Now that the new year has arrived, you might be deciding what to do with your year-end holiday bonus. Or, maybe you received the good news that you’ve earned a raise. For one reason or another, you might be seeing a bit more cash in your bank account throughout 2018. How can you put that money to use, in striving to best benefit you now and in the future?
Get out of debt. It can be tempting to spend extra money right away, but consider the long-term impact on your budget. If you’re still carrying older credit card debt and making only minimum payments, you could spend thousands on interest over the years. Put your extra income toward those debts, and you’ll thank yourself later.
Stash it in the bank. If you’re like most people, you sigh and reach for a credit card when emergency expenses strike. Use extra income to establish a rainy day fund, so you can prevent the need to go into debt.
Invest in education. Could you further your career by pursuing another degree or certification program? Sometimes it makes sense to invest in your own skill set, if you stand a chance of making more money later.
Save extra money for retirement. If you aren’t already maxing out your retirement plan contributions each year, now is the time to start. You can contribute $18,500 to a qualified retirement plan this year, while earning a valuable tax benefit. If you’re at least age 50, you can make additional “catch up” contributions of $6,000 each year.
If you’re already maxing out those contributions, consider opening an Individual Retirement Account (IRA) to stash additional funds for the future. By choosing a Roth account, you could enjoy tax-free distributions in retirement.
For more information on saving additional funds for retirement, or to investigate other options, give us a call. We can help you identify ways to put your money to good use – now an in the future.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.