No matter what age you are, retirement is something that should be in the back of your mind. Even if you’re younger and just starting out in the workforce, or almost at the retirement finish line. What you choose to do now can greatly affect your financial future. In this vein, there are 5 fantastic ways to maximize your retirement account benefits.
#1. MAXIMUM CONTRIBUTIONS to retirement account
If you have the means to do so, maximizing the contributions to your retirement accounts can really help boost you to a new level during retirement. Heck, this can even help you retire early, should you so desire. Here is the basic breakdown of the maximum you can contribute in 2022, according to the new IRS rules:
- $20,500 for 401(k), 403 (b), Thrift Savings Plan & some 457 plans
- $6,000 for IRA’s
- $1,000 for catch up contributions over the age of 50
- $27,000 for catch up contributions over the age of 50 if you have the government’s Thrift Savings Plan
The IRS increased some of the contribution limits going into 2022, which they have been consistently doing in past years as well. This continual increase should help a lot of Americans save more faster. But this only helps if you can contribute the full amount.
If you aren’t in a position to contribute the maximum amount currently, then you will first need to work on fine tuning your budget.
#2. TAKING ADVANTAGE OF MATCHING
If you do have the benefit of working for somebody else AND they offer to match for retirement contributions, then this is something you should fully take advantage of. Every company is structured differently, and it is completely up to each company how they decide to offer matching, if they do at all. So, you’ll need to reach out to your HR personnel to find out what your company currently offers.
However, here are some of the most common ways you might run across a matching option:
- $.50 on the dollar for the first 3-5% you contribute
- 2.7% of your pay, on average
- 100% match up to the first 3-5% you contribute
#3. SEP IRA
A SEP IRA is a great way to contribute to a retirement account when you are self-employed. This type of account is similar to an IRA, except that you can contribute more to it than a Roth IRA or Traditional IRA.
Currently, if you open a SEP IRA, you can contribute up to 25% of your income or $61,000, whichever one happens to be less. Not only that but you won’t be taxed on anything until you begin withdrawing funds in retirement. So this can be a really great way to maximize the benefits of retirement and save more along the way.
#4. WHERE YOU LIVE
When you’ve finally decided it’s time to retire, choose where you live wisely. Even if you don’t think it matters, it really does. The biggest determining factor here are that 37 states that do NOT tax social security income. Yes, you heard me correctly!
This means that if you want more bang for your buck when you retire then you should seriously consider where you live.
Don’t just look at which states are social security income friendly though. You will want to take a look at the property taxes, state and local taxes and taxes on other retirement income. These aspects are crucial to the overall equation in order to maximize your benefits in retirement.
maximize retirement account benefits summary
Overall, there are a few fantastic ways to maximize your retirement account benefits, no matter what your company offers. You may choose to maximize your contributions which will directly impact your company’s matching. Or, if you’re self employed, you may open a SEP IRA and put in as much as you’re legally allowed each year. No matter which of those two options you choose, where you live now and in the future does matter. This is something to keep in mind in order to keep more of your hard earned money and hopefully be able to enjoy retirement to the fullest.
What are some of the best ways you’ve found to maximize your retirement account benefits?
