Ways to Save More
What Accounts Should I Consider if I want to Save More?
Perhaps you…
Received a bonus or a raise and need guidance on how to save or invest the additional cash
Have a tax refund coming to you; or
Want to consider ways to save more this year.
Whatever the case may be, set your intentions and establish good habits to ensure you save for your financial goals.
Identifying available savings opportunities and prioritizing across accounts can be complex and overwhelming. For example, do you know whether you are eligible for and taking full advantage of pre-tax health care savings accounts, such as HSAs and FSAs? Are you optimizing your retirement savings, choosing between traditional and Roth options, obtaining the total amount of any employer match, and maximizing your contributions?
Do you need to save more in your Emergency Fund?
If so, consider the following:
If you have a spouse or partner and you both are employed, you may want to set aside three months of living expenses in case of an emergency.
If you are single or the sole income earner, you may want to set aside six months of living expenses in case of an emergency.
Do you have a Health Savings Account (HSA)?
If so, consider making a pre-tax/tax-deductible contribution of up to $3,650 ($7,300 for a family) and an additional $1,000 if you are age 55 or over. The HSA is the most tax-preferred vehicle available.
Do you have a retirement plan offered through your employer?
If so, consider the following:
Make sure you contribute enough to maximize the amount of any match offered by the employer. You can contribute up to $20,500 annually ($27,000 if age 50 or over) if your employer plan is a 401(k), 403(b) or 457.
You can contribute up to $14,000 annually ($17,000 if age 50 or over) if your employer plan is a SIMPLE IRA or SIMPLE 401(k).
Do you have a traditional IRA or a Roth IRA?
If so, review what amounts you are eligible to deduct for Traditional IRA or contribute, respectively. Contribute up to $6,000 ($7,000 if age 50 or over). Roth IRA Eligibility is phased out between $129,000 - $144,000 MAGI (single) and $204,000 - $214,000 MAGI (MFJ).
Are you or your dependents planning to attend college?
If so, consider using a 529 plan to save for college:
You can use your annual exclusion amount to contribute up to $16,000 per year to a beneficiary's 529 account, gift tax-free. Alternatively, you can make a lump sum contribution of up to $80,000 to a beneficiary's 529 account and elect to treat it as if it were made evenly over a 5-year period, gift tax-free. You may be eligible for a state income tax deduction or credit if you contribute to a plan sponsored by your state.
Are you looking to invest in the markets and are you not overly concerned about saving (or able to save) in tax-deferred accounts?
If so, consider a taxable brokerage account:
Long-term gains are taxed at preferential rates upon the sale (no tax at distribution from the account). Qualified dividends are also taxed at preferential rates. Some investments (tax-managed funds, zero-dividend stock funds, municipal bond funds, ETFs) can further mitigate any tax liability.
Are you charitably inclined?
If so, consider utilizing a Donor Advised Fund.
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