Make the Most of Your 401(k) in 2024

As 2024 ramps up, now is the perfect time to evaluate how your 401(k) plan can help you reach your long-term financial goals. While the standard advice is to contribute as much as possible, the “max out your 401(k)” approach may not work for everyone. This article provides an alternative perspective on strategically leveraging your 401(k) this year based on your unique situation and priorities.
 

Don’t Focus So Much on Contribution Limits  

The International Revenue Service (IRS) increased the 401(k) contribution limits to $23,000 for 2024, up from $22,500 last year. But just because you can put more in doesn’t mean you necessarily should. Contributing the maximum amount makes sense if you can afford it and want to turbocharge your retirement savings. However, for some, maxing out may mean sacrificing other important financial goals.

Instead of fixating on the limits, determine how much you can contribute while still achieving your other key goals like paying off debt, saving for a home, or building an emergency fund. Even contributing 5-10% of your income can help your money grow substantially over time through the power of compounding returns.
 

Consider Other Savings Vehicles Too  

While 401(k)s are popular for their tax benefits and employer matches, don’t put all your eggs in one basket. Consider contributing to an Individual Retirement Arrangement (IRA) as well, which provides more investment options and flexibility. Health savings accounts also offer unique tax advantages to save for medical expenses.

Having a diversified set of accounts provides more tax efficiency in retirement and an opportunity to invest based on your preferred time horizons and risk tolerance levels. Meet with a financial advisor to develop an integrated retirement plan that leverages all available accounts.
 

Don't Obsess Over Your Balance

It's tempting to frequently check your 401(k) balance to see how much it's growing. But short-term fluctuations in the market can be deceiving.  Your balance is less important than whether you contribute enough and make smart investment decisions.

Rather than making changes based on market ups and downs, review your 401(k) strategy only once a year or if there are significant changes in your life. Rebalance your investments if needed to maintain your target allocations, but otherwise, contribute consistently and stay the course. Your future self will thank you.
 

Make 2024 the Year of Progress, Not Perfection

While maxing out your 401(k) may be the ideal, don't beat yourself up if you can't achieve that this year. Focus instead on making steady progress by contributing a little bit more, automating deposits, and investing for the long run.  

Even modest progress made consistently over time can add up to something great. Stay flexible in your approach and make changes when needed to keep your retirement savings on track to provide income for your future needs. Progress, not perfection, is the key.

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It's always a good idea to consult with tax professionals or financial advisors to make sure you're making the best decisions for your specific financial situation. They can provide personalized advice and help you navigate the complexities of retirement savings and tax implications. Talk with a tax advisor now!