Caro elder law attorneys help you to create a plan to save enough for retirement so you are financially secure during your golden years. Most Americans are woefully behind in saving a sufficient amount of money to provide for themselves when they have left the working world. The average saving for a person aged 55 to 64 in 2016 was just $104,000, according to Investopedia. This nest egg would produce retirement income of just $310 monthly.
You don’t want to end up with so little retirement savings that you struggle to make ends meet during your senior years. You should work with Biddinger & Estelle to find out what types of accounts to invest in to save for retirement and what your financial goals should be for investing in these accounts.
Choosing the right account is vital because there are tax breaks for certain kinds of retirement investment accounts that could make saving enough for retirement much easier.
Understanding Tax Breaks for Retirement Savings
Your eligibility to invest in retirement savings accounts that come with tax breaks will vary depending upon many factors including your household income and whether you or your spouse have access to a workplace retirement plan.
Many workers are able to invest in a 401(k) account through their employer. Solo 401(k) accounts are also an option for self-employed business owners who have no employees other than their spouse. If you have a 401(k) at work, you’re allowed to invest $18,000 maximum in this account with pre-tax funds as of 2017. If you are older and eligible to make “catch-up” contributions, you are permitted to invest an additional $6,000. Many employers will match a portion of the contributions you make to a 401(k) and this employer match does not count towards your contributions.
There are also other retirement accounts that provide tax breaks as well. Individual Retirement Arrangements, or IRAs, are a popular option that you can consider, regardless of whether or not you have a 401(k) at work. You can open an IRA with many different banks or brokerage firms and can generally invest up to $5,500 with pre-tax funds in an IRA as of 2017. If you are older, you are again allowed to make a catch-up contribution of an additional $1,000 in pre-tax money to your IRA. Some high earners with workplace retirement plans, however, will not be allowed to invest in a tax-deductible IRA if their household income threshold is too high.
For self-employed individuals and small business owners, a SEP-IRA or a Simple IRA are two other retirement account alternatives that can be invested in with pre-tax funds. Both of these accounts have higher contribution limits than a traditional IRA does, with contribution limits depending upon factors like the income you earn.
Another alternative retirement account option that comes with tax breaks is a Roth IRA. A Roth IRA works differently than all of these other accounts. Instead of investing in a Roth IRA with pre-tax money and getting your tax break up front, you will instead invest with after-tax dollars. This means it costs you a little more to invest up front since you are not getting the tax break. However, you are able to withdraw money tax free from your Roth IRA when you take out your investments and gains. Tax-free investments are permitted as long as you follow IRS guidelines, and this mean substantial financial savings.
It can be difficult to determine which of these accounts you are eligible for and which is best for you to invest in, so you should make certain you get the help you need from a knowledgeable advocate to determine the best course of action for saving for your retirement.
Getting Help from Caro Elder Law Attorneys
Caro elder law attorneys will work with you to determine what tax-advantaged retirement accounts you are eligible to invest in. We can also provide assistance with other decisions you must make to protect your retirement, including using the right tools to protect your assets and making a plan in case you need nursing home coverage.
To find out more about how our legal team helps clients in Michigan’s shoreline communities, give us a call at (989) 872-5601 or contact us online today.