The best tax breaks for people 50 and over


Ever since you started working, you’ve set aside a sizeable piece of your paycheck for retirement. All that time you’ve been building a nest egg, you haven’t had to pay taxes on the interest earned in your investment account — and soon you’ll be able to crack it open and take advantage.

But there’s even better news: As you get closer to retirement, there are several other helpful tax breaks. Why does fortune favor seasoned workers? “Your 50s are typically your peak earning years, when you have the most disposable income,” says Bryan Kuderna, a certified financial planner with the Kuderna Financial Team in Shrewsbury, New Jersey, and the author of Millennial Millionaire in an interview conducted by Athene. “It’s that time in your life when you’re most apt to invest, so the government gives you extra opportunities and incentives to play catch up.”

Jump on these tax perks for those age 50 and older to save even more of your money for the future.

401(k) catch-up contributions: In 2021, everyone has the option to stash away an extra $500 in their company retirement plan, whether it’s a 401(k) or 403(b), with limits rising from $19,000 to $19,500 annually. But people 50 and over can tack on an additional $6,500 catch-up contribution, making for a $26,000 cap.

Traditional and Roth IRA catch-up contributions: Annual contribution limits for 2021 will remain the same at $6,000. People age 50 and over can make an extra catch-up contribution of $1,000 to their traditional or Roth IRA account for a total of $7,000.

HSA catch-up contributions: “Now’s a prime time to invest in your health,” says Kuderna. Luckily, health savings account (HSA) contribution limits have risen in 2021 to $3,600 for singles and $7,200 for families. Each person age 55 and over can contribute an extra $1,000 catch-up contribution to their HSA. “This is tax deductible and can be used tax-free for qualified health care expenses.”

Penalty-free withdrawals from 401(k) accounts: "Tempting as it is to tap all that money in your 401(k), you’ll incur a 10 percent penalty if you withdraw anything before age 59 and a half. But once you reach that age, you can take out money without penalty," Kuderna shares. "And if you’re 55 or older when you leave your job, you’re in the clear to start receiving distributions from your 401(k)." Keep in mind there may be tax consequences for withdrawing funds, even if there are no tax penalties.

Once you turn 50, taking advantage of tax breaks and catch-up contributions can help provide a valuable opportunity to boost your retirement savings and make up for the years you perhaps didn't save enough. Plus, the deduction you claim on these contributions can help you save on your annual tax bill. Contact your tax advisor if you need further guidance.

This information is brought to you by Athene — where unconventional thinking brings innovative annuity solutions that can help make your retirement dreams a reality.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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