Hello, everyone, and welcome to the brighter finances podcast. My name is Louis Guajardo, I am the founder of Brighter Days Planning and the lead financial planner. We would first like to thank you for taking some time out of your day to listen to our new episode, were excited to have you here! We promise to provide you with valuable information every time you tune into our show. 

In today's episode, Louis will go over our top accounts that are tax advantaged for the new year, 2024. He will discuss penalties, max contributions, and some eligibility for each of these accounts.

Educational Topics:

• 401(K)
  • Tax Advantage: Money goes into the account before paying taxes on it. All gains are tax deferred until distributions begin. Contributions to the 401(K) also decrease your taxable income.
  • Max Contributions: The max contribution for 2024 is $23,000 plus an additional $7,500 if you are over the age of 50. Employer's may also contribute on your behalf, maxing out 401(K) contributions between employee and employer at $69,000.
  • Employer Contributions: Employers can contribute on behalf of you and tend to do so through a fixed percentage, tiered percentage, or fixed percentage that is dependent on contribution limits.
  • Penalties: There is a 10% penalty for early withdrawals before reaching the age of 59 1/2. 
• Solo 401(K) and SEP IRA 
  • Tax Advantage: Both the solo 401(K) and the SEP IRA use pre-tax dollars for the contribution just like the traditional 401(k). 
  • Max Contributions: Solo 401(K) allow employee and employer contributions up to 69,000 for 2024 or 100% of compensation. SEP IRA’s allow up to 69,000 as well but are limited to 20% of income for the self-employed owner or 25% for other employees.
  • Employer Contributions: Contributions may only come from the employer, employees may not contribute to a SEP IRA.
  • Penalties: Same as 401(k) with few differences for exemptions.
• Roth IRA 
  • Tax Advantage: Contributions are after tax which allows for tax free growth. Distributions also aren't included in income.
  • Max Contributions: 2024 is $7,000, but gets phased out above $146,000 for single and $230,000 for MFJ. Between 146,000- 153,000 for single and 230,000-240,000 you may contribute partially.
  • Employer Contributions: Employer's cannot contribute to your Roth IRA, but may offer other Roth options through their retirement plan such as a Roth 401(K).
  • Penalties: Penalties for Roth IRA have a few differences, two of the biggest are exceptions to the penalty.
    • Up to $10,000 lifetime for first home purchase
    • qualified education expenses
• HSA 
  • Tax Advantage: Tax free growth if used for qualified medical expenses, use pre-tax dollars or are deductable. 
  • Max Contributions: $4,150 single or $8,300 for families.
  • Employer Contributions: ER can make contribution but aren't required to, if they do it’ll still be limited to the max contribution.
  • Penalties: If not for qualified medical expenses there will be a 20% penalty and subject to ordinary income tax. 

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