Your Guide to Becoming the Ultimate Retirement Saver – The Motley Fool

If you want to save as much as possible for your retirement, it is advantageous to take full advantage of all taxable accounts. You will have to make a lot of savings to reach all the maximums for these accounts, but if you are lucky enough to have as much capital investment available, you can make a huge difference in your tax bill. .

Here is a quick guide for anyone aspiring to ultimate retirement savings. By using all these accounts, you can maximize the tools at your disposal and greatly improve your chances of a comfortable retirement.

Maximize your IRA

Making the most of your IRAs is the simplest thing that a saver-retiree can do. The contribution limits for traditional IRAs and Roth are $ 5,500 in 2018 if you are under 50 years of age. If you have reached your 50th birthday, you can contribute $ 6,500 through the $ 1,000 catch-up contribution. gives you.

You might not be able to choose the type of IRA you want if your income is too high. Roth IRA contributions are completely denied with incomes above certain limits. You can still make a traditional contribution to the IRA, but in some cases you will not be able to deduct the amount of the contribution on your taxes if you have access to a workplace retirement plan. Regardless of this, starting with an IRA is a natural first step toward maximizing your total pension contributions.

Maximize your employer-sponsored pension plan

If you are an employee and your employer offers a 401 (k), higher limits generally apply. In 2018, employees under the age of 50 can contribute $ 18,500 to a full 401 (k), while an additional $ 6,000 is available if you reach age 50, bringing the total $ 24,500.

Not all employer plans are 401 (k) plans. For example, a SIMPLE IRA is easier to administer for an employer than a traditional 401 (k), but its limits are lower. For 2018, you can contribute $ 12,500 if you are under 50, with an additional catch-up contribution of $ 3,000 if you turn 50. In many cases, you will be able to contribute to an employer-sponsored plan. and make IRA contributions.

Get extra help from your employer with your 401 (k)

Some employers add additional amounts to what their workers save in a 401 (k). The most common source of these funds is either matching contributions or profit-sharing contributions, and these amounts are usually minimal.

However, those who are self-employed or are key employees can sometimes receive much larger contributions. The combined total of 401 (k) employee and employer contributions in 2018 is $ 55,000 if you are under 50 or $ 61,000 if you are 50 or older. However, you are generally limited to contributions equal to 25% of your net salary, which means that you must earn more than $ 200,000 to qualify for up to 401 (k) solo or another scheme that allows contributions from the employer. .

Contribute to health care expenses in retirement

Some preferred accounts that are not designed for retirement can help you achieve your long-term financial goals. For example, if you have a special health insurance plan with a high deductible, you can open a health savings account that will allow you to save tax and then withdraw money later without paying a premium. 'tax. as you use it for eligible medical expenses.

In 2018, the limits are $ 3,450 if you have a unique coverage for yourself or $ 6,850 for coverage that covers your entire family. If you are 55 or older, you can add $ 1,000 to these limits.

Keep everything you can

Obviously, you need a lot of extra savings if you want to maximize all your opportunities to finance privileged accounts. However, if you want to make the most of what tax professionals will offer you, you can save a lot of money from the start and in the long run by putting money into IRA accounts, 401 (k), HSA and other retirement accounts. run.