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Money Saving Tip: Catch-Up Provisions

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Money Saving Tip: Catch-Up Provisions

Once the kids are out of college and the wedding is paid for, it is generally YOU time – time to set aside as much as possible for your retirement. The tax code allows you to bump up your savings if you are age 50 and over to help you reach your retirement goals.

The 2018 new tax law keeps the age 50-and-over IRA catch-up provision at the same level as last year: $1,000 in addition to the $5,500 contribution limit. For those approaching retirement, this is a fantastic way to bolster your retirement savings. You generally have until April 15 to make your traditional and Roth IRA contributions for the previous tax year.

If you have an employer-sponsored retirement plan, be sure to contribute at least up to your company matching formula. Every dollar received as part of the match is free money to you – take it! The 2018 401(k) limit is $18,500, with $6,000 additional catch-up for those age 50-and-over.

If your employer offers a Roth 401(k) option, you may want to contribute to this plan as it allows you to diversify from a tax-perspective. The goal should be to have pools of assets in at least three of four available tax buckets.

To learn more about the importance of tax diversification watch our Retirement Tax Planning Video.

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