Every year, all types of changes are announced to retirement programs. The government encourages us to set money aside for the future by offering tax advantages when we put funds into certain accounts.
Although this can be a nice incentive, it can present a problem too. Because the financial and economic landscape is always changing, retirement accounts often change as well. This makes knowing the rules about retirement accounts, and putting away money for the future, a bit daunting.
Don’t miss out on important tax deductions, and additional ways to decrease your overall tax burden, just because you’re not sure of the current rules. We talk to an expert who shares 4 important things you should about retirement in 2015.
As a new year gets underway, we’re all thinking about saving more for the future, and creating better financial habits. But don’t let your excuse of the unknown persuade you into missing your goals this year!
“Too often I see people who haven’t been maximizing their contributions simply because they didn’t know that the limits had been adjusted,” says Joshua Kadish, of RPG Life Transition Specialists.
1. myRA Offers a New IRA Choice
If you make less than $129,000 a year as an individual, you can contribute to the new myRA. “It’s a Roth IRA account that isn’t connected to your employer,” says Kadish. It’s fully guaranteed by the federal government, and you can start by contributing as little as $5 of your paycheck. Contributions are made with after-tax dollars, so your money grows tax-free.
It’s important to note, though, that you don’t get a choice of investments with the myRA. You’re stuck with the money growing quite slowly, since it is pegged to a government fund. And the $15,000 cap means you can’t contribute more than this amount.
2. Higher 401(k) Contribution Limits
For 2015, the IRS recently announced a higher contribution limit. You can contribute another $500 to your account, so if you maxed out your contributions this year, you can increase what you’ve been setting aside each month.
“Maximizing your contributions allows your investments to grow more over time and decreases your income tax bill,” says Kadish.
3. Higher Social Security Payments
Those who are already retired, Social Security payments have been increased. “Due to the standard increase for cost of living expenses, those receiving Social Security benefits will see their payments go up 1.7 percent in 2015,” says Kadish.
However, if you aren’t retired, it’s important to recognize that you’ll need to prepare for a higher portion of your income to be taken out of your paycheck for Social Security. The portion of income subject to the Social Security tax will be a little higher, increasing by about 1.3 percent, according to Kadish.
4. Saver Tax Credit
Depending on your income, you may be eligible for a savers credit if you contribute to a retirement account. So, not only can you build your retirement over time, along with a tax deduction, you can also get a credit, if you have a lower income.
Kadish points out that if you’re single, and have an income of less than $30,500 per year, it’s possible to get up to $1,000 for a tax credit. A tax credit is helpful because it acts as a reduction to directly reduce your tax bill.
Know These Retirement Changes
No matter your situation, you’ll want to plan ahead, and consider how these changes will impact your retirement situation, as well as your current financial situation. There’s no reason to lose out on saving for the future, or missing out on tax deduction and credits you rightfully deserve.
Take a few minutes this week to do some quick research, or reach out to your financial planner, and find out about the current retirement account changes.
With the right planning, you have the chance to improve your future, as well get an immediate tax advantage.
Which one of these tips did you already know? Do any of them surprise you? Which do you think you qualify for this year?
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