Saving for retirement is something that is crucial, but commonly overlooked by many.
A survey by Transamerica Center found that a large percentage of Americans feel unknowledgable about investing for their retirement. CKS Summit Group wants you to feel as financially prepared as possible for retirement. Consider these two strategies to increase your savings for the future.
1. Catch-Up Contributions
According to the Transamerica survey, almost 50% of those eligible, or close to being, were not aware that catch-up contributions existed. This is a type of retirement savings that allows those that are 50 years or older to make additional contributions to their 401(k)s or IRAs. As most know, there are limits to how much you’re allowed to put towards your retirement account each year. Catch-up contributions are meant to allow those that are getting closer to retirement to start putting more towards it. If you have a 401(k) you’re allowed an additional $6,000 and an additional $1,000 with an IRA.
To be eligible for catch-up contributions you first must be 50 years of age, or turning 50 this calendar year, and maxing out your retirement account. The 2019 limit has been increased to $19,000 from $18,500 in 2018. While an extra $6,000 contribution may not seem significant now, it will eventually add up. Your future self will thank you for giving that extra cushion each year.
To begin taking advantage of these extra contributions all you need to do is contact your plan administrator or access your online account. This can be done at any time as long as it’s before the end of the year for 401(k)s or before the tax filing deadline for IRAs.
2. Saver’s Credit
Did you know that saving for retirement may also allow you additional tax breaks?
Saver’s Credit is a non-refundable tax credit available to eligible taxpayers who make salary-deferral contributions to their employer sponsored 401(k), 403(b), SIMPLE, SEP or governmental 457 plan, and/or make contributions to their traditional and/or Roth IRAs. It can be worth up to $1,000 if filing individually and $2,000 if married filing jointly. Credit is even better than a tax deduction because instead of less of your income being subject to taxes, this reduces your actual tax bill amount.
The value is calculated based on the current contribution amount to your retirement account. The maximum contribution amount that qualifies for the credit is $2,000 per year, or $4,000 per year if married filing jointly. You can also receive a credit of 50%, 20%, or 10% of your contributions depending on how much you earn each year.
Saver’s credit is a great benefit to those with low income, trying to save for the future because the less you earn the bigger the tax break. The initial savings amount may not be exponential, but just as catch-up contributions, it will add up in the long run.
Find Out If You’re Eligible
Working with a financial planner will ensure you’re getting the most out of the benefits you’re eligible for. A financial planner can help you forecast your ability to live comfortably and put your mind at ease when facing retirement income concerns. It’s never too late to get planning. Get the conversation started with a financial advisor at CKS Summit Group.