Retirement Savings Contributions Credit, copied from the IRS website:
If you make eligible contributions to certain eligible retirement plans or to an individual retirement arrangement (IRA), you may be able to take a tax credit. The amount of the saver's credit you can get is generally based on the contributions you make and your credit rate.
Refer to Publication 590, Individual Retirement Arrangements (IRAs), or the instructions for Form 8880 (PDF), Credit for Qualified Retirement Savings Contributions, for more information. If you are eligible for the credit, your credit rate can be as low as 0% or as high as 50%, depending on your adjusted gross income. The lower your income (or joint income, if applicable), the higher the credit rate; your credit rate also depends on your filing status. These two factors will determine the maximum credit you may be allowed to take. You are not eligible for the credit if your adjusted gross income exceeds a certain amount.
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When you’re developing a financial plan, it’s important to remember that one size definitely doesn’t fit all. Different family and income situations require different strategies to reach your financial goals. Here are some factors to consider when developing a financial plan.
Age
If you are in your twenties or early thirties, you have more time to save for your dream, whether that means your perfect house, early retirement, or world travel. It is important to start planning your finances early, so your savings can grow as much as possible. People in their thirties, forties, and fifties will need to save more aggressively for what they want, but with careful budgeting and investment, it can still be done.
Income
Savers who earn less and have less money to spare will need to adjust their saving plans. It’s important to set aside as much as possible, but you still need food, clothes, and a place to live. You may want to consider higher-yield investments to increase your return or change your goals. If you have a more generous income, be careful not to spend it all on lattes and luxury cars. Establish a budget for yourself and stick to it.
Family
Families clearly have to budget differently than single people. Feeding, clothing, and caring for kids takes money, which can mean less saving. If you have kids, keep in mind that you may not be able to afford many unnecessary expenses. It is also important to start college funds for your children. Consider establishing CDs or investment accounts to fund your children’s future.
Though you can develop your own budget and savings plan, you should consult a financial planner before making any major decisions. He or she can help you decide how to allocate your funds to reach your goals. Plan & Act is an independent financial advising service. Let us help you make the most of your money. Contact us today at, (720) 897-7966.