401(k)

You elect a percentage of each paycheck to be sent to your 401(k) before income tax is withheld, lowering your taxable income today. The 2024 employee contribution limit is $23,000 ($30,500 if you are 50 or older). Most employers offer a match (a common formula is 100% of the first 3%, then 50% of the next 2%). Withdrawals before age 59 1/2 generally trigger a 10% IRS penalty plus ordinary income tax. Always contribute at least enough to get the full employer match, anything less is leaving free money on the table.