One of the greatest missed opportunities of all time is the tax benefits offered through retirement savings. A lot of working Americans don’t realize how many layers of benefits there are to retirement plan participation. Just take a look at all the great things that retirement savings can do for you:
1. Reduces your taxable income. Participation in a traditional 401K, 403B or TSP reduces your taxable income as your contribution comes out of pre-tax dollars. Thus your federal and state tax withholdings are reduced and your taxable income at tax time is less. More money in your pocket right away because those tax savings go right into your pocket.
2. Matching benefits. Many employers match employee contributions. That is free money that the employee adds to their retirement nest egg. Free money that otherwise stays in the bosses pocket. Now who do you think can use it more?
3. Saver’s Credit. If you make contributions to an IRA or an employer retirement plan (including Roth contributions) and your income is less than $27,750 ($41,625 head of household or $55,500 married filing joint) you may be eligible for the savers credit which can be as much at 50% of your contributions!
With so many ways to save on your taxes while you are building your nest egg for the future, there is no reason not to ramp up your savings. For more great savings ideas and some more reasons to contribute to that retirement fund check out our retirement section at http://virginiasaves.blogspot.com/
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