Your Money Should Last
as Long as You Do.

Worried about outliving your savings? Discover how retirees in The Villages, Florida are building retirement income plans that generate reliable, lifelong income — no matter what the market does.

If you plan to retire in the next couple of years, you should ensure you are maximizing your retirement contributions. There are several reasons you should do this. One of them is tax savings. By contributing to a qualified retirement plan, you can save money on your taxes. This includes 401k, IRA, and 403(b) plans. Limits on 401(k) contributions To maximize your retirement contributions, you’ll need to determine what limits on 401(k) contributions apply to you. The IRS sets limits designed to ensure that the amount of money you contribute is in line with inflation. If you don’t take advantage of the limit, you may have to pay taxes on the total amount a few years down the road. Although the limit isn’t specific to 401(k) plans, it is essential to know that they are allowed in most IRAs. Depending on your employer, you can add up to $61,000 to your IRA. However, there’s a good chance you won’t get all of your catch-up contributions in before your plan ends. Similarly, if you have more than one 401(k) plan, you’ll need to pay close attention to how much you can defer each month. Limits on 403(b) contributions When you have a 403(b) retirement plan, you may save more money than you’d save with a 401(k) plan. The difference is that 403(b) plans are for nonprofits, while 401(k) plans are generally employer-sponsored. While both are good retirement savings options, the limits on each are different. In the case of a 403(b) plan, the annual limits are set each year. This is to prevent high-income workers from overusing these plans. The contribution limit on a traditional 403(b) is $22,500. If you contribute to a Roth 403(b), you can defer up to $15,000 in taxable contributions. For a Roth 403(b), you also have the option of contributing after-tax money. There are limits on both employee and employer contributions. These limits vary by age. Workers under 50 can contribute up to $61,000. People who are 50 or older can contribute up to $67,500. Catch-up contributions to IRAs If you are 50 years old or older, you have many options to help you save for your retirement. These include traditional IRAs, SIMPLE IRAs, Roth IRAs, and 403(b)s. The best option for you may depend on your circumstances. Depending on your income, catch-up contributions can add up. A $1,000 catch-up contribution can provide you with an extra $44,000 in retirement over the next twenty years. You can make these contributions in many different ways. Depending on your account type, your catch-up contribution may be available at any time during the calendar year. To determine if you are eligible, check with your benefits department. Besides letting you add more money to your retirement savings, catch-up contributions can also shield your investment from income tax liability. This can be especially helpful if you save more to meet your goals. Tax advantages of qualified retirement plans The tax benefits of a qualified retirement plan are a powerful tool to help you save money. These plans provide tax advantages for both employers and employees. A qualified plan is a plan that meets specific requirements as set by the IRS Code. Generally, a qualified plan must comply with the Employee Retirement Income Security Act (ERISA). Qualified plans allow you to defer taxes on earnings. You can also make contributions to your retirement plan on a pre-tax basis. However, you may have to pay income tax on these contributions if you withdraw them before retirement. Depending on your type of plan, you can contribute more. You can also invest your plan assets in higher-return assets. This allows you to earn a better rate of return, which will ultimately help you grow your money tax-free. Using a 401k retirement calculator A 401k retirement calculator can help determine how much you need to save. It considers your expected annual salary, age, and other factors. You can also input planned annual contributions and catch-up contributions. The result is a bar graph showing the cumulative amount of your account. Hovering over the bar shows the breakdown of your balance and how it grows over time. The 401k Retirement Calculator does not give you a guaranteed rate of return, but it is an excellent place to start. If you do not have an accurate figure, you can use the results to see how increasing your yearly contributions will improve your retirement outlook. Using the 401k retirement calculator to estimate your retirement savings is a smart way to take control of your future. Using wisely can help you determine how much you need to save for retirement, how much you need to invest, and how to stretch out your distributions.