While there are many different ways to save for retirement, it has been shown that setting aside your money in a tax-advantaged savings plan will make your retirement most comfortable. Because inflation in the US is relatively depleted, many of the standards and caps the IRS put on contribution to retirement savings plans won’t rise any further from 2015 to 2016.
If you have a 401(k), a 403(b), most 457 plans or the government’s Thrift Savings Plan, the most amount of money an individual can keep in their savings is $18,000, and it will continue to be the same through 2016. However, this $18,000 does not count towards the individual’s allowance to the amount of money in retirement, just the government’s. Even though an individual can contribute to their funds, the cap is still $53,000.
Fox Business uses these examples to help you better understand how beneficial saving money for retirement can be: “Let’s say, you start saving 10% of your $40,000 salary at age 30 with no employer match. You get 3% annual raises and earn 8% on your savings. You’ll have more than $1 million by the time you retire at 67. If you save 15%, you’ll be closing in on $2 million.”
Saver’s credit is a great deal if your income is relatively average. The government “matches” your savings by refunding your taxes. You can eventually reduce your taxes to zero; you can’t get a return on more money than you’re actually paid in your taxes. However, it still is nice to see your money return!