Hi, I'm Joel! Today, we'll explore how retirement savings plans can help you save on taxes.
Retirement savings plans like 401(k)s, 403(b)s and IRAs, offer tax advantages that can help you save more of what you make while building more wealth for the future.
With traditional retirement savings plans, your contributions are tax-deferred. This means you don't pay taxes on your earnings until you withdraw them in retirement, allowing your contributions to grow faster.
Let's see how contributing to a retirement plan affects your paycheck. If you earn $50,000 a year and contribute $6,000 per year to your retirement plan, you reduce your taxable income to $44,000.
This changes your taxable income bracket from 22% to 12% with the tax-deferred contribution, helping you save over $5,700 on taxes now while growing your retirement savings.
If you're 50 or older, you can make catch-up contributions. This means you can contribute extra money to your retirement accounts, boosting your savings and reducing your taxable income even more.
When you start withdrawing from your retirement accounts, the money is taxed as ordinary income. But since you may be in a lower tax bracket in retirement, you may pay less in taxes.
By understanding how retirement savings plans work, you can maximize your savings and enjoy a more comfortable retirement.
Visit Equitable.com/retirement for more information. We're here to help you achieve your retirement goals.
