Enjoying: A recommended TV series, podcast, book, and audiobook
📰 In the News: Stay up to date on personal finance news
📩 ICYMI: Recent newsletters you shouldn’t miss
🎙 Recent podcasts: Dig into loads of topics in the Money Girl archive (824+)
Hi, Friend -
If you participate in a workplace retirement account or are like me with a self-employed plan, you may want even more tax-advantaged benefits. One way is to also contribute to an IRA, which many people don’t realize is possible.
While you can contribute to both accounts in the same year, it can change the tax benefits you qualify for. That’s what I reviewed in Money Girl episode 824, 6 Rules for Contributing to an IRA and a 401(k).
Here’s a summary of what you should know to optimize your retirement saving strategy—but don’t miss the podcast for full details and limits!
1. Your workplace retirement contribution limit.
For 2024, employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Saving Plan (TSP) can contribute up to $23,000 or $30,500 if you're over 50. That's $500 higher than 2023. However, self-employed account limits can be much higher depending on your income.
If you max out a plan at work or contribute enough to maximize employer matching funds and have cash to spare, contributing to an IRA is a smart money move.
2. Your IRA contribution limit.
For 2024, the IRA contribution limit is also $500 higher than 2023. You can contribute up to $7,000 or $8,000 if you're over 50, with at least that much earned income. The limit applies to a traditional or Roth IRA, but not both.
3. Your Roth IRA eligibility.
While a Roth IRA sounds fantastic, there's a catch. You cannot make Roth IRA contributions when you earn over an annual threshold.
4. Your traditional IRA deductibility with a workplace plan.
Your tax deduction for traditional IRA contributions may be reduced or eliminated depending on your income.
5. Your traditional IRA deductibility with a spouse's workplace plan.
Let's say you work for a small company that doesn't offer a retirement plan, but your spouse does have one. That also limits how much you can deduct for your traditional IRA contributions.
If neither you nor a spouse has a retirement plan at work, no limits apply, and you can claim a full tax deduction for traditional IRA contributions.
6. You must track nondeductible traditional IRA contributions.
When you have a retirement plan at work but your income is too high to qualify for Roth IRA or deductible traditional IRA contributions, you may make nondeductible contributions.
While you don't get an upfront tax benefit for them, your investment earnings are tax-deferred until you make withdrawals in retirement. That's still a nice benefit! However, you must file IRS Form 8606, Nondeductible IRAs, when you make nondeductible contributions to a traditional IRA.
Also, I recommend opening a separate IRA account solely for any nondeductible contributions to prevent confusion about which funds have been taxed and which haven't.
💸 Your Debt-Free Blueprint--How to Get Out of Debt Fast! — Workshop Replay for Paying Subscribers
If you missed this 60-minute workshop, it’s available in the archive for paid subscribers (thank you for supporting my work!).
🥰 You can subscribe now (the cost is just $9 / month or $8.25 / month paid annually) and enjoy the event replay as a membership benefit.
»»» But if you prefer not to subscribe, you can purchase the workshop replay separately for $29.
Click here to buy the workshop without subscribing!
🎬 Thank You, Goodnight—The Bon Jovi Story is a four-part rock-u-series on Hulu about the New Jersey band’s epic past and singer, Jon Bon Jovi. I loved learning their backstory and have a new appreciation for their incredible songwriting. Jon is open about his vocal challenges and recent surgery to make a comeback.
🎤 Serial 4 is the fourth season of the multiple award-winning audio podcast that began in 2014. Each season unfolds a true story, and this one is about the history of Guantánamo, which is told by people who worked and lived there. I learned a lot from this excellent and somewhat disturbing show.
📕 River of the Gods: Genius, Courage, and Betrayal in the Search for the Source of the Nile is a New York Times Bestseller I’m really enjoying. It’s about the perilous quest to discover the Nile River’s headwaters in the African interior in the 1800s.
📚 I’m listening to Beyond Measure: The Hidden History of Measurement from Cubits to Quantum Constants, a surprisingly fascinating book about how measurement has invisibly shaped the world. Author James Vincent takes you from ancient Egypt to the present day, exploring how measurement has been used in our quest for knowledge and as a tool for oppression.
🗞 Interest rates were left unchanged this week, and the Fed said they aren’t likely to hike them even if inflation takes longer to tame, which sent stock markets higher!
🗞 Today’s home prices are 24 times higher than in 1963, but inflation is only 10 times higher, according to a new survey.
🗞 Most noncompete clauses in nationwide employment contracts have been banned by the Federal Trade Commission.
🗞 Airlines must issue cash refunds automatically when flights get canceled, luggage gets delayed, and onboard services you purchase aren’t available, according to a new ruling from the White House.
🎧 824: 6 rules for contributing to an IRA and a 401(k)
🎧 823: Understanding Bitcoin: Its history, halving, and controversy
🎧 822: Investing by lump sum versus dollar cost averaging (DCA)
🎧 821: 4 strategies to earn more interest on savings
🎧 820: 10 rules for successful investing you should know
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