Saving enough to afford the lifestyle you want when you retire? Now, is a good time to check whether you’re taking full advantage of all your retirement savings opportunities because you still have the rest of the year to adjust your retirement savings contributions.
Employer-sponsored retirement plan
Join the plan – If you haven’t already, join your employer’s retirement plan as soon as you can to increase your retirement savings. Many retirement plans have quarterly or semi-annual entry dates. Contact your employer immediately to find out when you can participate in the plan, and then join on the next entry date.
Salary deferral contributions – If your employer’s plan allows you to contribute to the plan, remember that you can decrease your taxable income by making pre-tax salary deferral contributions. You may also qualify for the Saver’s Credit for contributing to your plan. Many plans allow salary deferral elections to be submitted at any time, so review your contribution rate to ensure you are contributing as much as the plan allows.
The maximum annual salary deferral contributions allowed for 2014 are:
• $17,500 to 401(k) or 403(b) plans
• $12,000 to SIMPLE plans.
If you are 50 or older by the end of the year, your plan may allow you to make additional catch-up contributions of:
• $5,500 to 401(k) or 403(b) plans
• $2,500 to SIMPLE plans.
Your employer’s plan may match some part of your salary deferral contributions. For example, your employer may contribute 50 cents for each dollar that you contribute to the plan from your salary up to a certain amount. Contact your employer for details and adjust your salary deferrals to take full advantage of matching contributions.
Individual Retirement Arrangements (IRAs)
For 2014, you may be able to contribute to a traditional or Roth IRA the smaller of:
• $5,500 ($6,500 if you are age 50 or older), or
• your taxable compensation for the year.
This is the most that you can contribute, regardless of whether the contributions are to one or more traditional or Roth IRAs or whether all or part of the contributions are nondeductible.
Some factors may limit or eliminate your ability to contribute to an IRA (for example, your age, modified adjusted gross income, filing status and amount of compensation). Also, the amount of traditional IRA contributions that you can deduct from your taxable income depends on whether you or your spouse were covered for any part of the year by an employer retirement plan if your income is above certain thresholds.
Remember, saving for retirement requires planning! That is why you should periodically review your retirement savings goals, savings options and annual contributions to maximize your retirement savings.