Retirement Accounts — Tax-Advantaged Investing

401(k) — employer-sponsored:

Contribute pre-tax dollars (Traditional 401k) or after-tax (Roth 401k)

2024 contribution limit: $23,000 ($30,500 if 50+)

Employer match: If your employer matches contributions, contribute at MINIMUM enough to get the full match — it's free money (100% instant return)

Investments grow tax-deferred until withdrawal

IRA (Individual Retirement Account):

2024 contribution limit: $7,000 ($8,000 if 50+)

Must have earned income to contribute

Traditional IRA: Contribute pre-tax → grows tax-deferred → pay taxes on withdrawal

Best if you expect lower tax rate in retirement

Roth IRA: Contribute after-tax → grows tax-free → withdraw tax-free in retirement

Best if you expect higher tax rate later (usually better for young people)

Income limits: phase out above ~$161,000 (single) in 2024

Optimal order for retirement savings:

1. 401k up to employer match

2. Max Roth IRA

3. Max remaining 401k

4. Taxable brokerage account

Reference:

Wikipedia: 401(k)

https://en.wikipedia.org/wiki/401(k)