Every year the IRS updates the rules on how much you’re allowed to contribute to your IRA and 401(k) accounts. Both of those accounts offer a great tax advantage, so the IRS limits how much you’re allowed to put in them. They just announced the limits for next year!⁣
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The IRA limit will be the same. So if you have a $500/month auto investment into your Roth IRA set up, LET THAT BABY RIDE. That’s good for another 12 months. ⁣
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The 401(k) limit will increase by $1,000 to $20,500. If you’re one of those ass kickers who is maxing out their 401(k), you might need to log in to your 401(k) account and increase that by a bit for next year if you wanna take advantage of every penny of tax benefit.⁣
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Note that both IRAs and 401ks come in two flavors: Roth and Traditional. (So you can have a Roth IRA or a Traditional IRA). The limits apply to both types and you can HAVE both types but you can never contribute more than the limit total. So you could contribute $3,000 to a Traditional IRA and $3,000 to a Roth IRA for a total of $6,000. But not $6K each for a total of $12K because that’s over the limit. (Practically speaking, I would never contribute to two different IRAs in a year. It’s just complicating things for no reason)⁣
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One more reminder: IRAs and 401ks are just special types of brokerage accounts. A brokerage account is just an account in which you invest (by buying stuff like index funds). You can always contribute an UNLIMITED amount to a brokerage account. People get worked up over IRAs and 401ks because of the tax breaks. I agree you should take advantage of them. But when the tax breaks end, that doesn’t mean investing should stop. Dump the rest into a brokerage account and let that sucker grow. They only tax you on what you make! :)⁣
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As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.⁣
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– Jeremy⁣
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