Catch Up on Your Retirement, But Hurry!
If you're close to retirement age and haven't saved much, the 2001 Tax Act has some provisions that enable you to catch up. But you must act now! This is an amazing disappearing tax act that expires on December 31, 2010, unless Congress votes before then to extend it. But until 2010, you have a guaranteed chance to increase your tax-deferred retirement savings.
For the year 2008 you can put as much as $15,500 into an employer-sponsored 401(k) retirement plan, a nonprofit employer-sponsored 403(b), or a government employer-sponsored 457(b). If you were born before 1955, you can contribute an additional $5,000 to the plan in 2008. In 2011, the limit is scheduled to revert to where it was in 2001: $10,500.
If you are a sole proprietor, a small business owner, or an employee of a business with fewer than 100 employees, the maximum contribution for 2008 to a SIMPLE (Savings Incentive Match Plan for Employees) IRA is $10,500. If you turn 50 before the end of the year, you can put in an extra $2,500 as your catch-up contribution.
A Simplified Employee Plan (SEP IRA) owner may contribute up to 25% of an employee's compensation up to $230,000, with the maximum contribution topping out at $46,000.
We won't try to guess what's going to happen in Washington between now and 2010 with these catch-up contribution rules, and we don't recommend that you try either. Predicting both politics and the future is a thankless game. But right now, you can work on getting your own retirement house in order by taking advantage of the current law and contributing as much as you can to your work-related retirement accounts.
Feeling behind on your retirement savings? Our guides will get back on track:
Estate Planning
Invest Wisely
Taxes
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Dolan Recommended: College Resources |
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Child Savings AccountsWhen opening a savings account for your child, make sure their Social Security number is used as the account's tax identification number. That way, as long as your child is under age 14, interest earned will be taxed at your child's lower tax rate, not at your tax rate. This rule holds true as long as your child earns less than $1,300 a year in interest. |
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