Maximize Tax-Advantaged Accounts!

With year-end approaching, it’s the perfect time to review your financial strategy. Yesterday, I discussed with my team how tax-advantaged accounts can build wealth and reduce taxes. Have you fully maximized their benefits? Let’s break it down.

WHAT ARE TAX-ADVANTAGED ACCOUNTS?

Tax-advantaged accounts are savings or investment vehicles that offer tax benefits, helping you keep more of your hard-earned money. The most common types include:

• 401(k). Employer-sponsored plans often include matching contributions—a powerful way to grow your savings.
• Traditional IRA. Contributions are tax-deductible, and growth is tax-deferred.
• Roth IRA. Contributions are made with after-tax dollars, but qualified withdrawals are tax-free.
• Health Savings Accounts (HSAs). HSAs offer triple tax advantages: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
• 529 Plans. These plans are designed for education expenses and allow your contributions to grow tax-free.

STEPS TO MAXIMIZE TAX-ADVANTAGED ACCOUNTS

1. Contribute to Employer-Sponsored Plans. Contribute enough to your 401(k) to get the full employer match—it’s free money for your retirement.
2. Understand Contribution Limits. For 2024, the contribution limit for 401(k)s is $23,000 (or $30,500 if you’re over 50). For IRAs, it’s $7,000 (or $8,500 if you’re over 50). Make sure you’re contributing as much as you can afford.
3. Diversify Between Traditional and Roth Accounts. Balancing tax-deferred and tax-free growth helps manage retirement taxes. A financial advisor can guide the right mix for your goals
4. Leverage HSAs for More Than Healthcare. HSAs are great for medical expenses but can double as a retirement tool. After 65, funds can be used penalty-free for any expense (non-medical withdrawals are taxable).
5. Save for Education. Saving for a child’s education? 529 plans are smart. Check your state’s tax rules for potential deductions or credits.

ARE YOU LEAVING MONEY ON THE TABLE?

Here are some common signs you’re not fully leveraging these accounts:

• Not Taking Full Advantage of Employer Match. If you’re not contributing enough to get the full match, you’re leaving free money on the table.
• Overlooking Roth Options. Depending on your income, Roth IRAs or Roth 401(k)s can offer significant long-term benefits.
• Underfunding Your HSA. If you’re only using your HSA for current expenses, you might be missing its potential as an investment vehicle.
• Neglecting Catch-Up Contributions. For those over 50, catch-up contributions allow you to save more each year.

TIME FOR ACTION Maximizing tax-advantaged accounts builds wealth and lowers taxes. Unsure if you’re on track? A financial advisor can help you review goals, optimize contributions, and secure your financial future. The earlier you act, the greater your potential for growth—and the more secure your financial future will be.