Retirement brings images of strolling along the beach, cocktail in hand, warm sand between your toes and a perfectly groomed dog frolicking alongside. Saving up for our dream retirement not only helps us reach these dreams, but also helps us you along the way . Did you know that by making retirement contributions, you could increase your current tax refund or reduce the tax that you may owe? Magic? Almost.
It’s not breaking news that the more money you make, the more taxes you pay. But, by reducing your taxable income, contributions made towards retirement could save you money each tax season. Save money in the present and in the future by contributing to a retirement plan.
The IRS allows you to contribute up to $5,500 to a traditional IRA in tax-year 2014, or $6,500 if you are age 50 or older.
For those first-time contributors, the saver’s tax credit is available to help kick start your savings. The saver’s credit can be used in addition with any other tax savings that apply.
Roth IRA deposits won’t reduce your current tax bill, but the money will grow tax-free and you won’t have to pay taxes on it in retirement. So Roth IRAs may be a more beneficial idea for those who are at a lower tax rate currently than they will be at retirement.
Having a retirement plan offers so many incentives, now and for the future. Consider the benefits of contributing when thinking about tax planning.