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Retirement News4 unexpected ways to level up your IRA | #retirement | #elderly | #seniors

4 unexpected ways to level up your IRA | #retirement | #elderly | #seniors

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An individual retirement account, or IRA, is a powerful savings tool for retirement. But there are a few tricks you might not know to make the most of your retirement savings account. Here are four unexpected ways to level up your IRA.

1. Get paid to contribute

If you’re struggling to contribute to your IRA, the federal government wants to help you out. You can receive a tax credit just for contributing up to $2,000 to your retirement account if your income is below a threshold. It’s officially called the Retirement Savings Contribution Credit, but everyone just calls it the “Saver’s Credit.”

Here are the credit and income limits for 2021:

Credit Rate

Married Filing Jointly

Head of Household

All Other Filers

50% of your contribution*

AGI < $39,500

AGI < $29,625

AGI < $19,750

20% of your contribution

$39,501-$43,000

$29,626-$32,250

$19,751-$21,500

10% of your contribution

$43,001-$66,000

$32,251-$49,500

$21,501-$33,000

*up to $2,000 per person

Table source: IRS 

That tax credit stacks with the tax deduction you can take for contributing to a traditional IRA. If you’re on the threshold of qualifying for the next tier, you can use the IRA deduction in order to push your AGI below the threshold. That can maximize your tax savings on your contribution, and may be a good reason to choose a traditional over a Roth IRA.

If your income is low enough to qualify for the Saver’s Credit without any additional adjustments, you may be better off contributing to a Roth IRA.

A piggy bank sitting on top of blocks with the letters I R A.

2. Access your IRA early, before 59½ 

IRAs are meant for retirement, but what if you retire before 59½, the minimum age you can withdraw funds from your IRA without penalty? If you plan things carefully, you can avoid penalties entirely.

You can take advantage of Roth IRA conversions from your traditional IRA to access your funds as early as you want. The only catch is that you still have to wait five years following your conversion to make the withdrawal.

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