Broker Check

Monday Money Report

| December 11, 2023

The market finished up last week, as the jobs report showed the economy continues to be resilient.  While ongoing low unemployment raises hopes of the holy grail of the Federal Reserve Bank, a soft landing rather than a recession, the strong labor market also dashed hopes of a rate cut any time soon.

As we approach year-end, this is a good time to evaluate your retirement plan contributions for next year. First, make certain you are contributing at least enough to receive the full match from your employer.  Some plans only match when you are contributing, so front-loading contributions may work against you.  It’s often better to spread out contributions across the entire year.

The match is also not dependent on the type of contributions you make.  Both traditional and Roth contributions are eligible for the company match. Talk with your tax professional about which type of contribution makes the most sense for you.

If you have room in your budget to save more, employer-sponsored plans are usually a cost-effective and easy way to do so. The maximum you can contribute in 2024 is $23,000.  If you are 50 or older, you can contribute an additional $7,500 a year, for a maximum of $30,500.  Think of the catch-up contribution as a higher limit, and not a separate contribution that you make.

The IRS did delay the implementation of part of the SECURE 2.0 Act. Previously, if you earned more than $145,000 in 2024, your catch-up contributions would automatically be Roth, or after-tax, contributions.  To give companies time to amend their retirement plans, this has been delayed to 2026.

Some employers do offer a special Roth option, known as the mega-backdoor Roth. If your company’s plan allows it, you can contribute additional money post-tax to your plan. Then that post-tax contribution can be converted to the Roth portion of your account. If you have room in your budget for additional savings, this is something to discuss with your financial advisor and tax professional.

Your action item this week is to find something to be grateful for. There will always be someone with more, but there is also always someone with less. Take a moment to find happiness and appreciation for what you have this holiday season.   

CovingtonAlsina is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.