Are you starting to work on your taxes? If you are, you might be disappointed that your tax refund is less than what you expected. One reason for this could be that you earned more interest income or wages, causing you to pay more taxes.
Are You Interested in Avoiding a Reduced Tax Refund Next Year? (Photo from: NPR)
But don’t worry, there’s a simple solution to avoid this next year: max out your retirement account. By putting your money into an IRA or 401(k), you could potentially receive more income for your retirement and shield more of your income from taxes.
To do this, you need to know the contribution limits for 2024: $7,000 for an IRA if you’re under age 50, $8,000 if you’re 50 or older, $23,000 for a 401(k) plan if you’re under 50, and $30,500 if you’re 50 or older.
The good news is that you may be entitled to a match if you have a 401(k) plan through your employer. And even if you put money into a Roth IRA or 401(k), you’ll still enjoy some tax benefits.
The more money you can put into a traditional IRA or 401(k), up to the limits, the more money you might get back from the IRS in refund form next year. So, it’s worth examining your spending and finding ways to fund one of these accounts as generously as possible.
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