Who doesn’t aspire for a
golden era during the sunset days? Well, everyone does! We all know that to
have a good retirement, you must start saving early in life. Bob and Devin know
not only will saving for retirement help them financially for the future but will
also direct them towards helping themselves this year too. Disciplined savers
will only get closer towards their retirement dream. So, this week let’s discuss
the Retirement Savings programs that encourage taxpayers to save for the
You can boost your
retirement savings even more this year, thanks to the higher limits on some of
the most popular savings strategies. Stretch your budget to take maximum
advantage of these new limits, especially as studies show most of us save way
are some retirement savings plans that are available:
- You can defer (save) into your 401k. The
deferral or savings also applies to Tax Sheltered Annuities (TSA’s) that are available
to teachers, and some government workers. The deferral (savings) limit for
Simple (Individual Retirement Accounts) IRA’s is a different amount from the
other plans this year.
- Catch up contributions (the extra savings
that allows taxpayers to save even more) for those of age 50 and over are
available both for 401ks and Simple IRA’s this year.
- The limit of both savings accounts and
catch up amounts might change annually. You can find the amounts allowed at www.irs.gov
- There is both a Traditional and ROTH IRA,
in addition to other retirement savings plans. The limits for both Roth and Traditional
IRAs can be found by going to www.IRS,gov or asking your tax
professional. Traditional catch up
contributions allowed for those 50 and older.
are some tips to maximize your retirement savings:
- Contribute enough to at least obtain your
employer’s match in a 401K.
- Defer as much income as you can each
month. Try to max out the upfront contribution giving you bigger take-home pay
later on. If you reach the age of 50 during the year, remember to factor in
your catch up contribution for that year as you will be allowed to make extra
- Contribute to an IRA as early in the year
as possible to maximize savings.
- You might be entitled to a Retirement
Savings Credit, if you contribute to a Retirement Savings Plan. Your tax
preparer can help you with that determination. This could lead you to save thousands
- Be sure to contribute to some type of Retirement
plan each year in order to plan for retirement. There are many types of plans,
so be sure to speak to your tax professional to see which one or ones you are eligible
for (401K, SEP-IRA, Simple-IRA, 403B (Tax Sheltered Annuity-TSA), 457 plans
(Deferred Compensation plan), TSP plan (Thrift Savings Plan), Traditional IRA
and ROTH IRA.
If you made IRA
contributions or you’re thinking of making them, you may have questions about
IRAs and your taxes. Here are some important tips from the IRS about saving for
retirement using an IRA:
- You must be under age 70 1/2 at the end of
the tax year in order to contribute to a traditional IRA. There is no age limit
to contribute to a Roth IRA.
- You must have taxable compensation to
contribute to an IRA. This includes income from wages and salaries and net
self-employment income. It also includes tips, commissions, bonuses and
alimony. If you’re married and file a joint return, generally only one spouse
needs to have compensation.
- You can contribute to an IRA at any time
during the year. To count for this year, you must make all contributions by the
due date of your tax return. This does not include extensions. That means you
usually must contribute by April 15th. If you contribute between Jan. 1 and
April 15, make sure your plan sponsor applies it to the right year.
- For example, the most you can contribute
to your IRA for 2018 is the smaller of either your taxable compensation for the
year or $5,500. If you were age 50 or older at the end of 2017, the maximum you
can contribute increases to $6,500.
- You normally won’t pay income tax on funds
in your traditional IRA until you start taking distributions from it. Qualified
distributions from a Roth IRA are tax-free.
- You may be able to deduct some or all of
your contributions to your traditional IRA. Use the worksheets in the Form 1040 instructions to figure the amount that you can deduct. Unlike
a traditional IRA, you can’t deduct contributions to a Roth IRA.
- If you contribute to an IRA you may also
qualify for the Saver’s Credit. The credit can reduce your taxes by thousands
of dollars. Use Form 8880, Credit
for Qualified Retirement Savings Contributions, to claim the credit.
are some points to remember when trying to save for retirement, and maybe even
reduce your taxes:
- 401K, 403B (TSA), 457 (Deferred Compensation), Thrift Savings Plans (TSP) contribution plans.
- Simple IRA and SEP IRA contribution plans.
- Catch up for Age 50 and older plans.
- Contribute enough to at least obtain your employer’s match. (This always gives you free money)
- Consider the Retirement Saver’s Credit. (Ask your preparer if you qualify for a saver’s credit to reduce your taxes)
- Find the Annual limits of the retirement savings accounts AND the Catch-Up amounts at www.irs.gov
Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331 and on all social media under azmoneyguy.