Now is the time to review funding your retirement accounts for 2021. By establishing your contribution amounts at the beginning of each year, you’ll be on track from the start. Here are annual contribution limits for the most widely used account types:
How to use these accounts
- Identify the retirement savings plans that you currently have established.
- Note the annual savings limits of the plan for next year and adjust your savings to take full advantage of the annual contributions. Remember, a missed year is a missed opportunity that does not come back.
- If you are 50 years or older, add the catch-up amount to your potential savings total.
- Take note of the income limits within each plan type.
- For traditional IRA’s, if your income is below the noted threshold, your taxable income is reduced by your contributions. The deductibility of your contributions is also limited if your spouse has access to a plan.
- In the case of Roth IRAs, the income limits restrict who can participate in the plan.
If you have not already done so, consider…
- Setting up new accounts for a spouse or dependent(s).
- Using this time as a chance to review the status of your retirement plan, including beneficiary designations and your investment allocation.
- Reviewing contributions to other tax-advantaged plans like Flexible Spending Accounts (health care and dependent care) and prepaid medical savings plans like Health Savings Accounts.
Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.
