As the financial landscape evolves, it becomes increasingly crucial for individuals to reconsider their retirement savings strategies. In this podcast, Jeff emphasizes the importance of understanding the tax implications of 401(k) contributions and how these changes could impact your financial future.
Terry: Today, we want to focus on 401(k)s because I know that recently, there have been some changes coming in 2024. So, let’s revisit that and discuss if now is a good time to start thinking about our 401(k) plans and making some changes for next year.
Jeff: That’s right, Terry. The IRS came out this week with increased limits for 2024, and it’s crucial for people to consider saving more into their 401(k)s, both for tax benefits and retirement planning.
Tax Benefits of Contributing to a 401(k)
Terry: Absolutely. Walk me through some of the tax benefits of contributing to a 401(k).
Jeff: Well, there are two types of 401(k)s – the traditional 401(k) and the Roth 401(k). With the traditional 401(k), you get a tax deduction this year for any money you put into it. However, upon retirement, you have to pay income tax on both the contributions and the earnings. On the other hand, Roth 401(k)s don’t provide a tax deduction today, but in retirement, you don’t have to pay tax on either the contributions or the earnings. It’s a trade-off between immediate tax benefits and tax-free withdrawals in the future.
Terry: So depending on the current situation, individuals may choose between Roth or traditional, and that’s where conversations with professionals like you become essential.
Jeff: Exactly, Terry. By understanding your current and future income, you can make an informed decision. That’s where consulting with a CPA or another tax professional comes in handy.
Connecting with Hawkins Ash
Terry: This is a great opportunity for listeners to connect with the team at Hawkins and Ash to start thinking about changes for 2024. Jeff, what is the best way for our listeners to connect with you and the team at Hawkins Ash?
Jeff: I would recommend going to our website, hawkinsash.cpa, and visiting the CPA HQ section. There, you’ll find different ways to save taxes and connect with our team.