Invest Smarter, Minimize Taxes – 2024

Full Transcript:

I’m maxing out my 401(k), but I’m still getting killed in taxes. Where else can I save?

High-earning Shell super savers can put away up to $84,300 into tax-advantaged accounts this year. If you’re 50 and older, you can put away even more. Let’s talk about how.

First, let’s start with your Shell Provident fund, your 401(k). Within your 401(k), you can contribute up to $23,000 into either the pre-tax or the Roth bucket. Now, if you’re 50 and older, you get an additional catch-up contribution limit of $7,500 for a total maximum of $30,500 into Roth or pre-tax. Now, in addition to your contribution, Shell also contributes to your 401(k). Based on your years of service. For those of you with nine or more years of service, Shell put in 10% of both your base and your bonus into your 401(k), up to $34,500. Now, the Shell contribution to your 401(k) is always pre-tax.

Now we talk a lot about the pre-tax and Roth tax buckets within your 401k, but there’s a third, lesser-used bucket known as the after-tax bucket. With after-tax contributions, you don’t get a tax break upfront, and money in the after-tax bucket, when it grows, that growth is taxable. For 2024, you can contribute up to $11,500 to the after-tax bucket. And this is in addition to the $23,000 limit for your pre-tax or Roth. Now, when you put money into the after-tax bucket, the best way to use this from a tax standpoint, is then convert that money to Roth. When you do that, that money will then grow tax-free!

Now, in addition to your 401(k), you can also contribute to an IRA. However, many of you watching this make too much money to contribute directly to a Roth IRA, or to get a tax break on contributing to a traditional IRA. However, you can still contribute to a traditional IRA, and you can contribute up to $7,000. When you do this, you’ll have to contribute to a traditional IRA, but make the contribution a non-deductible contribution. However, you still get a tax advantage if you can then convert that to Roth. Now, in addition to the $7,000 contribution, for those of you 50 and older, you can get an additional thousand dollars in there with the catch-up contribution for a total of $8,000 this year.

Now, lastly, let’s talk about the health savings account, your HSA. With an HSA, you get access to this if you’re enrolled in the high deductible health plan. If you have more than one person on your health insurance, for your HSA, Shell will contribute $1,000, and you can contribute an additional $7,300 for a total contribution of $8,300. Now, your HSA contributions go in pre-tax, so you get an immediate tax break. However, with an HSA, you can also invest the money inside of it. And when you use that money for qualified medical expenses, it comes out tax-free. From a tax standpoint, this is the best account out of all of these.

Now, if we sum all of this up in 2024, you can put $84,300 into tax-advantaged accounts if you’re under 50, and $92,800, if you are 50 or older. That’s a lot of money going to tax-advantaged accounts.

Now, I encourage you to do as much of this as you can, because the more you can do, the sooner you’ll reach financial independence and the more likelihood you’ll save six or seven figures of lifetime taxes. Now, I hope you find this video helpful. And if you did, please share it with your coworkers to help them out as well.