Age has its tax advantages. People working after age 50 have few working years until retirement. The IRS recognizes many people need extra help getting caught up on retirement savings. There are a few tax advantages for people working after 50 that younger Americans cannot access.
After age 50 most people can take advantage of “catch-up” contributions to their retirement plans. These plans help people bolster their savings in preparation for their retirement years.
The IRS allows Americans over age 50 to contribute an extra $6,000 to their 401(k) retirement plans and still be able to take advantage of the IRS tax sheltering of those plans.
Free Retirement Calculator: When Can You Retire? — Click Here to Find Out
While there are some catch-up advantages for people in traditional IRA plans, it does not begin to touch the advantages for people working after 50 who have access to employer sponsored 401(k) plans. Traditional IRAs and Roth IRAs have contribution limits at $5,500 for people under age 50 and $6,500 for people over age 50. For 401(k) contributions, workers over 50 can save $18,000 in 2015 plus an additional catch-up contribution of $6,000.
Those contributions are usually pre-tax dollars, which means an added tax advantage of a lower tax burden on income.
FindLaw recommended a continued investment in your retirement plan, even if you are semi-retired or retired. As long as you are younger than 70 ½ the IRS lets you continue to contribute to your account. Any contributions will lower your income tax burden.
When you get just a little bit older there is another tax advantage – a higher standard deduction. People older than 65 years of age can add just a little bit to the amount they are able to deduct simply because of their age.
The AARP recommended workers older than 50 remember to claim a portion of long-term care premiums as a medical expense. If you are over 50 the amount you can deduct goes up.
How Soon Can You Retire? Free Test Shows You When — Click Here
© 2023 Newsmax. All rights reserved.