The tax filing season is coming. Very few think of investing in their retirement fund. There are two benefits to it. It reduces your taxable income and the second is, it increases your tax refund. So, what are some tips that can you help you with it? We have got some of those tips which can help you here. For calculating, you can use a tax calculator. Now, Let’s check out those tips.
Check the IRA contributions
If you pay attention, you will find out; the IRS has a separate account for it. It is known as the IRA aka Individual Retirement account. The more money you put into it, the better it will grow. Now, the date for the latest contribution is until April 15, 2020. The maximum amount you can contribute is $6,000. If you are 50 or older, you can put up to $7,000. If you are self-employed, then you have to add into Simplified Employee Pension(SEP), which is another version of the IRA. There are two versions of the IRA. They are the traditional IRA and the Roth IRA.
Contributing Into 401(K)
As per some experts, there is no better way to contribute to your retirement plan than to add to 401(K). They grow over time because of the compound interest rate. The best thing is that it will be free of any taxes. So it’s free money with the growing feature in the future. You can contribute a maximum of up to $19,000. If you are 50 or older, you can contribute up to$25,000. The other benefit is your taxable income will get lower and you will have more funds for your retirement.
Now, you should know that you can not contribute to Solo 401(K), if you have any employees.if you still want to help, then the best way is to make your spouse as an employee. However, in standard employee 401(K), it is possible.
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Check for the Saver’s Credit
This is something which you have to check yourself. But if you are eligible, then it becomes another way for adding money into your retirement fund. The saver’s credit is worth $1000 for single and $2,000 for filing jointly. You can also claim it for your simple IRA or SEP. It could even get claimed for 401(K), 403(b) and 457 Plan. The traditional IRS is also eligible.
To open a Retirement account if you are self-employed, you can take the help of online brokers. File the papers with IRS and you are good to go. There are many account types to check like simple IRA, IRA, or SEP-IRA and Solo 401(K).
So, these are some of the tips for you to contribute to your retirement fund. After all, it’s your hard-earned money; it is never a bad idea to save some for your future, we have already told you using a tax calculator to see how much you will save. We are sure these tips will benefit you.