Time is growing short to strategize and execute retirement savings plans for 2013. As you know, CPA Accounting and Tax Solutions continually blogs about the importance of retirement savings. We often see tax clients approaching retirement age with little or no savings. There are tax advantaged retirement savings plans available to you. These small business retirement plans are more complicated than personal Traditional IRA or ROTH IRA’s, and it is wise to seek professional help in reviewing and selecting the best option for you and your company. We partner with some of the best Certified Financial Planners in Southwest Florida. Together we can analyze your company’s financials and help you select the most tax effective strategy.
Remember also, that CPA Accounting and Tax Solutions offers free consultations on your Accounting, Payroll, and Tax Preparation needs. We will analyze prior year tax returns as well. We often discover overlooked tax deductions, which can be recovered through amended tax returns. Please remember that we can only offer these free consultations before the beginning of tax season. Feel free to call us at 239-596-6050.
Following are some 2013 Federal Income Tax reduction strategies:
Fund your Traditional IRA: If you are eligible, you can contribute to a tax deductible traditional IRA up to April 15, 2014. For Tax Year 2013, you can contribute up to $5,500 in a traditional IRA, and if you are age 50 and older, you can get an additional $1,000.
While ROTH IRA’s do not reduce your taxable income directly, do not overlook this superb longer term tax strategy.
Contribute to your 401k, or 403b. If your employer matches some of your contributions, you should always contribute at least the amount your employer matches. For example, if your employer will match up to 3% of your salary, be sure you contribute 3% into your 401K. At this point you will have saved 6% of your salary, and reduced your taxable income by 3%. 401k or 403b contributions must be made by 12/31/2013 for the 2013 Tax Year. You can contribute up to $17,500, plus $5,500 more if you are age 50 and older.
As we mentioned in our last BLOG , saving toward retirement must be one of your top priorities. I see many people continue to work well beyond the traditional retirement age of 65. While some people are very happy working beyond 65, too many are required to work to make ends meet. You should begin to save systematically, as early in your working career as possible. Regular investments produce spectacular results over time through compounding. In future blogs, I’ll run a few examples to demonstrate the power of regular savings. Starting a savings plan with small monthly investments, creates the savings habit. Then increase the monthly amounts as you are able, and you will be amazed at how much you have after 5 years.
One thing that is absolutely certain in these uncertain times is the fact that we all getting older. That means someday we will either be retired, or want to be retired. For most of us, we will need savings to be reasonably comfortable in retirement, and we will need a lot more savings than you think. Speaking from experience, and contrary to what most young people think, you really don’t cut back on your living expenses that much when you retire, unless you have no choice. Most people are healthy and active retirees, playing sports, travelling, giving back and so on.
Sadly, the savings rate in our country is very low. Many young and middle aged people have little or no savings at all. It is hard to save because people tend to think you need to put a lot away, but in fact, regular systematic savings result produce amazing results, even with amounts as small as $25 a month. Next we are going to tell you how you can save for the future, and gain a tax advantage as well. Continue reading →