7 Ways to Grow Your Extra Money

If your finances are in good shape with emergency savings and regular investing, and you have an increase in income or receive a cash windfall, you may wonder what to do with it. Before making big financial decisions, it’s wise to consider what you genuinely want to achieve.

For instance, should you purchase certain insurance coverages, buy a home or start a business? Only you know the answers, but we’ll review seven excellent ways to grow your extra money.

1. Maximize a workplace retirement plan

If your employer offers a retirement plan, such as a 401(k) or 403(b), you can have a flat amount or percentage of your paycheck automatically contributed to your chosen investments. Some employers match your contributions, such as up to 3% of your income, giving you extra savings as a company benefit.

For 2024, you can contribute up to $23,000 or $30,500 if you’re over 50 to an employer-sponsored retirement plan. If you’re a participant, consider using your extra money to max out a retirement account at work.

READ ALSO: What’s your retirement number?

2. Maximize a self-employed retirement account

If you have part- or full-time business income, you can fund a self-employed retirement plan, such as a Simplified Employee Pension plan, known as a SEP-IRA. It allows you to make tax-deductible contributions up to 20% of your net self-employment income.

For 2024, your total contribution can be up to $60,000. However, you can’t contribute more to a SEP-IRA than you earn.

3. Maximize a Roth IRA

No matter how much you contribute to a retirement plan at work, you can always max out an after-tax Roth IRA in the same year. For 2024, you can contribute up to $7,000 or $8,000 if you’re over 50.

However, annual income limits to qualify for a Roth IRA don’t apply to a traditional IRA. Also, note that while Roth IRA contributions are nondeductible, they give you tax-free income in retirement, which is a terrific benefit.

For 2024, if you file taxes as a single, you’re ineligible for a Roth IRA when your modified adjusted gross income (MAGI) reaches $161,000. If you’re married and file taxes jointly, neither spouse can contribute to a Roth IRA when your household MAGI reaches $240,000.

If your income is below those annual limits, you can partially or fully fund a Roth IRA and a workplace retirement plan for 2024.

RELATED: What is a Roth IRA and how to open one?

4. Maximize a health savings account (HSA)

If you’re enrolled in an HSA-eligible, high-deductible health plan you purchase through a group plan at work or as an individual, you can contribute to an HSA, regardless of your income.

HSA contributions are tax-deductible, and distributions are tax-free when you pay qualified healthcare costs, including medical, dental, vision, chiropractic, acupuncture, prescriptions and many over-the-counter medications and products.

For 2024, you or anyone else (such as a family member or your employer) can contribute up to $4,150 if you have an individual health plan or $8,300 with a family plan. Plus, if you’re over 55, you can contribute an additional $1,000.

Another HSA benefit is that funds roll over yearly with no penalty. If you have a balance after 65, you can spend it on non-medical expenses penalty-free.

5. Fund a 529 college savings plan

If you want to pay education expenses for yourself or a family member, a 529 college savings plan comes with excellent tax benefits, regardless of income. While 529 contributions are not tax-deductible, your account growth is never taxed if you use the funds for qualified expenses, such as tuition, books, computer equipment, internet and room and board.

In addition, you can use up to $10,000 per year for education expenses related to public or private schools for students in kindergarten through high school. Once a student is out of high school, you can use a 529 for any college, university, graduate school or vocational school without an annual limit if the institution is eligible to participate in a federal student aid program.

6. Invest through a brokerage account

Consider using a taxable brokerage account once you’ve exhausted tax-advantaged ways to invest your extra money. Your tax rate depends on how long you own an investment, your tax filing status and your total taxable income. The upside is that you can take penalty-free withdrawals from a brokerage account at any time.

The investment firm you choose should depend on the investments you want to purchase, such as exchange-traded funds, cryptocurrency or precious metals.

ALSO READ: 5 best ways to invest your money

7. Make after-tax retirement contributions

While it may seem pointless to make nondeductible, after-tax contributions to a retirement account, such as a traditional IRA or 401(k), your investment earnings can grow tax-deferred until you make withdrawals in retirement.

If you have more to invest, consider making after-tax contributions to your workplace retirement plan when allowed. For 2024, the total amount of deductible and nondeductible contributions you can make to an employer-sponsored retirement plan is $69,000 or $76,500 if you’re over 50.

About the author

Laura Adams is a money expert and spokesperson for Finder. She’s one of the nation’s leading personal finance and business authorities. As an award-winning author and host of the top-rated Money Girl podcast since 2008, millions of readers, listeners and loyal fans benefit from her practical advice. Laura is a trusted source for media and has been featured on most major news outlets, including ABC, Bloomberg, CBS, Consumer Reports, Forbes, Fortune, FOX, Money, MSN, NBC, NPR, NY Times, USA Today, US News, Wall Street Journal, Washington Post and more. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Her mission is to empower consumers to live healthy and rich lives by making the most of what they have, planning for the future and making smart money decisions every day.

This article originally appeared on Finder.com and was syndicated by MediaFeed.org.

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