Moneyanatomy - personal finance blog

Wednesday, September 27, 2017

How long is the list of tax advantaged retirement savings options?


The tax advantaged options are very few: 401k (and similar plans like 403(b), 457 and SEP), IRAs and HSA.

HSA is a special case: it is a health savings account but after age of 65 it can be used as an IRA.
401k and IRAs have 2 varieties: Roth and Traditional which means the contributions are post-tax or pre-tax. 


Here is this short list including contribution limits:

1. 401k (or Roth 401k) How to decide between regular 401k and Roth 401k 
    2018 limits: $18,500, catch up with 50 - additional $6,000


2. IRA (Traditional or Roth) How to use backdoor Roth IRA
    2018 limits: $5,500, at 50 - additional $1,000
      

3. HSA Why is it on this list
    2018 limits: 
    Individual $3,450, family: $6,900, 
    at age 55 - additional $1,000 (per person of age 55)


I am not counting the 529 college savings plan. Even if this account is in your name and theoretically it can be used as savings back up but the penalties are very high.



In the tables below are the maximum yearly contributions based on 2017 contribution limits. 
The first table is for a family with two working adults showing two 401k and IRA accounts and a family HSA.

You can see the added "catch-up" contributions at age 50 (401k and IRA) and at age 55 (HSA). 






The second table shows yearly contributions for a single person showing one 401k, IRA and single HSA.





The list is short and the contribution amounts are small. 
A high income professional will use up those options fairly soon. 
The rest of the savings will have to go into a taxable account. 






No comments:

Post a Comment