Why You Shouldn’t Wait to Save for Retirement
If you’ve been thinking about putting money aside for retirement, listen to your intuition and start now!
The sooner you start saving, the more your money will grow. “Compound Interest” is an influential factor for successful saving. With compound interest, you earn interest on what you save, as well as on the dividends received.
There are several different types of retirement plans that can help you save for retirement. These include Traditional IRA, Roth IRA, 401(k) or 403(b) offered by your employer, Solo 401(k), SEP IRA, Simple IRA, and a Health savings account.
AHFCU provides Traditional and Roth IRAs. These are generally a safe way to save for retirement, and you’re able to earn competitive market interest rates. One of the most significant benefits of an IRA is that earnings are generally not taxed until you take a distribution. All or part of your contributions may also be tax-deductible.
In 2020, you can contribute up to $6,000 ($7,000 if you’re 50 or older) a year to an IRA. Until you take withdrawals, the money grows tax-deferred. If you make $65,000 or less (single filer) or $104,000 or less (joint filer), you’re able to take a full deduction, up to your contribution limit. If you and your spouse are not covered by a retirement plan at work, you can benefit from a full deduction, regardless of your income.
If you can contribute to both an IRA and a 401(k), you’re unable to take any deductions from your IRA contributions if you earn more than $75,000 (for single filers) or $124,000 (married filing jointly).
The limits for 2019 are the same as in 2020.
Contributions to a Roth IRA get made with after-tax dollars. The money you earn grows tax-free. Unlike traditional IRAs, you can withdraw the amount you contributed (not the investment earnings) at any time with no penalty or taxes due. You are not taxed on withdrawals if they are made after age 59 1/2. Also, unlike traditional IRAs, you are not required to take withdrawals after age 70 1/2. You must make less than $137,000 (if you’re single) or $203,000 (if you’re married filing jointly) in 2019/2020 to contribute to a Roth IRA. If your income is more than $122,000 (single) or $193,000 (married and filing jointly), your allowed contribution is less. You are able to contribute to both a Roth IRA and a traditional IRA, but the contribution limits apply to your total deposits.
Allied Healthcare Federal Credit Union is committed to your financial health, so we strive to make the process as easy as possible. To learn more or to start an IRA, call 562.933.0370 or stop by one of our branches.