High-income W2 employees (aka YOU) pay more taxes per dollar of income than anyone else in the country.
You have almost no tax breaks available to you, so you want to take full advantage of the 3 that you do have.
1. Pre-tax 401k contributions
2. HSA contributions
3. Mega Backdoor Roth Contributions (aka after-tax 401k contributions)
With 2 paychecks left for 2023, make sure you’re on track to:
1. Max out your pre-tax employee 401k contributions ($22,500 per person)
2. Max out your Health Savings Account ($3,850 individual / $7,750 family)
3. Max out your after-tax 401k contributions (up to $66,000 per person).
If you do, you could not only help your distant future self, but also your April 2024 self.
Maxing out your 401k means you could get an extra $2500 in your tax refund. (Or $5,000 for a two-income household.)
Maxing out your HSA means you could get an extra $1800 back per household (or half that for an individual).
Maxing out your after-tax 401k could save you 24% in capital gains.
Financial Zen Masters look for ways to apply maximum financial leverage.
So if you’re not on track to max these out, then increase your contribution amounts NOW for your last 2 paychecks.
Your retired future self will thank you (and so will the April 2024 version).
Pro Tip: You can find your current year-to-date contribution total on your paystub.
