How much money do you need to retire comfortably? Consider these tips to get a better understanding of how much you should be setting aside.
Updated March 31, 2021, at 10:35 a.m. CT
If you meant to set aside more money for retirement or health expenses last year, you now have more time to make good on those goals.
Individual Retirement Accounts
You’ve heard it before, but it’s worth repeating: The sooner you start saving for retirement, the more money you’ll have later when you need it.
IRAs offer a tax-advantaged way to invest—and save—for retirement.
If you’d still like to contribute to an IRA for 2020, here’s what you need to know:
- Eligible individuals can make contributions to a Traditional or Roth IRA for 2020 until May 17, 2021, thanks to a recent extension from the Internal Revenue Service.
- IRA contributions for the 2020 tax year are limited to the lesser of earned income or $6,000 ($7,000 if you’re 50 or older).
- Individuals of any age can now make Traditional IRA contributions if you (or your spouse, if filing a joint return) earned income during that tax year, thanks to the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).
- You could receive a deduction for Traditional contributions or a saver’s tax credit for Traditional or Roth contributions.
Health Savings Accounts
If you have a high-deductible health plan, an HSA can help you set money aside for current and future medical expenses.
To be eligible for an HSA, you:
- Must be covered under a high-deductible health plan.
- Can’t be covered by another health plan (with limited exceptions).
- Must not be enrolled in Medicare.
- Can’t be claimed as a dependent on someone else’s tax return.
If you want to contribute to an HSA for 2020, here’s what you need to know:
- Eligible individuals can make contributions to an HSA for 2020 until May 17, 2021, thanks to the IRS’ recent extension.
- HSA-eligible individuals can make tax-deductible contributions, earn tax-free dividends and withdraw money tax free for qualified medical expenses.
- You don’t have to use all of your HSA funds each year. Your balance carries over—and remains with you regardless of changes in coverage or employment.
* Contact your tax advisor to verify eligibility and contribution limits.