Latest news with #contributions
Yahoo
26-07-2025
- Business
- Yahoo
7 reasons to max out your Roth IRA in 2025
If you've opened a Roth IRA, you've already laid the foundation for one of the most important parts of your life: putting money away for your post-working years. However, opening a Roth IRA is only the first step to a smart retirement saving strategy. Optimizing your Roth IRA to its fullest potential could be a wise approach to retirement planning. Here's how to maximize your Roth IRA — and more importantly, why it's smart to do so. Compare advisors: Bankrate's list of the best financial advisors Maximizing your Roth IRA A Roth IRA offers you the opportunity to save a considerable sum for your golden years and enjoy the benefits of tax-free withdrawals in retirement. Roth IRAs also provide a variety of investment options, including potentially high-return investments such as stock funds. Plus, you have the flexibility of passing on the IRA to your heirs, who will receive it free of tax (as long as they don't withdraw from the account before it is five years old). To maximize its advantages, you need to focus on topping up your contributions. Hitting that threshold looks different depending on your age: If you're under 50 in 2025, you can contribute up to $7,000. If you're 50 or older, you can put in an extra $1,000 as a catch-up contribution for a total of $8,000. However, depositing money in a Roth IRA will not give you the immediate rush of a tax break. Since your contributions are not tax-deductible — regardless of income or whether you have a retirement plan at work — you might be tempted to use that money for other purposes. Learn more: Best ways to get free financial advice But if you can afford to max out your Roth IRA, waiting for the delayed gratification of tax-free withdrawals in retirement can prove to be one of your smartest financial decisions. Consider these seven reasons. 1. With no requirement to withdraw funds, a Roth IRA can act as your longevity insurance One of the unique benefits of a Roth IRA is what it doesn't have: a requirement to begin taking money out at a certain age. With other tax-deferred options like a traditional IRA or a 401(k), account holders must begin taking money out by age 73. Think about your family history. Is one of your grandparents still alive at age 90? While the average American has a life expectancy of about 78 years today, keep in mind that advances in medicine can increase that typical time frame. A Roth IRA gives you a pool of money that you can hold off on dipping into until you think the time is right. No matter what age you are now, the much older version of yourself will be thankful for those maximum contributions. 2. Roth contributions can benefit your heirs, too You might never need to actually use the money in your Roth IRA, which means that your heirs will be the ones thanking you for your decision to max out your tax-free contributions. Your heirs will typically need to withdraw the money over a 10-year period following your passing (though there are exceptions), but their withdrawals will be tax-free since it is a Roth IRA, and the money can even grow over that period, making a Roth IRA even more valuable. 3. Since the Roth IRA rules can change in the future, it's crucial to make the most of the current potential There's no guarantee that you'll be able to contribute to a Roth IRA in future years. Congress could consider lowering the annual income limits and making other changes, limiting who can convert a tax-deferred retirement account to a Roth IRA or restricting the ability to use a backdoor Roth IRA, for example. So, while the benefit is here, don't let it slip away. Learn more: 5 important questions to ask your financial advisor 4. Changes to tax rates can affect Roth IRAs, too You can't predict what tomorrow will look like, but you can take steps to protect yourself against higher taxes. By maxing out your contributions each year in your Roth IRA and paying taxes at your current tax rate, you're eliminating the possibility of paying an even higher rate when you begin making withdrawals. Just as you diversify your investments, a Roth IRA can help diversify your future tax exposure. 5. You'll have a realistic picture of your retirement budget What you have accumulated after taxes is what really counts. After all, that's what will pay your bills. Providing after-tax money is one of the key benefits of a Roth IRA. Because the entire amount in a Roth IRA is yours, you have a real understanding of your future finances. The same cannot be said for your tax-deferred 401(k) or traditional IRA, which will involve sharing some of the proceeds with Uncle Sam when you take money out of those accounts and then owe taxes on the withdrawals. 