Here’s how you could score almost $10,000 in FREE retirement money
IF you’re looking to score some extra cash towards your retirement, you can get close to $10,000 of free money if you act fast. Depending on your financial situations and the amount of money you’re willing to invest in your future – you could score $9,620 from the government. How to score thousands in free […]
IF you’re looking to score some extra cash towards your retirement, you can get close to $10,000 of free money if you act fast.
Depending on your financial situations and the amount of money you’re willing to invest in your future – you could score $9,620 from the government.
How to score thousands in free retirement money
In order to score free money from Uncle Sam, invest in a retirement account that provides tax breaks for your contribution.
The most common one is a 401(k) and it has a larger annual contribution limits than most other tax-advantaged retirement accounts.
In 2020, if you’re younger than 50, you can contribute up to $19,500 towards your 401(k).
If you’re 50 or over you can contribute a maximum of $26,000 and are eligible for catch-up contributions.
These are pre-tax contributions you can consider, so you won’t have to claim the funds as income and won’t pay taxes on the money.
Since the contribution won’t reduce your take-home pay as much due to the tax savings, the contribution will effectively cost you less right now.
If you max out your entire $26,000 contribution and you’re in the 37 percent tax bracket, the government subsidy would be worth up to $9,620 in saved taxes.
In the end, you’d only spend $16,380 to end up with $26,000 saved – effectively receiving $9,620 in free cash from the government.
However, eventually you’ll have to pay taxes on 401(k) withdrawals.
This means this free money doesn’t work exactly like most government subsidies – you’re essentially just saving on taxes now and deferring your payment until later.
But because you can earn tax-free gains on money throughout your working years and the chances are good you’ll be in a lower tax bracket as you retire.
So you’re getting free money to invest today and paying some back in taxes later at a potentially reduced rate.
Another added bonus is the free money you get from Uncle Sam may not be the only extra money you get when contributing to your 401(k).
If your employer matches your contribution you’ll also get some extra cash for your company as well.
For example, say your employer matches 50 percent of your contributions up to a certain percentage of your salary.
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If you haven’t exceeded that percentage and you contribute $1,000 to your 401(k), that contribution would cost you just $780 if you were in the 22 percent tax bracket.
If your employer give you another $500 in matching funds, you’ve just turned $780 into $1,500 before even purchasing a single investment.
So if you have access to a workplace 401(k) plan you can’t afford to pass up all this free retirement cash.