We know there’s a lot to understand about planning and saving for retirement. Between tax considerations, how much you should save, Social Security and creating a retirement income plan — you may feel overwhelmed. That’s why we’re here. To help you understand your options and create a plan that will work for your specific circumstances.
Worth a look? We think so. Keep reading for help on planning and saving for your financial future.
Age 50+ Catch-Up
Age 50+ Catch-Up allows participants who are age 50 or older to make additional contributions above the IRS regular deferral limit in plans that offer this feature. Learn more about the current IRS limits.
As part of Secure 2.0, there will be a change to the way some individuals can make their Catch-Up contributions. Check out this article to learn more about this new requirement and other changes as part of Secure 2.0.
Before Tax vs. Roth
It's important to understand these different types of savings options.
Before-tax accounts Your contributions are made before they are taxed2 so you save on taxes today.
Roth accounts Your contributions are taxed today for tax-free2 income in retirement.
Keep in mind as you learn about the options, your plan may offer just one or both contribution types. In addition, your plan may offer regular after-tax contributions. You should review your plan documents for what’s available to you.
How do they work?
With before-tax contributions you are not paying taxes on the savings, which lowers your current taxable income, but you will pay taxes when you withdraw the money in retirement. Roth contributions are taxed today, but let you build savings of tax-free income in retirement. Learn more about the considerations and regulations.
Understand tax implications
Taxes can play a big role as you think about these retirement savings options since before-tax and Roth contributions will impact your paycheck differently today than they will in retirement. Check out an example of how each scenario could impact your paycheck and account balance. Use our calculator to see how this will work for you.
Find ways to save more
Retirement planning starts with envisioning your future. Think about how you want to spend your time, where you want to live and what big goals you might have. Then, think about ways you can save more. Remember, even small adjustments can make a big difference in your future income in retirement. Here are a few considerations:
Start today. The earlier you start the more your savings may grow over time thanks to the power of compounding. Learn more about how this works to help improve your financial outcome.
Understand how much to save. Simply put, the amount each person should save is dependent on a number of factors including your income, lifestyle and goals.
Maximize your match. If your employer offers matching contributions, be sure you are saving enough to take advantage of this great benefit.
Save more. Think about ways you can trim your spending to find additional dollars to save. Create a budget to help you get started.
Health Savings Accounts (HSA) can help you save for medical expenses now and in retirement. Health care can be one of the biggest expenses you face in retirement, so it’s important to start planning now. If you currently have a high deductible health plan, you can contribute to a Health Savings Account (HSA) for current and future health care needs.
Investing
It's important to know how your money is invested so that it aligns with your goals and comfort level with risk. Asset allocation is the types of investments in your portfolio — such as stocks, bonds and cash — and how you invest in each.
Revisit
Make sure to check back over time to make sure you are on track. myOrangeMoney can help, especially as your goals and circumstances change. Saving for your future takes time, but you are worth it!
IMPORTANT: The illustrations or other information generated by the calculators are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. This information does not serve, either directly or indirectly, as legal, financial or tax advice and you should always consult a qualified professional legal, financial and/or tax advisor when making decisions related to your individual tax situation.
1 Wages as defined by Internal Revenue Code Section 3121(a).
2 Refers to federal taxes and assumes any distribution is a qualified distribution. Refer to your state's tax rules and local tax rules to determine if additional taxes apply.
This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. Please consult an independent legal or financial advisor for specific advice about your individual situation.
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