Brenden Healy, Tax Partner of Whittlesey discusses retirement plans. There are a number of options available to the business owner and the taxpayer to properly plan for their retirement while saving tax dollars today. Things like a Simple IRA, SEP IRA, Solo 401k plan, and Cash Balance Plans.

To learn more visit:

Contact:
860.522.3111
marketing@wadvising.com
280 Trumbull Street, 24th Floor
Hartford, CT 06103

Music: …(read more)

LEARN MORE ABOUT: IRA Accounts

CONVERTING IRA TO GOLD: Gold IRA Account

CONVERTING IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

Saving tax dollars is a topic that is always on everyone’s mind, and it is especially significant when it comes to retirement planning. A retirement plan not only helps one save money for the future but also provides potential tax benefits. In this article, we will explore the ins and outs of how to save tax dollars by investing in your retirement plan.

Firstly, it is important to understand the types of retirement plans available. The two main retirement plans are 401(k) plans and individual retirement accounts (IRAs). Both of these plans offer tax benefits, but they differ in how they work.

401(k) plans are offered by employers to their employees. Employees are allowed to contribute a portion of their salary to the 401(k) on a pre-tax basis. This means the employee’s taxable income is reduced by the amount contributed to the 401(k), resulting in a tax saving. Additionally, employers may also make matching contributions to the 401(k) plan, which further helps in building retirement savings.

IRAs, on the other hand, are individual retirement plans. They are available to anyone who has earned income and can contribute up to a certain limit each year. Traditional IRAs offer tax benefits in the form of a deduction from the taxable income in the year contributions are made. Additionally, these contributions grow tax-free until retirement age when the withdrawals are taxed.

Another way to save tax dollars is by investing in a Roth IRA. Roth IRAs are similar to traditional IRAs but with different tax benefits. Contributions to a Roth IRA are made on an after-tax basis, meaning there is no immediate tax deduction. However, the account’s growth is tax-free, and qualified withdrawals in retirement are also tax-free.

One crucial consideration for investing in a retirement plan is to maximize contributions to take the full benefit of tax savings. The maximum contribution limit for 401(k)s is $19,500 in 2021, and for IRAs, it is $6,000. Individuals over the age of 50 are allowed to make “catch-up” contributions, which increases the contribution limit for 401(k)s to $26,000 and $7,000 for IRAs.

Furthermore, there are additional tax benefits for lower-income earners. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is available to individuals with a low to moderate annual income. This credit provides a valuable tax break of up to 50% of the contribution to the retirement plan.

In conclusion, investing in a retirement plan is not only crucial for long-term financial planning but can also provide significant tax benefits. With the various retirement plans available, individuals can choose the plan that best suits their needs and income. By taking advantage of maximum contributions and tax credits available, one can effectively save tax dollars while securing the future.