Tax Haters Rejoice

Quote

“Money isn’t the most important thing in life, but it’s reasonably close to oxygen on the ‘gotta have it’ scale.” - Zig Ziglar

Tax Haters Rejoice

Good news (no we aren’t talking about Bitcoin hitting $40k)!

It was confirmed by the IRS that Roth IRA contribution limits will be increasing in 2024. In honor of this great milestone, we are going to breakdown what a Roth IRA is, what the limit changes were, and how those changes impact your portfolio.

Let’s get into it. 🤝 

What Is A Roth IRA

Here is the quick and dirty on a Roth IRA incase you aren’t familiar with this legendary account.

A Roth IRA is a tax advantaged retirement account. Money you contribute to a Roth IRA is post tax, but the magic is that your investments are then able to grow tax free. Once you reach that magic age of 59.5 you can enjoy your gains without having to share any with the IRS.

There are other rules around income limits, and withdrawal exemptions but I’ll point you to this post as a starting point for those details.

What Limits Are Increasing

Hopefully you get the hype around a Roth IRA since it lets you skirt the tax man at retirement.

Since these accounts are so great, the government actually limits how much you can contribute to each year. In 2023 the max amount you can contribute to a Roth is $6,500. This jumps to $7,500 if you are 50 or older. Note, in case you haven’t maxed it yet for this year you can contribute up until you file taxes for 2023, typically in April 2024.

Knowing this…here is the big news.

The IRS is increasing the Roth IRA limit to $7,000 in 2024. This is the second year in a row that the limit has been increased. If we are being honest, it probably should be more with the inflation we have seen over the last couple years.

(the 401k limit is also increasing to $23,000. You can read an IRS post summarizing the changes here).

We’ll take what we can get though, as $500 can make a huge difference long term. Let me explain.

What $500 Means For Your Portfolio

With the current limit of $6,500 this comes out to a monthly contribution of $541. With the $7,000 max, monthly contributions come out to $583.

That’s a $42 dollar difference…chump change right?! (;

Not so fast, let take a look at how this can add up and really make a difference once compounding takes over.

Assuming an 8% annual return:

• $6,500 max

• 30 years

• Total: $762,000

Example #2 assuming the same 8% annual return.

• $7,000 max

• 30 years

• Total: $821,000

Here is a link to this investment calculator if you want to change the return or timeline: Link to calculator

Conclusion

Basically, the IRS just gave you another $60k to enjoy tax free at retirement so go ahead and add that extra $42 per month into your investing plan for 2024.

Is it world altering news…not quite. But it’s nice to see that over the last two years it’s possible to have another $120k tax free in retirement.

Sign me up Uncle Sam. ~ Cade

Cade's Finds

Mark Cubans +1,128% Return: Post on how Mark Cuban turned $285 million into $2.5 billion investing in the Dallas Mavericks and how it might be a bigger scheme to bring legalized gambling to Texas.

20th vs 21st Century Returns: Cool chart to remind you that this time probably isn’t different.

Cybertruck Bullet Test: Not that any of us plan on needing a bullet proof truck, but here are the results from Tommy Gun v Cybertruck.

Best Memes

Another shot at Ivy League schools and we’re here for it.

Not a meme…but you know who you are.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email don’t hesitate to send me a reply.