As we grow older and get closer to our expected retirement, we often look for ways to increase our savings to have better retirement income. There are several ways you may be able to do that.

Employer Matching Contributions

Obviously, if your employer offers a retirement savings plan like a 401(k) or 403(b), you should be participating. This article is about saving “more.” You can’t save “more” until you are already saving. If you haven’t started saving yet, do it now.

Assuming you’re already doing so, the next question is how much are you saving? At the very least, you should be saving enough to maximize any matching contributions from your employer.

Many employers offer to match your contributions to a retirement plan. They may match your contributions dollar for dollar or they may match a lower amount (perhaps 50 cents from them for each dollar you save). They’ll have a maximum amount they agree to contribute. You should save enough in this plan to receive every dollar they are offering to you — it’s free money they’re handing you, so why not accept it?

Maximizing Your Own Contributions

After you start saving enough to take advantage of all the matching contributions offered to you by your employer, what’s a good next savings goal?

The federal government limits how much you can donate into your 401(k) plan each year. The maximum in 2018 is $18,500. If you are older than 50, you can make additional catch-up contributions of up to $6,000 more. So, for those older than 50, the maximum this year is $24,500.

Are you saving that much? If it’s possible given your income and your expenses, you should be.

IRS Saver’s Credit

The IRS offers a special Retirement Savings Contributions Credit on your taxes if you qualify and earn less than $63,000 in adjusted gross income. It’s usually referred to simply as the Saver’s Credit. The amount of credit you can get (which translates into more money you could be saving) varies according to household income.

The IRS website says, “The amount of the credit is 50 percent, 20 percent, or 10 percent of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A).”

Individual Retirement Account

Regardless of whether or not your employer offers a savings plan like a 401(k) or 403(b), you may also save in an IRA on your own.

There’s a lower maximum amount you can contribute annually to this type of retirement account — you can only save up to $5,500 per year in 2018 ($6,500 if you are 50 or older). Still, that’s another way to add to your retirement savings.

For those covered by a workplace retirement plan such as a 401(k), the income ranges for IRA deduction phaseouts also changed for 2018.

• For single taxpayers with a workplace retirement plan, the deduction is phased out for those making $63,000 to $73,000, up from $62,000 to $72,000.
• For married couples filing jointly, where the IRA contributor is covered by a workplace plan, the income phaseout range rises to $101,000 to $121,000, from a range of $99,000 to $119,000.
• And for couples where the individual contributor is not covered by a plan, but their spouse is, the income phaseout range climbs to $189,000 to $199,000 from $186,000 to $196,000.

There were also increases in the income phaseouts for Roth IRA contributions.

Remember that while it’s a nice additional benefit to be able to deduct your IRA contributions, you still have the advantage of tax-deferred savings growth even if you’re over the income limits for the deduction.

No one accidentally ends up with good income in retirement. Unless you count the oh-so-rare major lottery grand prize winner [NOTE: Don’t count on that for your retirement]. Good retirement requires good planning. That’s what we do at Texas Financial and Retirement.

Contact James Holloway, Sr. and the rest of the team at bestclients@texasfinancialandretirement.com or (903) 534-5477 and ask about a free initial consultation. First, we listen to our clients and learn what resources they have and their personal retirement goals. Then we help them develop a good plan, customized for them, to help them to reach and enjoy their retirement.