Traditional pensions managed by employers are becoming scarce outside of public service and certain unionized industries. The 401(k) plan transfers saving and investing responsibilities to employees. When companies offer 澳洲幸运5官方开奖结果体彩网:employer-sponsored plans, workers mus✃t strategize to plan for ret🃏irement income.

Contribution Limits

For 2024, the 澳洲幸运5官方开奖结果体彩网:maximum contribution limit for employees who participate in 401(k), 403(b)s, most 457 plans, and the federal government's Thrift Savings Plan is $23,000, increasing to $23,500 in 2025. There's also a 澳洲幸运5官方开奖结果体彩网:catch-up contribution of up to $7,500 in 2024 and 2025, allowed only if you're 50 or older.

Due to changes implemented by 澳洲幸运5官方开奖结果体彩网:SECURE 2.0, a higher catch-up contribution limit of $11,250 applies for employees aged 60, 61, 62, and 63 in 2025. Employers can contribute to your 401(k), although not all do. For 2024, the combined annual limit for your and your company's contributions is $69,000, increasing to $70,000 for 2025.

Roth 401(k) vs. 401(k)

Employers may offer a choice between a traditional 401(k) and a 澳洲幸运5官方开奖结果体彩网:Roth 401(k). The contribution limits are the same, but the Roth 401(k) is funded with after-tax dollars, as is a Roth IRA. The traditional 401(k) gets you an immediate tax break. Your gross income is reduced by the amount you pay into your account. You'll only owe taxes on that money when you withdraw it.

The Roth IRA collects the income tax owed immediately. You won't owe more tax when you withdraw, whether the money you paid or the profits earned. The traditional option gives workers a useful tax break during their working years. The Roth provides a tax-free source of retirement funds.

Max Out

Can you afford to save the maximum? If you 澳洲幸运5官方开奖结果体彩网:cannot afford to contribu🌱te the maximum amoꦿunt, due to other expenses such as mortgage or utilities, consider supplementing whatever you can contribute with any bonuses or 澳洲幸运5官方开奖结果体彩网:profit-sharing payments you may receive.

Try to be consistent with your savings. Set a specific per-paycheck amount and do not change it unless necessary. Some experts advise 澳洲幸运5官方开奖结果体彩网:saving a minimum of 15% of your 澳洲幸运5官方开奖结果体彩网:gross pay. T🎉his amount with reasonable investment returns, will help fund a c💜omfortable retirement.

An employer match will 澳洲幸运5官方开奖结果体彩网:greatly boost retirement savings. Many employers contribute the same amount you contribute, or a percentage, like 3%. Some employers elect to 澳洲幸运5官方开奖结果体彩网:match contribution☂s in company stock. While this is not always as desirable as cash, it shouldn’t dissuade you from maximizing your match.

Required Minimum Distributions (RMDs)

As with other retirement savings plans, 401(k)s have RMDs.As of January 1, 2023, owners must start taking RMDs at age 73, whether they need the money or not. There's a 25% penalty for failing to withdraw the correct amount.

RMDs don't apply if an employee remains working for the same employer that sponsors the plan. Roth 401(k)s previously had RMDs, but as of 2024, they will not.

Vesting

An employer may require a certain number of years of service before its matching contributions belong to the employee. The U.S. 澳洲幸运5官方开奖结果体彩网:Department of Labor requires full vesting after six years of service. There are two types of 澳洲幸运5官方开奖结果体彩网:401(k) vesting schedules:

• 澳洲幸运5官方开奖结果体彩网:Cliff vesting refers to an employee going from owning 0% of matching contributions to 100% ownership after a specific amount of time.
• 澳洲幸运5官方开奖结果体彩网:Graduated vesting refers to an employee owning an increasing portion of the matching contributions until they eventually own all.

Types of Fees

• Investment Advice: Some employee retirement plans include investment advice from independent professionals. Unfortunately, this advice may cost you 1% to 2% of your fund annually.
• Investment Expenses: Expenses vary based on the type and the 澳洲幸运5官方开奖结果体彩网:costs of the investments held. Many fund families offer 澳洲幸运5官方开奖结果体彩网:no-load funds. 澳洲幸运5官方开奖结果体彩网:Exchange-traded funds commonly offer low-cost 澳洲幸运5官方开奖结果体彩网:index funds. Investors must evaluate all savings options including 澳洲幸运5官方开奖结果体彩网:annuities and 澳洲幸运5官方开奖结果体彩网:target-date funds.

Additional Savings

What do you do if you have maxed out your 401(k) but want to save even more? There are options available, including 澳洲幸运5官方开奖结果体彩网:traditional IRAs and ♏Roth IRAs. You may also consider buying and investing in annuities or opening a 澳洲幸运5官方开奖结果体彩网:Health Savings Account if you have a 澳洲幸运5官方开奖结果体彩网:high-deductible health plan.

The Bottom Line

Tax-advan🐼taged retirement savings plans are a tax break for everyday workers. Careful saving may not necessarily be a gateway to becoming independently wealthy but it can go a long way toward ensuring a comfortable retirement. Employees should contr🌜ibute as much as possible to their 401(k), 403(b), or IRA.