6. This year's IRA contributions are a long-term growth opportunity Between worries about inflation and concerns about the stock market's volatility, you might be concerned about buying too high. However, maxing out your contributions is not a one-and-done strategy. Ideally, you will contribute to your Roth IRA this year, next year and for many years to come. And when you begin to withdraw funds, you'll likely draw it down over an extended period of time. So, don't worry about what the market does today or tomorrow — spend time thinking about how your investments will look much further down the road. Get started: Match with an advisor who can help you achieve your financial goals 7. A Roth IRA can act as a last-resort backup for your emergency fund Since you've already paid taxes on the money you're contributing to your Roth IRA, there are no taxes or penalties for withdrawing the money you've contributed — at any time, for any reason. If you wind up encountering a serious emergency that completely drains your primary emergency fund (remember, that first emergency fund is absolutely essential to your financial well-being), the money contributed to your Roth IRA (but not the investment earnings) is one additional buffer against major money troubles. However, the 'last' in last resort can't be stressed enough. Withdrawing from a Roth IRA is a one-way street. You're not granted higher annual contribution limits in future years to make up for it. Instead, any early withdrawals represent a permanent setback to your retirement planning. When to make your IRA contributions You can make 2025 contributions until Tax Day in mid-April 2026, and you'll have until Tax Day 2027 to make your contributions for 2026. If you haven't yet hit your annual maximum, keep your focus on the rearview before looking ahead to next year's limits. Bottom line Maximizing your contributions to a Roth IRA can greatly benefit your retirement planning and provide peace of mind for the future. With the potential for tax-free withdrawals, the ability to pass on the account to heirs, and the flexibility to use it as a last-resort emergency fund, it can be a smart financial decision. So, make sure to prioritize contributing to your Roth IRA and plan ahead for a secure and comfortable retirement. — Bankrate's James Royal, Ph.D., contributed to an update of this article. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Independent
22-07-2025
- Business
- The Independent
How to boost your pension pot now if you have no savings at all
Warnings that millions of people are heading for a retirement crisis due to a shortfall in pension savings are nothing new, but a new government review aims to tackle the issue to prevent a 'tsunami of pensioner poverty'. It's estimated that a single person will need more than £14,000 for every year of retirement, while a couple will need £22,000 to maintain a minimum level of lifestyle. It sounds a lot, but it is achievable without the need to immediately start stuffing thousands of pounds a month into an account. But how do you get there if you haven't already started saving? Check employer contributions If you're already in work, the first thing you should do is check if your employer pays the minimum three per cent of your salary or higher – some may well offer to match your own contributions, but this might only happen if you opt to pay more. For example, if you're paying in five per cent, your employer could raise their contributions by an additional two per cent, and it won't cost you anything extra or remove anything from your pay packet. Do remember to ask if it means you change pension plan, provider or anything else though, to make sure it suits your needs. Focus on building an emergency savings buffer Next, it's time to get that money in place so you don't need to worry about unexpected bills or costs. Experts say you should ideally have between three and six months' worth of expenses in an easy-access account paying a good level of interest, to cope with things such as the loss of a job, higher-than-expected living expenses or a major outlay for repairs or purchases. Again, if you're just starting out, it's important to forget the eventual size of the pension pot and focus on the first steps. If you are starting with nothing, open a new savings account and start to pay money in weekly or monthly, whichever helps you stay on track best. The consistency of seeing it grow will help you get used to building a savings buffer, and it doesn't matter if that begins with £5, £20 or whatever else you can initially afford. Cut expenses if you need to; one pint of beer fewer a week is about £6-8 (depending where you live), which could add to your savings, and one unused subscription cancelled is a monthly boost of even more than that. Regularity and time will see you hit your goals. And, if you are really in need of a quick boost to your savings, you can consider changing banks. Several will offer over £150 in cash or bring other perks to your account if you switch your current account. Check here for details, and always ensure you choose a bank or building society right for your needs, not just which offers the most immediate funds. Pensions contributions are no different The same process can see you boost your pension pot once you've got a chunk of savings you're happy with – plus, if you're putting money into a personal pension, you'll get tax relief too. For example, if you're a basic rate taxpayer and you put £80 into a pension pot, the government will add £20. Again, it seems small, but do that monthly over a 40-year work career and it's an extra £9,600 being put to work for your future. 'Putting your money away in a pension is a good place to start, rather than a standard savings or investing account. You get the perk of government tax relief on the money and this will significantly boost your pot over time, particularly as you benefit from investment returns on your own money,' said Laura Suter, director of personal finance at AJ Bell. 