When it comes to retirement, we all know we should be saving for it. But where do we start, and how do we know how much of our paychecks we should be putting away every month? You can start by signing up for your employer’s retirement savings plan or by setting up a direct deposit with your bank. But for additional help, we suggest hiring a professional to assist with the complex tasks. At Income For Life, we can help you come up with effective retirement solutions so that when you retire, you can stay retired. Contact us today!
In this blog, we go over seven retirement saving strategies you should consider when saving for your future.
1. Deposit your tax refund directly to an IRA.
When tax season hits, we know it can be tempting to use your tax refund to pay off debt or to purchase a new luxury item. Income For Life suggests you have a portion or all of your tax refund deposited to your retirement plan account, whether that’s a traditional IRA, Roth IRA or myRA. You can accomplish this retirement solution by using IRS Form 8888.
2. Take advantage of your employer contributions.
A lot of companies (larger ones, especially) will match your contributions to your 401(k) plan. Discover where your company caps out in regards to matching contributions, and try to reach that number to maximize your savings.
3. Utilize tax-free IRA charitable contributions.
This one isn’t as relevant until you’re more than 70 years old, but it’s still something to keep in mind. You must withdraw from a traditional IRA after you’re 70 ½ years old, and each time you do you’re tagged with an accompanying income tax. However, if you’re 70 ½ or older and retired, you can avoid this tax if you directly transfer up to $100,000 to a qualified charity.
4. Defer your income tax on retirement savings.
Take advantage of any tax-deferrals on retirement savings! You can delay paying income tax on your retirement savings in a 401(k) and IRA — up to $18,000 and $5,500, respectively. For workers more than 50 years old, you can add another $6,000 on top of that for your 401(k) and another $1,000 for your IRA. The income tax on this money won’t be due until you withdraw it from your account.
5. Take advantage of the myRA.
The myRA (my Retirement Account) is a new type of Roth retirement account in which earnings and withdrawals are tax-free under certain circumstances, according to the U.S. Department of the Treasury. It doesn’t have any fees or minimum deposit requirements.
Keep this in mind though: When your myRA reaches 30 years old or $15,000, your savings are transferred to a private sector Roth IRA.
6. Research saver’s credit.
Those who have a gross income of less than $30,750 for individuals and $61,500 for couples have the possibility of qualifying for saver’s credit. The saver’s credit is a tax credit that is worth anywhere between 10 and 50 percent of your retirement account contributions — up to $2,000 for individuals and $4,000 for couples.
7. Use trustee-to-trustee transfers when you switch jobs.
If you decide to change jobs and need to roll over your 401(k) to an IRA or a new 401(k) account, make the transfer via trustee-to-trustee transfer. This allows you to avoid the 20 percent tax income that occurs when you’re cut a check for your savings, and can potentially save you taxes and fees that occur when the money isn’t immediately transferred into a new account.
Let Income For Life Help
At Income For Life, we help retirees and pre-retirees get the most out of their retirements. We want to help you find retirement solutions that will maximize your quality of life when you decide to retire. Contact us today to meet with our expert financial planner about your retirement income. Many clients have written a testimonial about our financial planning, too, so check them out here!