3 Best Retirement Accounts for 2024
Many people see the start of a new year as a time of change in their lives. This may include getting organized, paying off debt, creating a new budget, etc. It’s also a good time to review your retirement strategy or create a savings plan if you haven’t already started.
One of the first things you need to do is decide which retirement account to use. Here are the three best options for 2024:
1. 401(k)
A 401(k) is a great place to start if you qualify for a 401(k) match. This is free money given to you by your employer to contribute to your retirement account. If you are one of them, insist that it be your top priority by 2024.
If you’re not sure how the company matching formula works, check with your employer. Typically, you can get $1 or $0.50 for every dollar you put into your retirement account, up to a certain percentage of your income. Once you know this, figure out how much you need to set aside each pay period to claim the full match. Try saving at least this much in 2024.
Even if your company doesn’t offer a match, a 401(k) can still be a great home for your savings as long as the fees aren’t too high and it offers the investment options you want. In 2024, you can contribute up to $23,000 to your 401(k) if you are under 50, or $30,500 if you are 50 or older. This makes it a strong contender for people looking to set aside a large sum for retirement.
2. IRA
IRAs are a great option for people who don’t have access to a 401(k) through their employer. It’s also suitable for people who want more freedom to invest how they want, without being restricted by their employer on the number of funds they choose.
IRAs have lower contribution limits. By 2024, it will be just $7,000 for adults under 50 and $8,000 for adults over 50. However, you are free to invest in almost anything, which gives you much more control over how much you pay in fees.
You can also choose when to pay taxes on your savings. Traditional IRAs offer a tax break in the year you make your contributions, but you have to pay taxes on withdrawals in retirement. This may be a good fit for people who expect to be in a lower tax bracket when they retire. If not, consider a Roth IRA. You pay taxes on your contributions up front, but you can take tax-free withdrawals in retirement.
3. Health Savings Account (HSA)
Health Savings Accounts (HSAs) aren’t really retirement accounts, but they can be used that way if you want. Contributions to this account reduce your taxable income for the year, just like 401(k) and traditional IRA contributions. But as a bonus, you can take tax-free medical withdrawals at any age.
Only people enrolled in an individual health insurance plan with a deductible of $1,600 or more or a family plan with a deductible of $3,200 or more can contribute to an HSA this year. You can save up to $4,150 for a qualified individual plan and $8,300 for a qualified family plan. And if you’re 55 or older, you can add an additional $1,000 to this limit.
If you plan to use this money for retirement savings, avoid withdrawing money for medical expenses if possible. Instead, save in a savings account. You should also consider investing your savings so that you can put that money to further use.
You can use more than one.
You are free to combine two or more of the above retirement accounts, if that’s better for you. For example, you could save the full match amount in your 401(k) until you claim it. Then, if you convert it to an IRA and have maxed out that money, you can convert it to an HSA if you qualify.
As we head into 2024, make sure you have some sort of strategy in place. Without a strategy, you risk missing out on valuable savings opportunities, which can significantly delay your retirement plans.