Retirement plans provide a great way to save for the future. In addition to many benefits, like the convenience of payroll deduction, various investment options, and sometimes even an employer match, one of the greatest features is the ability to save on a pre-tax basis.
When you contribute to the plan, money is deducted from your paycheck pre-tax. This means that whatever you contribute reduces your current taxable income. So, when it comes time to file taxes, the amount of income you report for the year is less, meaning the amount of taxes you owe that year could be less as well.
Keep in mind that when you eventually make withdrawals during retirement, you will have to pay taxes on contributions and earnings. Most theorize, however, that their tax rate may be lower at that point, since they will be retired.
Are you maximizing the amount you can save on a pre-tax basis?
If you are under age 50, you can put up to $19,500 in your plan each year. If you are over age 50, you can put in an additional $6,500 each year, called a “catch-up contribution.” To see how much you can afford to save, use our Contribution Calculator. You will even see your estimated annual tax savings in the calculation results.
Remember, in addition to the tax benefits, saving more could also increase the amount you have at retirement as well.
Now is the perfect time to save even just a little more. Log in to your account and increase your savings today.
The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
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