How to boost retirement accounts

The Savings Game

Saving enough for retirement is a challenge for most people. So why do so many ignore the incentives and tax advantages that are there for the taking? Perhaps they don’t know about them, or maybe they need reminders.

With that in mind, here’s a list of steps to take to boost your retirement accounts.

Take your employer’s matching contributions: If your employer matches some of your contributions to your 401(k), it is foolish not to contribute enough to receive the maximum employer match. Even if you have to borrow on a short-time basis to make that contribution, it will still be worthwhile. Any employer contributions you don’t take are lost forever.

Use Roth conversions to your advantage: People who earn more than $135,000 in the current year, or couples that earn above $199,000, are not eligible to contribute to a Roth that year. However, you can contribute to a traditional IRA and then convert to a Roth. If you do the conversion quickly, you avoid tax liability on earned income resulting from the contribution.

It can also be a good idea to do a Roth conversion during years when your income is low. When you do a Roth conversion, your tax liability depends on your marginal tax bracket. If you anticipate in 2018 you will be in a relatively low tax bracket, and you determine that in the long run Roth accounts are to your advantage, make a conversion before year-end.

Roth accounts have many advantages over traditional IRAs. There are no mandatory withdrawals after age 70 1/2. In addition, all subsequent earnings are tax-free as long as you invest for at least five years, and all contributions can be withdrawn without penalty, regardless of the holding period.

Continue to make Roth contributions after retirement age: Current tax regulations do not allow you to contribute to traditional IRAs after age 70 1/2, but they do allow you to contribute to a Roth, as long as you have earned income. If you earn income after age 70 1/2 — and can afford to contribute to a retirement plan — it would be a mistake not to.

Take advantage of “age-based” options: For example, tax regulations allow non-working spouses to establish IRA accounts as long as their spouses have earned income, a joint return is filed and the joint income does not exceed $190,000. In that case, the spousal IRA can be established with a $5,500 contribution each year. If the spouse is 50 or older, $6,500 can be contributed.

Also, if you are 50 or older, you can increase your contributions for traditional IRAs and Roth IRAs from $5,500 to $6,500 in 2018.

Use a health savings account: More corporations are instituting health care plans requiring large deductibles for their employees in order to minimize health care expenses. Under certain circumstances, these permit you to open and contribute to an HSA.

If your employer has instituted such a plan, it is to your advantage to make the maximum contribution and carry over the balances in the HSA indefinitely. You are not required to withdraw your contributions in the year you contribute. If you can afford to pay your health care bills with other assets available to you, it is to your advantage to do so.

Tax regulations allow your contributions to be tax-deductible. Income earned from these accounts is not taxable. Subsequent withdrawals are tax-free, even after you retire, as long as you use withdrawals for qualified health-related expenses.

Tax regulations provide more advantages for HSAs than any other retirement accounts. Spouses who are beneficiaries of these accounts can use the funds for qualified health care expenses without tax liability.

Establish retirement accounts with self-employed income: Many people who participate in a 401(k) with one employer also earn self-employed income. In that situation, you should look at additional self-employed retirement plan options. Some options are SEP IRAs, simple IRAs and/or Solo 401(k)s. Discuss these options with a major mutual fund, brokerage firm or your local bank.

Elliot Raphaelson welcomes questions and comments at

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