Saving money on taxes is a top priority for many Americans as it’s never fun to send a lot of money to the IRS. The good news is, there are plenty of ways to reduce your tax bill – including saving for your own retirement.
In fact, there are several tax deductions you can claim just for investing for your later years. You just need to know how to take advantage of them to reduce the amount you owe.
To help you figure that out, here are three accounts you can potentially invest in to save on your taxes while building your retirement nest egg.
1. A workplace 401(k)
You can invest in a 401(k) if your employer offers one. This account comes with an upfront tax break. You make contributions with pretax dollars, and your taxable income is reduced by the amount you invest. For example, if you make $50,000 in income and contribute $5,000 to your 401(k), the contribution would reduce your taxable income to $45,000.
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In 2022, you can contribute up to $20,500 to your 401(k). If you’re over 50, you can make an additional catch-up contribution of $6,500. This brings your total allowable contribution – and total allowable tax deduction – to $27,000.
Your employer may also match some of your contributions, which is free money for you – but you can’t claim any additional tax savings for funds your employer invests on your behalf.
2. A traditional or Roth IRA
Traditional IRA and Roth IRA…
