Maximize Retirement Plan Contributions
If you are in a retirement plan with a 401(k) or similar feature, at a minimum, you should contribute up to the maximum amount your employer will match. If you can contribute more, do so even if your employer stops matching. You still get the benefit of the tax deferral on contributions and earnings. Increasing your contributions by just 1% can greatly affect your retirement savings. Consider contributing to a Nondeductible Traditional IRA
If you are in a retirement plan and your income exceeds the amount allowed for making regular or Roth IRA contributions, consider making a nondeductible IRA contribution to defer tax on the earnings until you take distributions from the IRA. Contribution limits change annually, so to find this year’s contribution limits, please see the list provided on our website under Resources titled “Annual Updated Tax Numbers” for this and other limits, thresholds, and rates that change annually.
If you are over 50, you can contribute an additional $1,000 annually as a ‘catch up’ contribution. You should plan to withdraw the funds ONLY after you reach age 59, since premature withdrawals create a 10% penalty. Note: These contributions MUST BE reported in your tax return on Form 8606 to prevent paying tax on the contributed funds when withdrawn.