What allows you to save money for your retirement while also potentially decreases your yearly tax bill? A retirement plan! Here are four retirement plan actions that may help put you into a lower tax bracket this year (so your income will be taxed at a lower rate).
Contribute to your 401(k). Time is running out for 2018 contributions to your 401(k) plan. This year, you can put up to $18,500 into your plan. And if you’re 50 or older by Dec. 31, that limit increases to $24,500.
Contribute to your SIMPLE plan.
If you have this type of plan, you can contribute up to $12,500 in 2018, and $15,500 if you’re 50 or older.
Contribute to your IRA. Contribution limits this year are $5,500, and $6,500 if you’re 50 or older.
Make timely required minimum distributions (RMDs). If you’re older than 70.5, you generally have to take minimum distributions from your retirement plans by Dec. 31.
Things are a little different if you turn 70.5 in 2018. You can either take your first RMD by Dec. 31, or you can wait as long as April 1, 2019, to do so. Keep in mind that if you wait, you’ll have to take two distributions in 2019. That’s why it’s important to plan accordingly so your RMDS won’t unexpectedly push you into a higher tax bracket if you wait to take two next year.
Questions about how your retirement plan can help save you tax dollars? Call today.