The difference that Retirement Fund contributions can make to the PAYE tax levied at salary source….(read more)

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As the year comes to an end, it is important for individuals to review their retirement fund contributions and ensure they have maximized their contributions for 2018.

A retirement fund, also known as a pension plan or superannuation scheme, is a fund set up by an employer or an individual for the purpose of providing income during retirement. Contributions made to these funds can be tax-deductible and can accrue interest over time, allowing for future financial stability.

For those who have access to an employer-sponsored retirement plan, such as a 401(k) or 403(b), the maximum contribution limit for 2018 is $18,500. This limit includes both employee and employer contributions. For individuals over the age of 50, there is an additional catch-up contribution of $6,000, bringing the total limit to $24,500.

It is important to note that contributions to a traditional 401(k) plan are tax-deductible, meaning that income taxes are not paid on the contributions until they are withdrawn during retirement. On the other hand, contributions to a Roth 401(k) plan are made with after-tax dollars, but the money grows tax-free and withdrawals made during retirement are also tax-free. It is important to evaluate which option may be more advantageous based on individual financial circumstances.

For those who do not have access to an employer-sponsored retirement plan, there are individual retirement account (IRA) options available. For 2018, the contribution limit for traditional and Roth IRAs is $5,500, with an additional catch-up contribution of $1,000 for those over the age of 50.

Maximizing retirement fund contributions can provide individuals with the potential for significant financial growth and stability during retirement. It is important to review contributions and ensure that the maximum limits have been met for the year. If not, there may still be time to make a contribution before the end of the year in order to receive the tax benefits and secure a better financial future.