An individual retirement account, or IRA, is a powerful savings tool for retirement. But there are a few tricks you might not know to make the most of your retirement savings account. Here are four unexpected ways to level up your IRA.
1. Get paid to contribute
If you’re struggling to contribute to your IRA, the federal government wants to help you out. You can receive a tax credit just for contributing up to $2,000 to your retirement account if your income is below a threshold. It’s officially called the Retirement Savings Contribution Credit, but everyone just calls it the “Saver’s Credit.”
Here are the credit and income limits for 2021:
|
Credit Rate |
Married Filing Jointly |
Head of Household |
All Other Filers |
|---|---|---|---|
|
50% of your contribution* |
AGI < $39,500 |
AGI < $29,625 |
AGI < $19,750 |
|
20% of your contribution |
$39,501-$43,000 |
$29,626-$32,250 |
$19,751-$21,500 |
|
10% of your contribution |
$43,001-$66,000 |
$32,251-$49,500 |
$21,501-$33,000 |
*up to $2,000 per person
Table source: IRS
That tax credit stacks with the tax deduction you can take for contributing to a traditional IRA. If you’re on the threshold of qualifying for the next tier, you can use the IRA deduction in order to push your AGI below the threshold. That can maximize your tax savings on your contribution, and may be a good reason to choose a traditional over a Roth IRA.
If your income is low enough to qualify for the Saver’s Credit without any additional adjustments, you may be better off contributing to a Roth IRA.
