As a new year begins, it’s time for those resolutions! Many people make at least one resolution concerning their financial lives. If you’re in your 40s, 50s, or 60s, planning for retirement should top your list of priorities. Remember these five ways to save all you can this year, and you’ll be better prepared for retirement when you finally get there.
Max out your 401(k) contributions. Review your most recent pay stub, and check to see how much you contribute to your 401(k) each week. Better yet, take a look at how much you contributed in 2015. Did you reach the maximum allowable tax-deferred contribution of $24,500? If not, you’re leaving valuable tax savings on the table, and you’ll be less prepared for retirement.
If you’re age 50 or older, make catch-up contributions. Workers age 50 or more can make additional 401(k) catch-up contributions of $8,000 per year (or $11,250 per year if you’re age 60 to 63), for a total of up to $32,500 per year socked away in your retirement fund. Once again, it doesn’t make sense to neglect the valuable savings you can earn on your tax return, so increase your contributions if you can.
At least reach your employer match amount. Some people can’t afford to save the maximum allowable amounts each year, but you should at least strive to meet your employer match amount. This is free money, so don’t turn it down. If you’re going to receive a raise at the beginning of the year, adjust your payroll withholding so that you’re contributing the difference to your retirement fund. You’ll still bring home the same amount of money each pay period, and you’ll “earn” more in the long run by taking advantage of the matching contribution from your employer.
Consider opening and funding an IRA. Individual Retirement Accounts (IRAs) offer additional tax savings. You can stash $7,500 (or $8,600 if you’re age 50 or older) in an IRA while enjoying tax-deferred status. If you’re already maxing out your 401(k) contributions, consider opening an IRA as well.
Remember the Saver’s Credit. Some people who save for retirement are able to earn a tax credit of 10 to 50 percent of their contributions. Call us to schedule a retirement planning consultation, and we will help you find potential tax advantages for which you’re eligible.
For more help with saving for retirement, or for information on other questions you might have, call our office at (781) 995-0253 to schedule an appointment.
Portions of this article have been excerpted from “How to Maximize Your Retirement Accounts in 2016” by Emily Brandon, U.S. News Money.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.