3 Win-Win Money Deals for You and ‘You’ll Come’

3 Win-Win Money Deals for You and ‘You’ll Come’

Saving for retirement is like time travel for your personal finances. When you save and invest money, you are sending money to your future self. And every time you rack up credit card debt or take out a loan, you’re borrowing money from your future self. One of the biggest challenges in spending, saving, and investing is: Will the “now you” and “you in the future” be happy with the deal?

If you borrow a lot of money from your future self, you can force your “future self” to work harder to earn more money to pay off the debts. In the worst case scenario, the “future you” may never retire.

But the opposite problem can also occur. If you save and invest every last dollar, if you don’t spend money to have fun and make memories along the way, you may have a lot of money, but not enough time, health, or energy left to enjoy it. .

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Let’s take a look at some money moves that can be a win-win deal for you now and you in the future.

1. Put money into a 401(k) or other retirement account at work

One of the first things you should do in 2024, if you haven’t already, is make sure you’re contributing money to your 401(k) or other work retirement plan. If you get an employer match, try to put in the minimum amount needed to get the full amount matched. (For example, many companies may offer to match 50% of the first 5% of your salary. So if you put in 5% of your salary, you will get an additional 2.5% of salary as matching contributions to the boss.)

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Why this is a good deal for you in 2024: Putting money into a 401(k) or other retirement plan before employment taxes can reduce your taxable income. This will help you relax at tax time. For example, if you are single with an income of $60,000, that means you are in the 22% tax bracket for 2024. So if you put 5% of your salary in 2024 into a 401(k), it will reduce your taxes that income by $3,000, saving you $660 in taxes.

Why it’s a good deal for your “future you”: Saving money for retirement can help your future self have more income in retirement, rather than relying entirely on Social Security.

2. Put the money in a traditional IRA

If you don’t have a 401(k) plan at work, or even if you do, you can put extra money toward retirement in a traditional IRA account. This is another pre-tax account that allows you to reduce your taxable income. For 2024, you can put up to $7,000 into a traditional IRA (with an additional $1,000 “catch-up contribution” if you’re age 50 or older).

If you or your spouse qualify for a 401(k) or other retirement plan at work, you can’t deduct all the money you put into a traditional IRA. There are limits based on income and tax filing status. But depending on your income, if you have extra money, you can put the maximum amount into your 401(k) and still put $7,000 into a traditional IRA.

Why this is a good deal for you in 2024: Traditional IRA contributions — if your income is low enough to qualify — are big tax deductions, because they’re “above the line” deductions that reduce your adjusted gross income. For example, if you and your spouse (married filing jointly) have a combined income of $120,000 and you both have retirement plans at work, you can each put $7,000 into a traditional IRA for in 2024. This will reduce your taxable income by $14,000. Since you are in the 22% tax bracket, reducing your taxable income by $14,000 equals a tax savings of $3,080.

Why it’s a good deal for your “future you”: It’s always a good idea to save more money for retirement, especially if you get a tax break. If you don’t like the investment options in your 401(k), or if you’ve outgrown your 401(k), putting extra retirement savings into a traditional IRA can provide your future self with another source of retirement money.

3. Put the money in a health savings account

One of the biggest expenses for retirees is out-of-pocket health care costs. Not everyone can use a health savings account (HSA), but if you qualify, it can be a great way to pay for health care for “your future.” If you have an HSA-eligible high-deductible health plan (HDHP), here’s how much you can put into an HSA for 2024:

  • Single coverage: $4,150
  • Family coverage: $8,300

Why this is a good deal for you in 2024: There are no income limits on HSA contributions. So if you’re a high earner whose income is in the “phase-out range” for deducting traditional IRA contributions, an HSA can give you an extra few thousand dollars in tax deductions. . And like a traditional IRA, an HSA is a desirable “above the line” deduction.

Why it’s a good deal for your “future you”: The average retiree can expect to spend $157,500 on health care, even with Medicare. Your future self will need all the help they can get. Maybe they should get a side hustle.

Bottom line: All of these money moves are win-win deals for you and your future self. Investing extra money in tax-deductible retirement accounts or a health savings account can help reduce your taxes now, and make life easier for your “future you” retirement.

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