Are you thinking now about your savings plans for 2021 while you finalize your 2020 contributions?
This is the time of year that a lot of folks begin to dig into their savings plans for finalizing some of their 2020 contributions. And, sorting out what – and how much – they can plan on contributing to those plans in the New Year.
There’s some news – that might be seen as good OR bad – about that…
Contribution Limits & Good News
For starters, contribution limits are remaining the same for next year virtually across the board.
Employees who are using 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan will be able to contribute up to $19,500 to those plans during the year. That’s the same contribution limit in place for 2020.
Roth and traditional IRAs also stay the same. At $6,000 annually.
I know, I know, “So how is that good news?”
Well, for starters, those limits didn’t go down. But more importantly, the deduction phase-out for your contributions are all going up.
So while you might not get to “save” any more, you’ll qualify for the tax credits when your income increases in 2021.
Losing Money Or Free Money?
Now, you might think that, as hard as 2020 has been, 2021 might be challenging. And there’s no way to know until we get there.
The bigger point is this: right now, if you don’t have a plan to maximize your contributions, you’re losing money.
Free money.
I want to make sure that doesn’t happen. How?
Getting A Plan In Place
Simple! You get a plan in place!
The secret is to approach your personal finances the same way your company might approach its operational costs – with a budget.
I discuss this sort of thing all the time with clients who are getting close to retirement, and it’s almost the same thing. Think about it: you know how much your car payment is, your mortgage, your various bills, and your subscription services for television each month. AND you know what your paycheck is. From there, you can – and should – be able to deduce how much you CAN save every year.
Do you “have” to save it all? No, not if you don’t want to.
You can budget your family vacation in your plan. Or a weeklong getaway with your spouse. Even season tickets for your home team.
None of that matters!
Create A Plan To Save In 2021 & Use The Tax Breaks
What is most important is that you create a plan to save. And that you use the tax breaks we currently have in place to maximize the value of every dollar you save.
If this seems like too much, I recommend you make an appointment BEFORE the end of the year to sit down and look at your current savings strategy. We can then see where you’re leaving money on the table.
Let’s get it in your pocket!
When it comes to savings plans for 2021, and any other financial advice, my team and I are more than happy to answer your questions and even make some recommendations. Give us a call or send us a message through our contact form and let’s get you on the right track!
