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Maximize Your Retirement Accounts

Maximize Your Retirement Accounts

You might think retirement accounts are a simple tool—a place to stash money while you work so you can enjoy it when you finally stop. But here’s the thing: there’s more to these accounts than meets the eye. With the right strategies, your retirement accounts can do more than help you ride off into the sunset—they can power your financial freedom long before you get there.

But First, A Quick Primer on Retirement Accounts

First, the term retirement account covers a lot of ground. Each type of account comes with its own unique advantages and rules and knowing the differences can make a big impact:

  • 401(k): Often offered by employers, these accounts let you contribute pre-tax dollars, reducing your taxable income now while saving for the future.
  • Roth IRA: Funded with after-tax dollars, your withdrawals in retirement (including earnings) are tax-free.
  • SEP IRA: Perfect for self-employed individuals and small business owners, offering higher contribution limits than a traditional IRA.

Five Ways to Make the Most of Your Retirement Account

1️⃣ Maximize Contributions (and Your Employer Match)

If your employer offers a matching contribution to your 401(k), that’s free money—don’t leave it on the table. Aim to contribute at least enough to get the full match. For 2024, the contribution limit for 401(k)s is $23,000 (plus an extra $7,500 if you’re over 50). IRAs have a $7,000 limit, with an additional $1,000 catch-up contribution for those 50+.

2️⃣ Take Advantage of Tax Benefits

The government incentivizes retirement savings, and there are a few ways to maximize your accounts and minimize the IRS’s cut.

  • Reduce Your Taxable Income Now: Traditional 401(k) and IRA contributions lower your taxable income, which could push you into a lower tax bracket.
  • Grow Tax-Free or Tax-Deferred: With Roth accounts, earnings grow tax-free. With traditional accounts, your growth is tax-deferred until you withdraw.
  • Pay Taxes Now, Not Later: Roth IRAs use funds you’ve already paid tax on, and if you expect to be in a higher tax bracket at retirement, these are a great option.
  • Dabble in A Little of Everything: Consider splitting your contributions between traditional and Roth accounts to enjoy both immediate tax savings and future tax-free withdrawals.

3️⃣ Start Early. (And If You Can’t Do That, Start Now.)

The earlier you start saving, the more you benefit from compound interest—that magical snowball effect where your money earns returns, and those returns earn returns. But if you haven’t started yet, don’t panic. Starting now is better than waiting. You can play catch-up by taking full advantage of annual contribution limits.

4️⃣ Know The Exceptions

In some circumstances, retirement accounts aren’t just for retirement. Depending on the account, you may be able to tap into your savings for other purposes without penalty, such as:

  • First-time Home Purchase: With IRAs, you can withdraw up to $10,000 penalty-free.
  • Education Expenses: Some accounts allow penalty-free withdrawals for qualified higher education costs.
  • Medical Expenses: In certain cases, you can use your funds for medical bills without extra fees.

5️⃣ Stay the Course

Finally, the most important tip: stay consistent. The market will have its ups and downs, but you’re playing a long game. With retirement savings, you have to avoid the temptation to time the market or make emotional decisions during downturns. A diversified portfolio and regular contributions are your best allies. Working with a level-headed advisor doesn’t hurt either.

Retirement accounts are more than just savings vessels—they’re strategic tools for building your money into wealth and securing your future. If you’re not sure how to make the most of yours, let’s talk. We’re here to help you navigate the possibilities and take your savings strategy to the next level. Wherever you are in your retirement savings journey, we’ve got you covered!

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

This information is general and should not be considered tax advice. Investors should consult with a qualified tax consultant as to their particular situation.

Astra Wealth Management, LLC (“Astra”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Astra and its representatives are properly licensed or exempt from licensure.

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