From UBS, a partner in SHRM-Atlanta’s 470+ Retirement program

 

It’s not really a holiday, but maybe you should take a few minutes to appreciate just how great a benefit your retirement plan really is. The following list might just make you feel like celebrating.

Your plan is convenient

It’s simple and convenient—sign up and contribute. The money you contribute to your plan account is deducted automatically from your pay and invested according to your instructions.

It offers pretax savings

The money you contribute is deducted from your pay before federal income (and, possibly, state and local) taxes are taken out. When taxes are deferred on a portion of your income, your tax liability for the year decreases. You end up with more spendable pay than you would if you saved the same amount in a taxable investment account.

Tax deferral is a big plus

You won’t owe income taxes on what you contribute until you start receiving money from your plan when you retire. In addition, any income your plan contributions earn is also tax deferred. Your contributions and earnings will compound over time. Over time, compounding has the potential to impact your plan account balance positively.

The saver’s tax credit helps

If you qualify, you may be eligible to claim the “Saver’s Credit” on your federal income tax return for contributions to your retirement plan. The Saver’s Credit is 10%, 20%, or 50% of a maximum of $2,000 ($4,000 if married filing jointly) in qualified retirement savings contributions for the year. Eligibility and the applicable credit rate depend on your income and filing status.

Celebrate with confidence

Your retirement plan means you won’t have to rely only on Social Security to pay living expenses when you retire. That knowledge is invaluable.