Are you looking for another way to minimize your 2023 taxable income for better tax results? Max out your annual contribution to your 401(k) retirement plan account if you haven’t already. This strategy is a two-for-one winner.
In 2023, you can contribute as much as $22,500 to your 401(k) plan account, $30,000 if you’re age 50 or older. For every additional $1,000 you defer to your account before year-end, you potentially may reduce your federal income tax by $240 if you’re in a 24% bracket, $320 in a 32% bracket, $350 in a 35% bracket, and $370 in a 37% bracket.
As for your retirement savings, here’s what each additional $1,000 you contribute this year invested at an average annual return of 7% compounded monthly could give you at retirement.
- $1,000 in 10 Years = $2,010
- $1,000 in 20 Years = $4,039
- $1,000 in 30 Years = $8,116
Remember, that’s just $1,000 more for one year. Think of what you could save for retirement if you contributed more every year.
Source: LTM Client Marketing, 2023