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!
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.
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.
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)
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! :)
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
Yesterday I had people guess why I actually lost to the market during the day trading challenge, and I don’t think anyone got it right.