Let Uncle Sam Invest in Your Retirement!
Since it’s tax time, I wanted to tell everyone that you could receive some extra cash via the government for your retirement contributions.
So basically, the government will actually pay you to invest in your retirement?!?
Yep! It’s true. If you do your taxes right and meet the qualifications, the government will give you money to save for retirement! There is a special tax deduction that Americans can qualify for in order to make it easier to retire, up to $5,500 ($6,500 if you’re age 50 or older). All you need to do is specify that you’ve either 1) made these contributions, or 2) will make these contributions, to a Traditional IRA (Roth IRAs are used with post-tax money and are not eligible for deductions) by the tax deadline.
What’s particularly useful is the 2nd scenario. You have up until the tax deadline for the following year to make your contribution, meaning if I wanted to contribute to an IRA this year, I can use part or all of my tax refund to contribute to the IRA, and it will reduce the taxes I owe for my 2013 return, possibly increasing my refund! Playing around with our refund, my wife and I could gain an extra $300 if we contribute $2000 to her IRA by April 15.
Unfortunately, not everyone is eligible for the deduction. If you participate in an employer’s retirement plan, you may only be able to deduct a portion of your contribution, if at all. And there are also rules around excess contributions. To learn more about the tax deduction check out the IRS Website or TurboTax. You can also purchase TurboTax here.
Finally, it pays to save for retirement!
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