Retirement accounts & 401(k)s will be getting a BIG boost in limits for 2023 due to inflation.

So for those of you nearing retirement, we are going to discuss 3 things you need to think about before you max out your 401(k).

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Disclosures:

0:00 Intro
0:58 Can you afford to max your 401(k)?
2:03 You Need to Analyze Your Employer Benefits
3:33 Why your tax situation makes a difference
4:38 Why you should still contribute when your 401(k) is losing value?…(read more)

LEARN MORE ABOUT: 401k Plans

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As we approach 2023, there’s a significant increase in the 401k contribution limits. For individuals under 50 years, the maximum contribution limit in 2022 is $19,500, whereas it is set to increase to $20,500 in 2023. For those over 50 years, the catch-up contribution limit also goes up from $6,500 in 2022 to $6,000 in 2023. This means that individuals over 50 could contribute up to $27,000 per year to their 401k accounts.

With this significant increase in contribution limits, it’s important to decide whether maxing out your 401k account is the right strategy for you. Here are some factors to consider:

Firstly, contributing more to your 401k account would mean that you’re saving more money for retirement. With increased contributions, you could potentially maximize your retirement income and secure your financial future.

Secondly, 401k contributions, up to the limit, are tax-deductible. This means that you could potentially reduce your taxable income by making the maximum contributions. This could also result in a reduction in your tax bill.

Thirdly, some employers offer matching contributions. It’s important to note that matching contributions are based on your contributions. If you’re not maximizing your contributions, you’re missing out on free money from your employer.

However, there are some downsides to maxing out your 401k account. Firstly, you’d be tying up your money for retirement and would not be able to access it until you reach the age of 59 and a half. Secondly, you could potentially miss out on other investment opportunities by putting all your money in a 401k account.

In conclusion, the increase in 401k contribution limits in 2023 is a great opportunity for individuals to save more for retirement, reduce their taxable income, and possibly receive matching contributions from their employer. However, it’s important to consider the downsides of maxing out your 401k account and make a decision that best suits your financial goals and needs. Consulting a financial advisor could also help in making an informed decision.