When it comes to retirement planning in the United States, most Americans can use all the financial help they can get. Because saving and preparing for retirement is often a confusing and difficult task, any ability to double-dip by improving the effectiveness of your retirement savings dollars is welcome. Are you taking advantage of these opportunities to make your savings contributions work harder?
1. Company Matches
Many workers are employed by companies that offer a company 401(k) or HSA match. To do this, the company agrees to contribute a certain percentage of what the employee saves in their eligible account. This is free retirement money and may as much as double your contribution, so do your utmost to meet the criteria to receive this bonus.
2. Multiple Accounts
While most Americans focus on one type of retirement account, you often have access to more than one at the same time. If you reach the maximum allowable tax-advantaged contribution in one account, fund the other. Or focus automatic contributions in your 401(k), for instance, while using windfalls to fund an IRA. And if you work for a government agency, don't forget you can fund both a 401(k) plan and a 457(b) plan.
3. Self-Employed Options
Did you know that a separate set of retirement accounts exists for self-employed persons and small business owners? These accounts — including the SEP-IRA, SIMPLE Plan, Solo 401(k), and Keogh Plan — often have much higher contribution limits and the owner designs the plan's rules. But you gain access to these plans even if you only pursue a side gig like consulting or delivering groceries.
4. Income Tax Credits
Claiming income tax credits for money put into a retirement account is an easy way to benefit from it twice. The most common is the Retirement Savings Contribution, or Savers, Credit which allows you to reduce your tax bill by up to $2,000 (for married couples). This is on top of the tax benefits from the types of accounts you use. Then, reinvest this savings into your retirement fund.
5. Pre-Fund Future Contributions
Does your income or expenses vary from year to year? Are you too young to make increased catch-up contribution limits? Just because you must wait to make those tax-advantaged contributions doesn't mean you can't earmark that money now. Pre-funding future contributions ensures that the money will be available, gets taxation out of the way, and allows you to grow your fund by investing it while you wait.
Where to Start
Are you in a position to use any of these tips to jumpstart your retirement savings? If you're not sure how to do so, start by meeting with a retirement financial planner in your state today. The sooner you take advantage of all possible savings hacks, the better your retirement will be.