Tricks for Tax Time Retirement Savings

Many people fail to worry about retirement at tax time.  However, some of the most generous provisions of the tax code are incentives to save whether via a workplace 401(k), an Individual Retirement Account, a Roth IRA, or one of the many retirement plans for the self-employed.  Below are some tricks to make the most of the breaks, and traps to watch out for. 

• Snagging the Saver’s Credit.  One of the biggest overlooked credits is the saver’s credit, which gives low-to moderate income taxpayers with adjusted gross income of up to $60,000 a tax credit of up to $1,000 for saving in a retirement plan per person.
• Scour Taxes for Savings.  Taxpayers typically miss deductions and credits based on life changes.  Find one, and it is like free money.  Then, you can steer it towards retirement savings.
• Get a 1099.  Rather than a W-2, independent contractors or freelancers get 1099s.  They can benefit from retirement plans geared towards the self- employed: a SIMPLE IRA, SEP-IRA, a solo 401(k).  “There are a lot more ways to put money away and in higher dollar amounts.”
• Forego Cashing Out.  If you have switched jobs, do not take the money out of your old 401(k).  “We see a lot of low balances, and we try to remind people to roll it over into a new employer plan or into an IRA.”  If you leave a small balance 401(k) behind, your ex-employer could move it into a forced IRA, which could deplete the account.
• Help Kids Save.  Business owners can employ their children and start them on an early road to retirement savings by creating an IRA for their earnings. 

See Ashlea Ebeling, 7 Tax Time Retirement Savings Tricks, Forbes, Jan. 30, 2015.