We recommend you save 12% to 15% of your pay each year for retirement, including employer contributions if you're investing in a retirement plan at work.
An IRA can offer tax benefits, either immediately or when you withdraw from it. If you're not covered by an employer retirement plan, you can deduct the entire amount of a traditional IRA contribution on your income tax return. If you are covered by a retirement plan, your income will determine whether your contribution is deductible.
If you participate in a 401(k) at work, consider opening a Roth IRA. A Roth IRA offers tax-free growth now and tax-free withdrawals in retirement—which, down the road, could help you develop a tax-effective strategy for withdrawing from your retirement accounts.
For both traditional and Roth IRAs, the annual contribution limits for the 2023 tax year are $6,500 for those younger than 50 and $7,500 for those age 50 and older. The annual contributions for the 2024 tax year are $7,000 for those younger than 50 and $8,000 for those age 50 and older.
For both traditional and Roth 401(k)s, the annual contribution limits for the 2023 tax year are $22,500 for those younger than 50 and $30,000 for those age 50 and older. For the 2024 tax year, they are $23,000 for those younger than age 50 and $30,500 for those age 50 and older.
