More Money at Retirement: How to Spend Tax Refunds Wisely
With company pensions disappearing, Americans are now more responsible than ever for creating their own “personal pensions.”
Whether it’s a 401(k) or other workplace retirement plan, IRA, or other form of savings, it’s up to you to create your own retirement income.
And if you aren’t thinking about your retirement income now…
If you haven’t given thought to the lifestyle you want when you retire…
If you don’t have a plan on how to meet your retirement goals, chances are you’ll be like too many Americans and NOT have enough income at retirement.
According to a study published in late 2018, out of 16.2 million 401(k) participants, only 187,000 had over a million dollars in their 401(k)s.¹
And, according to Vanguard’s How America Saves,² only 13% of employees with retirement plans at work saved the then-maximum 401(k) contribution limit of $18,000 in 2017. Only 14% of those 50 or older took advantage of plans offering catch-up contributions.
We’re not sharing these statistics to discourage you if you aren’t on track for a comfortable retirement.
We’re sharing this information because we believe you deserve to have the greatest opportunity for a secure and fulfilling retirement.
That said, there is one simple thing you can do TODAY that may make a difference during retirement…
Invest your tax refund into your 401(k) or other workplace retirement plan.
If you add to your 401(k), it needs to go through payroll deduction. So, how do you invest your tax refund exactly?
Simply contact your Human Resources department, tell them what you want to invest, and they will take it out of your paycheck(s). Then use your tax refund to live on and make up the difference during this time.
Whether you are 25, 41, or 58, it doesn’t matter. It’s never too late to save.
And, really, there’s no better way to spend your tax refund than to invest in yourself and in your future.
Keep reading for new IRS contribution guidelines, and how investing your refund now (no matter how small or big it is) may make the difference between being comfortable at retirement and struggling to get by.
New IRS Retirement Plan Contribution Limits for 401(k)s
The IRS recently published its new contribution limits for 2019. Here’s what you need to know…
401(k) Contributions: The annual contribution limit has been raised to $19,000 for 2019 for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. This is $500 over 2018.
401(k) Catch-Up Contributions: For employees age 50 or older in the plans listed above, the additional contribution limit will stay the same for 2019 at $6,000. This means the annual contribution limit is $25,000 for those 50 or older.
Note: If you don’t turn 50 until December 31, 2019, you can still make an additional contribution for the year.
Solo 401(k) Contributions: If you are a small business owner and self-employed, the maximum contribution to your solo 401(k) is $56,000 in 2019. This is a $1,000 increase from 2018.
After-Tax 401(k) Contributions: If your employer allows 401(k) after-tax contributions, the limit is $56,000 for 2019. This is an overall cap that includes your $19,000 salary deferral plus your employer contributions. This does not include catch-up contributions.
Click here for more information on other contribution limits
Expert Tip: You don’t have to wait for enrollment season to make changes to your 401(k) election. You can make changes anytime during the year!
More Money For Retirement: Your Future Self Will Thank You
What would 40% more income do for you at retirement–a retirement that could last 5, 10, or even 20 years?
Would 40% more income allow you to buy that home you’ve always dreamed of? Would it allow you to take luxury vacations instead of backyard staycations?
If you’re like most people we talk to, it would make a HUGE difference in the type of retirement you experience.
The bottom line is this…If you take care of your money now, your money will take care of you in the future.
Sure, having that new TV would be great. And, yes, we know that jacuzzi in your backyard would make the neighbors jealous.
Before you run out and buy that new gadget or make that dream purchase, really think about your future retirement income.
If you’re on track to reach your goals, please accept this virtual high five!
If not, we challenge you today to take your tax refund and invest it into your 401(k) or workplace retirement account. Or, if you have an IRA or government Thrift Savings Plan, put it in there.
Remember, if you add to your 401(k), it needs to go through payroll deduction.
Simply contact your Human Resources department, tell them what you want to invest, and they will take it out of your paycheck(s). Then use your tax refund to live on and make up the difference during this time.
Do what you can to maximize the contribution limits for 2019. Your future self will thank you. Promise.
If you’d like more tips and guidance on how to have more income at retirement, download our guide on How to Supercharge Your 401(k) Performance Today.
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