'The money will be locked up until your pension age, which is currently 57. It means that you can't dip into the cash if you needed it in the short term, so you need to bear that in mind, but it also means that you can't be tempted to dip into it before retirement. Even small contributions each month can add up. Putting away £100 a month, which then gets topped up to £125 a month after tax relief, would be worth almost £52,000 after 20 years, assuming 5 per cent investment growth a year after charges.' What if you earn more but have no pension? Pension concerns are far from limited to those with low earnings. There are plenty of reports, for example, of NHS staff – who would typically get a large employer contribution – opting out of that pension plan to receive a larger immediate salary because the cost of living is so high. If so, trying to take advantage before any possible rule changes might be wise. If you're a higher- or additional-rate taxpayer – with income over £50,270 this tax year – then making use of the extra tax relief can provide a huge boost to your retirement pot. There, instead of the aforementioned 20 per cent relief, you can get 40 or 45 per cent (whichever tax band you are in). The government will contribute at the basic tax rate, as your pension provider will claim it for you, and then you are able to claim the additional amounts by noting your pension contribution when you complete a self-assessment form for the tax year. It has been suggested that such relief may change in future, which makes it important to utilise existing allowances, says Reme Holland, a financial planning partner at accountancy firm Albert Goodman. 'My top advice would be to act now while we know the available allowances and reliefs,' he said. 'For an additional rate taxpayer, you can receive 45 per cent tax relief on your pension contributions, there is the ability to use the last three years of unused allowances via a mechanism known as carry forward. If a flat rate of tax relief is introduced, that could make it far more expensive to fund pension contributions in the future.'
Bloomberg
30-06-2025
- Business
- Bloomberg
Australian Workers Get a Final Boost to Their Retirement Savings
From today, Australian workers get a final boost to their mandatory retirement contributions — a key milestone for the country's A$4.1 trillion ($2.7 trillion) pension system. Employers will now be required to pay the equivalent of 12% of workers' wages — the last scheduled increase to a number that's steadily climbed since the current superannuation system was created in the early 1990s. Back then, employers contributed the equivalent of 3% of wages.
Fox News
02-06-2025
- Business
- Fox News
Maxine Waters campaign to pay $68K for violating campaign finance laws
Progressive California Rep. Maxine Waters' campaign has agreed to pay a $68,000 fine after an investigation found it violated multiple election rules. The Federal Election Commission (FEC) said the longtime House lawmaker's 2020 campaign committee, Citizens for Waters, ran afoul of several campaign finance laws in a tranche of documents released Friday. The FEC accused Citizens for Waters of "failing to accurately report receipts and disbursements in calendar year 2020," "knowingly accepting excessive contributions" and "making prohibited cash disbursements," according to one document that appears to be a legally binding agreement that allows both parties to avoid going to court. Waters' committee agreed to pay the civil fine as well as "send its treasurer to a Commission-sponsored training program for political committees within one year of the effective date of this Agreement." "Respondent shall submit evidence of the required registration and attendance at such event to the Commission," the document said. Citizens for Waters had accepted excessive campaign contributions from seven people totaling $19,000 in 2019 and 2020, the investigation found, despite the maximum legal individual contribution being capped at $2,800. The committee offloaded those excessive donations, albeit in an "untimely" fashion, the document said. Waters' campaign committee also "made four prohibited cash disbursements that were each in excess of $100, totaling $7,000," the FEC said. The campaign committee "contends that it retained legal counsel to provide advice and guidance to the treasurer and implemented procedures to ensure the disbursements comply with the requirements of the Act." Leilani Beaver, who was listed as Citizens for Waters' attorney, sent the FEC a letter last year that maintained the campaign finance violations were "errors" that "were not willful or purposeful." Waters, the top Democrat on the House Financial Services Committee, has served in Congress since 1991. The new movements in the probe were first reported by OpenSecrets. It is not the first time, however, that Waters has generated public scrutiny. In 2023, a Fox News Digital investigation found that Waters' campaign paid her daughter $192,300 to pay for a "slate mailer" operation between Jan. 2021 and Dec. 2022. It was reportedly just one sum out of thousands that Waters had paid her daughter for campaign work. A complaint that Waters' campaign had accepted illegal campaign contributions in 2018 was overwhelmingly dismissed by the FEC in a 5-1 vote. Fox News Digital reached out to Beavers, Waters' congressional office and Citizens for Waters for comment.
