Who doesn’t aspire for peace of mind during the sunset years? Well, everyone does! We all know that to have
a good retirement, you must start saving early in life. Bob and Devin know that saving for retirement will not
only help them financially for the future but will also direct them towards helping themselves this year, too.
Disciplined savers will only get closer to their retirement dream. So, this week, let’s discuss the Retirement
Savings programs that encourage taxpayers to save for the future.

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 too little.

Here 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
  (TSAs) that are available to teachers and some government workers. The deferral (savings) limit for
  SIMPLE (Savings Incentive Match Plan for Employees) IRAs is a different amount from the other IRA
  plans.
• Catch-up contributions (the extra savings that allow taxpayers to save even more) for those age 50 and
  over are available for most retirement plans. Additionally, beginning in 2025, a new "super" catch-
  up contribution is available for those who are between the ages of 60 and 63 during the year,
  allowing an even higher contribution to eligible employer plans.
• The limits for both retirement savings accounts and catch-up amounts are adjusted annually for
  inflation. You can find the current amounts allowed at www.irs.gov
• There is both a Traditional IRA and a 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 by asking your tax
  professional. Catch-up contributions are allowed for those age 50 and older.

Here are some tips to maximize your retirement savings:

1. Contribute enough to at least obtain your employer’s match in a retirement plan.

2. Defer as much income as you can each month. Try to max out the upfront contribution, giving you
bigger take-home pay later. 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 contributions.

3. Contribute to an IRA as early in the year as possible to maximize savings.

4. 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 in taxes.

5. 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, Solo 401K, SEP-IRA, SIMPLE-IRA, IRS code section 403B (Tax Sheltered Annuity
— TSA), IRS code section 457 plans (Deferred Compensation plan), Federal TSP plan (Thrift Savings
Plan), Traditional IRA, and Roth IRA).

Making IRA Contributions

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 about saving for retirement using an IRA:

1. There is no age limit to contribute to an IRA.

2. 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
youre married and file a joint return, generally only one spouse needs to have compensation.

3. 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.

4. The most you can contribute to your IRA for 2026 is the smaller of either your taxable compensation for
the year or $7,500. If you were age 50 or older by the end of 2026, the maximum you can contribute
increases to $8,600. These limits are adjusted for inflation, so check www.IRS.gov for the current
year’s amounts.

5. 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.

6. You may be able to deduct some or all of your contributions to your traditional IRA. See your tax
professional’s instructions to figure the amount that you can deduct. Unlike a traditional IRA, you can’t
deduct contributions to a Roth IRA.

7. If you contribute to an IRA, you may also qualify for the Savings Credit. The credit can reduce your
taxes by thousands of dollars. Use Form 8880, Credit for Qualified Retirement Savings Contributions,
to claim the credit.

Inheriting Retirement Accounts (2020 and later — SECURE Act and SECURE 2.0)

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act), signed into law on
December 29, 2019, and further updated by SECURE 2.0 in 2022, changed the way many people inherit
retirement accounts. Before the SECURE Act, you were able to inherit retirement accounts and stretch the
amount of time you took to receive the money, so you could pay less taxes over time.

NOW, with the new law, that strategy is significantly reduced for many people who inherit retirement accounts.
New rules generally require that inherited retirement accounts be completely distributed to heirs within
10 years of inheriting them. This means no more stretching out the payments and the resulting taxes from
the extra income.

An important additional point: if the original account owner had already begun taking required minimum
distributions (RMDs) before they passed away, most non-spouse beneficiaries must also take annual RMDs
during the 10-year period — not just wait until year 10. If the original owner had not yet started RMDs,
beneficiaries generally have the flexibility to take distributions on their own schedule, as long as the account is
fully depleted by the end of the 10th year.

There are some exceptions to this, such as:

• Inherited accounts from owners who died prior to 2020
• Spouses
• Minor children of the account owner (until the child reaches age 21, after which a new 10-year
  distribution window begins)
• Disabled or chronically ill beneficiaries
• Heirs not more than 10 years younger than the deceased

Here 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; super catch-up for ages 60–63 under SECURE 2.0.
• Contribute enough to at least obtain your employer’s match. (This always gives you free money)
• Consider the Retirement Saver’s Credit. (Ask your tax professional 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 from your tax
  professional or at IRS.gov.
• The SECURE Act and SECURE 2.0 have changed how inherited retirement accounts are distributed —
  most non-spouse heirs must fully deplete the account within 10 years.

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.

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