Top 8 Retirement Savings Strategies for 2023-2025: Maximize Your Wealth and Secure Your Future

Charlene Rhinehart, CPA and CFE, chairs an Illinois CPA Society committee and holds degrees in accounting and finance from DePaul University.

Regardless of your age—whether you're 25 or 55—prioritizing retirement savings is a crucial financial move. Retirement will arrive for everyone, whether by design or necessity. Whether you're on track or need to accelerate your savings, or if you're a financial advisor seeking to empower clients, these eight essential retirement tips will help you grow your nest egg effectively.

Key Insights

• Maximize employer-sponsored retirement plans and company matching contributions.
• Explore opportunities to double your contributions with specialized catch-up options.
• Leverage retirement savings tax credits available to eligible taxpayers.
• Utilize backdoor Roth IRA strategies to bypass income limits.
• Consider relocating to states with favorable tax policies for retirees.
• Combine self-employment retirement accounts with health savings accounts for enhanced savings.

1. Capitalize on Your Employer’s 401(k) or 403(b) Match

If your employer offers a retirement plan with matching contributions, contribute at least enough to receive the full match. For optimal growth, aim to maximize your annual contributions as allowed by law. The earlier you start, the greater your financial advantage.

For example, if José earns $50,000 annually and his employer matches 5% of his salary, by contributing $2,500 to his 401(k), he effectively receives an additional $2,500 from his employer, plus valuable tax benefits. Failing to contribute this amount means leaving free money on the table.

2. Take Advantage of Double Contribution Options for Certain Professions

Some public sector and nonprofit employees, including teachers and healthcare workers, qualify for enhanced catch-up provisions allowing double contributions to 457(b) and 403(b) plans. Check IRS resources for eligibility and details.

In 2023, eligible individuals can contribute up to $22,500, increasing to $23,000 in 2024, significantly boosting retirement savings potential.

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3. Claim the Retirement Savings Tax Credit

Lower- and middle-income taxpayers may qualify for a tax credit up to 50% of their retirement plan contributions. For 2023, married couples filing jointly with an AGI below $73,000 (rising to $76,500 in 2024) can benefit. Income limits vary by filing status.

The maximum credit is $2,000 for joint filers and $1,000 for singles, applied against contribution limits.

4. Boost Savings Using the Backdoor Roth IRA Method

Income limits can restrict direct Roth IRA contributions. However, high earners can contribute to a traditional IRA (non-deductible) and then convert those funds to a Roth IRA, allowing tax-free growth and withdrawals if guidelines are met.

Contribution limits are $6,500 for 2023 and $7,000 for 2024, with an additional $1,000 catch-up for those 50 or older.

5. Choose a Tax-Friendly State for Retirement

States like Alaska, Florida, South Dakota, New Hampshire, Tennessee, Wyoming, Texas, Nevada, and Washington impose no state income tax, benefiting retirees. Note that New Hampshire taxes dividends and interest but not earned income.

Most states exempt Social Security benefits from taxation, but always review the full tax implications before relocating.

6. Maximize Self-Employment Retirement Accounts

Self-employed individuals can contribute up to 25% of net earnings into solo 401(k) or SEP plans, with limits of $66,000 for 2023 and $69,000 for 2024. Employees under 50 may contribute $22,500 (2023) or $23,000 (2024), with an additional $7,500 catch-up if over 50.

7. Utilize Health Savings Accounts (HSA) for Retirement

HSAs are a strategic tool for retirement savings, especially alongside high-deductible health plans. Contributions are tax-deductible, funds grow tax-free, and withdrawals for qualified medical expenses are tax-exempt.

Contribution limits for 2023 are $7,750 for families and $3,850 for individuals, rising to $8,300 and $4,150 respectively in 2024, with an extra $1,000 catch-up for those over 55.

Remember

Traditional IRAs use pre-tax dollars, while Roth IRAs use after-tax dollars. Choose based on your tax situation.

8. Leverage Increased Contribution Limits After Age 50

Individuals over 50 can make higher contributions to retirement accounts, boosting savings potential. For example, IRA limits increase to $7,500 in 2023 and $8,000 in 2024, and employer plan limits rise to $30,000 and $30,500 respectively.

How Much Should You Save for Retirement?

Retirement savings needs vary by personal circumstances, but experts recommend aiming for 70% to 80% of your pre-retirement income as monthly retirement income.

2023-2024 401(k) Contribution Limits

You can contribute up to $22,500 in 2023 and $23,000 in 2024 to your 401(k), with an additional $7,500 catch-up if you're 50 or older.

IRA Contribution Limits for 2023-2024

The limit is $6,500 for 2023 and $7,000 for 2024, plus a $1,000 catch-up for those 50 and older.

Final Thoughts

Automate your retirement contributions to build wealth consistently. Maximize tax-advantaged accounts and start early to secure a prosperous retirement. Taking advantage of all available benefits today ensures a financially stable tomorrow.

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