A Firm Message to Save More

If there is one clear message that comes from the tax law changes implemented in Washington this year, it is that individuals should be putting more money away for their future.

A number of provisions in the tax bill recently enacted offer clear savings incentives. That means more than ever, you have an opportunity to benefit from a tax perspective while building up a bigger nest egg.

A wide range of savings incentives
The new provisions give individuals a number of ways to increase their retirement savings:

More IRA savings
Starting in 2002, the annual contribution limit for individuals (current law allows a maximum contribution of $2,000 per year) will increase. The maximum rises to $3,000 next year and continues increasing each year, up to a $5,000 maximum in 2008.

Those who have reached age 50 are allowed a "bonus" contribution of $500 per year above the maximum allowable limit, which will provide an opportunity to "catch up" on past opportunities missed.

Employer-sponsored plans
Participants in workplace retirement plans will have the ability (based on their salary level) to put more money to work in those plans starting in 2002. The current annual maximum of $10,500 into a workplace retirement plan will increase to $11,000 next year and eventually to $15,000 by 2006.

Contribution limits have also been increased for those participating in plans through government employers (457 plans) and educational and non-profit institutions (403(b) plans).

As with IRAs, those who are 50 or older will have an opportunity to contribute more to any of the three types of plans, up to $1,000 more in 2002, eventually as much as $5,000 more in 2006.

The bottom line – take more responsibility
Why the push for more retirement savings? The answer may be simple – the government and large employers will play a smaller role in funding your retirement. With many questions being raised about Social Security and fewer companies offering traditional pension plans, more of the burden for your financial future is likely to be placed in your hands.

Be sure to look at your entire financial picture. Consider putting as much money to work as possible in all of the retirement savings vehicles available to you, including workplace plans, IRAs, and non-qualified annuities.

Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.