Saving for retirement can be tough, especially if you’re starting late or don’t have a lot of savings.
But there’s some good news ahead: starting in 2025, the Internal Revenue Service (IRS) will allow you to contribute more money to your 401(k) and other retirement accounts. This could help workers save more, especially those who are close to retiring.
In 2024, you can put up to $23,000 into a 401(k), or $30,500 if you’re 50 or older. But in 2025, these limits are going up, so it’s a great chance for workers to save more.
However, many people can’t even max out their 401(k) contributions, let alone save extra money. What can you do to make the most of this opportunity? Here are some practical steps.
1. Claim the Full 401(k) Match
Many employers match your 401(k) contributions, and this is free money that can help you build your retirement savings faster. With just a few months left in 2024, it’s important to make sure you’re taking full advantage of this match.
Check your savings and spending for the last few months of the year. Then, talk to your HR department to find out how much you can contribute to get the full match. This is a great way to boost your retirement savings with no extra cost to you!
However, this advice only works if you have a “vested” 401(k) plan, meaning that if you leave your job, you won’t lose the money you’ve contributed.
If your plan isn’t vested, you may want to consider putting your money into an individual retirement account (IRA), which offers more control over your money and its fees.
2. Minimize Fees in Your Investment Account
When you open a retirement account, one of the challenges is the fees that come with it. These fees can eat away at your savings over time.
While you might not be able to change the administrative fees your plan charges, you can control the investment fees. Investment funds charge a fee called the “expense ratio,” which is a percentage of the money you put in.
For example, a 1% expense ratio means that for every $100 you invest, you’ll pay $1 in fees.
To get the most out of your investments, try to keep these fees as low as possible. If your current fund has high fees, consider switching to one with a lower expense ratio. This simple change can help you save more in the long run.
3. Plan Your 2025 Strategy
With only a few months left in 2024, now is the time to start planning for 2025. Look at your entire retirement portfolio, and figure out which areas you need to improve. Start with your employer-matched 401(k).
Make sure you’re contributing enough to get the full match, and consider how you can spread your contributions out over the year to make them more manageable.
Next, check other retirement accounts like Roth 401(k)s and IRAs. Some of these accounts offer tax benefits or other perks, so it’s important to review which ones you can contribute more to.
Paying attention to these details now can help you maximize your retirement savings when you retire.
Saving for retirement may seem hard, especially if you haven’t saved much yet. But with the IRS raising contribution limits in 2025, you’ll have a great chance to put more money away for your future.
By claiming the full 401(k) match, reducing investment fees, and planning your 2025 strategy now, you can make the most of these opportunities and set yourself up for a more secure retirement.
What is the maximum I can contribute to my 401(k) in 2024?
In 2024, you can contribute up to $23,000 to your 401(k), or $30,500 if you’re 50 or older.
How can I get the most out of my 401(k)?
Make sure to claim the full employer match and contribute as much as you can. Talk to your HR department for help.
What are the best ways to reduce fees in my retirement account?
Look for low-cost investment funds and avoid high expense ratios, which can reduce the amount you save over time.
Should I contribute to a 401(k) or an IRA?
If your 401(k) offers an employer match, try to contribute enough to get the full match. Otherwis
What’s the benefit of contributing to a Roth 401(k)?
A Roth 401(k) allows you to pay taxes on your contributions now, so you don’t have to pay taxes when you withdraw the money in retirement.
