If you have a workplace retirement account, like a 401(k), 403(b) or 457 plan, it should be your go-to for investing because it’s loaded with benefits, including:
For 2024, the contribution limits for most workplace retirement plans are $23,000 or $30,500 if you’re over 50. Make a goal to max out a workplace plan when you can.
If you still have more to invest or don’t have a retirement account at work, consider these five excellent places to invest.
After maxing out a workplace retirement plan, see if you qualify for an after-tax Roth IRA. When your 2024 modified adjusted gross income (MAGI) falls below $146,000 as a single, you can max out a Roth IRA.
Married people filing joint taxes qualify for a full Roth IRA contribution with MAGI under $230,000. However, when you file separately, you’re ineligible to max out a Roth IRA.
For 2024, the IRA contribution limit is up to $7,000 or $8,000 if you’re over 50. A Roth IRA is an excellent investment account because it’s available to anyone with earned income, including minors and seniors. There are no required distributions, and withdrawals are entirely tax-free in retirement.
So, if you qualify for a Roth IRA, that’s the first place your investing dollars should go after exhausting a workplace retirement plan.
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Unlike a Roth IRA, a traditional IRA has no income limits, making it an excellent choice for high earners. Therefore, it’s the next best place to save for retirement after maxing out a 401(k) if you don’t qualify for a Roth IRA.
With traditional retirement accounts, contributions are tax-deductible, reducing your taxable income for the year, even if you don’t itemize deductions on your tax return. You must pay ordinary income taxes on withdrawals and take required minimum distributions starting at age 72 or 73.
However, your and your spouse’s income affects whether you can deduct traditional IRA contributions when participating in a workplace retirement plan in the same year. For 2024, the contribution limit is $7,000 or $8,000 if you’re over 50.
When your 2024 modified adjusted gross income (MAGI) is $77,000 or below as a single, you can deduct traditional IRA contributions when you also have a retirement plan at work. Married people filing joint taxes must have a MAGI at or below $123,000, and those filing separately generally can’t have a traditional IRA and a workplace plan.
Additionally, if you’re not covered by a workplace retirement plan but your spouse is, the MAGI cutoff for deducting all your traditional IRA contributions is $230,000.
To clarify, you can contribute to or max out a workplace plan and a traditional IRA in the same year, no matter how much you earn. However, some or all of your contributions may not be tax-deductible, depending on your financial situation.
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If you have part- or full-time business income on the side of a day job where you participate in a 401(k), you can also have a self-employed retirement plan. Two of the most popular are a traditional solo 401(k) and SEP-IRA, which have higher contribution limits than an IRA or 401(k).
For 2024, you can contribute an amount equal to your business income up to $69,000. However, with a solo 401(k), those over 50 can contribute up to $76,500.
Note that the totals include your workplace contributions. For instance, if you’re under 50 and max out a 401(k) by contributing $23,000, you could put up to $46,000 ($69,000 – $23,000) in a solo 401(k) if you have that much business income.
That’s an excellent way for entrepreneurs who max out a regular 401(k) at their day job to save even more for retirement and reduce taxes.
ALSO SEE: 7 financial accounts you need for a richer life
After exhausting tax-advantaged retirement accounts, consider investing through a health savings account (HSA). However, it’s only available when you’re enrolled in an HSA-eligible health plan.
For 2024, HSA contribution limits are $4,150 for an individual health policy or up to $8,300 for a family plan. HSA contributions are tax-deductible, and you can make withdrawals to pay (or reimburse yourself) for many eligible healthcare expenses on a tax-free basis.
ALSO SEE: 11 best brokerage accounts
A taxable online brokerage is the next best place to invest money after maxing out tax-advantaged accounts. While a brokerage doesn’t reduce income taxes, it’s incredibly flexible because you can tap it for any reason without penalty.
Plus, you can select just about any investment, such as stocks, bonds, exchange-traded funds, index funds, mutual funds and cryptocurrency. Unlike a retirement account, you pay capital gains tax on brokerage withdrawals.
Laura Adams is a money expert and spokesperson for Finder. She’s one of the nation’s leading personal finance and business authorities. As an award-winning author and host of the top-rated Money Girl podcast since 2008, millions of readers, listeners and loyal fans benefit from her practical advice. Laura is a trusted source for media and has been featured on most major news outlets, including ABC, Bloomberg, CBS, Consumer Reports, Forbes, Fortune, FOX, Money, MSN, NBC, NPR, NY Times, USA Today, US News, Wall Street Journal, Washington Post and more. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Her mission is to empower consumers to live healthy and rich lives by making the most of what they have, planning for the future and making smart money decisions every day.
This article originally appeared on Finder.com and was syndicated by MediaFeed.org.
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