Daily Mail
01-06-2025
- Business
- Daily Mail
Why isn't 8% of my salary going into my pension like it's meant to? STEVE WEBB replies
At my place of work, a big retail chain, the agreement for workplace pension contributions is 8 per cent, including 4 per cent from the employee. I work in the warehouse as a warehouse operator (not management). When I questioned HR on why 4 per cent of my wage was not being taken out, I was informed that there is a £480 (per 4 weeks) threshold and that the pension contributions start after this £480. Whenever I read up on work place pension contributions, I see it stated about the minimum 8 per cent but in reality this not correct, due to this threshold figure. My questions are: why is 8 per cent given as a minimum, and why and when did the £480 threshold come into effect? Steve Webb replies: The often-quoted figure of 8 per cent minimum workplace pension contributions is, as you rightly say, not quite what it seems. I'm happy to explain what is going on, why it was set up in this way and how it might change in future. To understand what is going on, it's worth going back to basics about what pensions are trying to achieve. One of the main reasons why we have a pension system is to help ensure that people's standard of living does not drop sharply when they no longer have a wage. To achieve this, we often talk about a target, for people on modest incomes, of securing around two thirds of pre-retirement income once you stop working. People should not need 100 per cent of their pre-retirement income because they typically no longer have 'working age' costs such as mortgage, travel-to-work or childcare costs, and also no longer pay National Insurance on their income. But a target of around two thirds would enable most people to enjoy a similar standard of living when retired to the standard they were used to when in work. The next thing is to look at how much of this will come from the state pension. As a very rough benchmark, the new state pension will replace a little under one third of the average worker's wage. This means that they need a similar amount from a private pension to bring them up to the two thirds target. When automatic enrolment was being designed, it was assumed that the first slice of earnings was fully replaced by the state pension and that what was needed on top of this was a percentage of the 'next slice' of earnings. For this reason, when the law was written to require workers and firms to make pension contributions at a set percentage rate, this percentage was applied to earnings above a floor, currently £6,240 per year. Earnings above this level (up to a ceiling of £50,270) are described as 'qualifying earnings', and the mandatory 5 per cent from the employee (or 4 per cent net of tax relief) and 3 per cent from the employer are applied to this band. I should stress that we are talking here about the legal minimum rates of contribution and that many employers and workers do more than this, including some who apply contributions from the first pound of earnings, not just on 'qualifying' earnings. Over time there has been growing concern over this system, particularly because of the impact on lower earners. To give an example, for someone who works part-time and earns (say) £12,480 – double the floor for qualifying earnings- the mandatory pension saving rate is applied to just half of their wage. By contrast someone working full time on £31,200 – five times the floor – is making contributions based on four fifths of their total wage. In response to this, a Government review of automatic enrolment published back in 2017 recommended that the starting point for contributions should be reduced to zero, so that the 8 per cent headline figure would apply to all earnings up to the ceiling, currently £50,270. Despite the general consensus about this recommendation, nothing has so far changed. In the last parliament a law was passed which paves the way for this change, but it has yet to be implemented. Unfortunately, it seems that progress on this front is probably now further away than it has ever been. The reason for this is that any widening of the band of 'qualifying earnings' would cost both workers and employers more. With concerns over an ongoing 'cost of living' crisis for many lower paid workers, and with a very substantial increase in employer National Insurance in the Autumn 2024 Budget, there is very little appetite in Government for further measures that would hit paypackets or employer costs. In short, therefore, although we urgently need to get more money going into pensions, the chances of reform any time soon look very small. The one glimmer of hope is that the Government is expected shortly to announce the second phase of its major review of pensions, and this will include the adequacy of existing pension saving rates. It is possible that such a review will eventually (again) recommend applying mandatory contributions to the first pound of earnings, not just those above a floor. But, even if it did so, I suspect that the implementation process would be protracted and could even fall outside the current parliament. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
