February 23, 2023
Tips for Tax Season and Beyond
Now is a great time to think about actions you can take to lower your taxes. Not just this year’s bill—future ones, too. Making bigger retirement plan contributions is one way to improve your tax picture.
Anyone who’s enrolled in an employer-sponsored retirement plan gets these main tax benefits:
- Contributing to a 401(k) or 403(b) lowers your taxable income now.1
- Any tax-deferred growth of your contributions and their investment gains can help you build retirement savings you’ll need later.2
During tax season, it’s worth taking a moment to consider whether you’re getting the most out of those benefits.
Are you contributing the maximum amount allowed by your plan?The more you contribute to a tax-deferred retirement plan, the bigger the tax advantage. When you do the math to see how much you can afford to contribute each pay period, remember to factor in the taxes you won’t have to pay on any additional amount you put into the plan.
Are you taking advantage of any matching contributions your employer offers?
If you’re fortunate enough to be eligible to receive an employer match, try to allocate enough to your retirement plan each paycheck to get the maximum matching contribution. That’s money you won’t make otherwise, and it can grow tax-deferred until you retire—meaning, it can ultimately be worth more than an equivalent bump in your salary.
If you have questions about changing your contributions or other plan features, your local Mutual of America representative can help.
1 Current income tax may be reduced by making traditional, tax-deductible, elective deferrals. Income tax applies to those contributions and any earnings when distributions are made. If permitted by your plan, designated Roth contributions may be made, which are after-tax contributions. If certain rules are met, designated Roth contributions, including earnings thereon, are distributed tax-free.
2 Withdrawals of the tax-deferred interest and any investment earnings are subject to income tax at your ordinary income tax rate at the time of withdrawal, and if made prior to age 59½, a 10% federal tax penalty, unless qualified distributions from a designated Roth account, which are tax-free.
The tax information contained herein is for informational purposes only. You should consult your financial adviser or attorney regarding your individual circumstances.
