Financial Market Update – Q2 2024
It's Tax Time
By: Peyton Gentry
As we put the finishing touches on what was another back-and-forth yet pleasantly surprising year in the financial markets, it is time to shift our focus to the most wonderful season of all—TAX TIME!
There are very few positives that come out of inflation, but one of my favorites is an adjustment in the amount we are allowed to contribute to our Retirement Accounts. These increased limits apply across the board to all types of retirement accounts, both through our employers and our Individual Retirement Accounts (IRAs). For the majority of investors, some of the most powerful wealth building tools at their disposal are Tax Qualified Retirement Accounts, as they allow us the ability to invest money that can grow tax-deferred or even tax-free as it relates to Roth Contributions*.
As a business owner, offering a retirement plan through your company can be even more advantageous. These plans can give you the ability to deduct matching contributions to your employees as you sock away significantly more retirement dollars for yourself than if you were only investing in your outside IRA. If you have never offered a retirement plan before, recent changes to legislation have also opened substantial tax credits to help offset the cost of operating the plan in the early years. These benefits are not limited to full-blown 401(k) plans and also apply to SIMPLE IRAs and SEP IRAs that tend to be a better fit for smaller businesses. Yes, this is a shameless plug to encourage you to talk to a Hummel Financial Advisor about the specifics of these plans, since nobody wants to dive into those weeds while reading a newsletter column—not even me.
As we march onward into tax season, take time to review your financial situation and see if there are opportunities for you to contribute to your existing retirement accounts, or open a new one to put yourself in a more tax-advantaged position as you save for your future. It is important to note that you are eligible to make 2023 IRA contributions up until April 15th of 2024, so as you work with your accountant on the previous year’s taxes, you still have time to potentially offset some of them with a contribution.
Below is a helpful guide to retirement account contribution limits for both 2023 and 2024. Thank you, IRS—We don’t get to say that often enough… Happy tax season!
*To qualify for tax-free and penalty-free withdrawal of earnings, a Roth IRA must satisfy a five-year holding period requirement and the distribution must take place after age 59½, or due to death, disability, or a first-time home purchase (up to $10,000 lifetime limit).
Be sure to follow the rules for contribution, income, and deduction limits. Income thresholds may also apply. Tax and/or legal advice is not offered by Peyton Gentry. For more information specific to your situation, consult a qualified tax professional.
