As each year draws to a close, it's a good time to take stock of your retirement savings and health care plans. With the pandemic still ongoing, there's no better time to ensure you have the right plans in place to secure your future.
There are many options available to help you boost your retirement and health care savings, from tax-advantaged accounts to employer benefits. In this post, we'll explore some of the strategies you can use to maximize your savings and protect your health.
Retirement Savings
When it comes to retirement savings, there are several options available to you. One of the most popular is a 401(k) plan, which allows you to contribute pre-tax dollars to a retirement account. You can contribute up to $19,500 in 2021, and those over 50 can contribute an additional $6,500 in catch-up contributions.
Another option is an Individual Retirement Account (IRA). There are two types of IRAs: traditional and Roth. With a traditional IRA, you can contribute up to $6,000 in 2021, and those over 50 can contribute an additional $1,000 in catch-up contributions. Contributions to a traditional IRA are tax-deductible, but withdrawals in retirement are taxed as income.
A Roth IRA, on the other hand, is funded with after-tax dollars. While you can't deduct contributions, withdrawals in retirement are tax-free. You can contribute up to $6,000 in 2021, and those over 50 can contribute an additional $1,000 in catch-up contributions.
When deciding which retirement savings accounts to use, it's important to consider your tax bracket and other factors. A financial advisor can help you determine the best strategy based on your individual circumstances.
Health Care Savings
Health care costs can be a significant expense in retirement, but there are several ways to save money on medical expenses. One option is a Health Savings Account (HSA). An HSA allows you to contribute pre-tax dollars to a savings account that can be used to pay for qualified medical expenses, including deductibles, copays, and prescriptions.
You can contribute up to $3,600 in 2021 for an individual HSA, and $7,200 for a family HSA. Those over 55 can contribute an additional $1,000 in catch-up contributions.
Another option is a Flexible Spending Account (FSA), which allows you to contribute pre-tax dollars to an account that can be used to pay for qualified medical expenses. The contribution limit for an FSA is $2,750 in 2021.
It's important to note that with an FSA, you must use the funds by the end of the plan year, or you will lose them. With an HSA, the funds roll over from year to year, so you can build up a significant balance over time.
Employer Benefits
Many employers offer retirement and health care benefits to their employees. It's important to review your benefits annually to ensure you're taking advantage of all available options.
Some employers offer matching contributions to 401(k) plans, which can help you maximize your retirement savings. Others offer health care benefits such as health insurance, dental insurance, and vision insurance.
It's also important to review your employer's open enrollment period to make any necessary changes to your benefits. This can include adding or removing dependents from your health insurance, changing your contribution amounts to retirement accounts, or adjusting your HSA or FSA contributions.
Conclusion
As the year comes to a close, it's a good time to review your retirement and health care savings. Consider your options for retirement savings accounts, health care savings accounts, and employer benefits. A financial advisor can help you determine the best strategy for your individual circumstances.
By taking a proactive approach to your retirement and health care savings, you can secure your future and protect yourself against unexpected expenses.