Tuesday, June 10, 2014

Increasing Retirement Contributions--Maybe???

I'm fairly close to paying off my car and I am toying with the idea of increasing my retirement contributions. I currently contribute 8% to my 401k and receive a 5% match. My contribution is set to increase by 1% every year. I also have a pension. I have an old Roth but am not contributing anymore. Y contributes 2% of his income to his pension and his employer contributes another 10%. He also contributes another 5% to his 457. He also has an old Roth but is no longer contributing.

I am thinking that I would like to increase my automatic contributions at work to 10%. I'm leaning towards this for a few reasons. We get hit hard with taxes. Our marginal tax rate is 25% and will likely be lower with retirement. Also, sometimes we can't even claim the child tax credit. I'm not an accountant but I think it makes more sense to lower our taxable income by utilizing my 401k.

What do you think? Or should I leave them as is?

6 comments:

  1. I have to admit that I don't really know the US system but if it would help lower the tax hit at the end of the year and you have the money then I say go for it! I hate paying taxes at the end of the year :(

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  2. Absolutely add more to the accounts. A good goal is to max out all of your accounts each year. It will help definitely help with taxes since a higher income doesn't take away the deduction.

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  3. If you can afford to put more in your 401K at this time I think you should increase it. You can always lower it back down if money gets tight. I am always looking at those online retirement calculators and they all show that it's better to put more away when you're younger vs more as you get older. Compounding interest and all that jazz. I finally increased mine to where I am putting in the Max amount allowed for the year. I have the out of sight out of mind mentality. The money is gone before it ever shows up in my paycheck so then I don't spend it.

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  4. Go for it.....like Kay said, you can always change it again if need be.

    Why can't you claim the child credit?

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    1. The $1000 child credit begins to phase out if your adjusted gross income is $110,000 or more (for married people). It drops $50 for each $1000 over $110,000 until it reaches $0 at $130,000. The more you make the more tax breaks you lose. It definitely doesn't make me want to have kids which seems counter productive. We need to maintain our population after all.

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  5. I would totally go for increasing it. I wish I could increase mine, but that's not really possible. You can change and adjust it as the year progresses. That's one secure place where the funds cant hurt.

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