Retirement Strategies: I’ve Maxed Out My IRA Contributions

An IRA, or Individual Retirement Account, is a great option for saving for retirement, especially if you don’t have access to a 401(k) plan through your employer.  While these savings accounts offer big tax breaks, they have one major drawback: the annual contribution limit. In 2017 you are allowed to contribute up to $18,000 to a 401(k) account, plus a $6,000 catch-up contribution if you’re over the age of 49. But it’s a different story with IRAs. The contribution limit for 2017 is just $5,500 with an additional $1,000 catch-up contribution permitted.

If you’re contributing 10% of your income to your IRA, which happens to be the lowest recommended percentage, you’re going to have issues as soon as your annual income exceeds $55,000. Luckily, there are other options for your retirement dollars. Here’s a look at four different strategies, suggested by the financial professionals at The Motley Fool.

Health saving account (HSA)

An HSA can offer equal, if not better, tax breaks than a traditional IRA. Your contributions are tax-deductible AND as long as you use your distributions on qualified medical expenses, you get to skip the tax bill on them too. The annual contribution limit for 2017 is just $3,400, but many of the versions of the latest healthcare reform in Washington include substantial increases to this limit. The major drawback: in order to have an HSA, you first have to have an HSA-qualified health insurance plan.

Spousal IRA

Another limit to your IRA contribution involves your earned income. You have to make at least as much in earned income as you contribute. So, if you only make $3,000, then your limit is $3,000, not $5,500. There is a work-around though. If your spouse earns enough, she or he can contribute the remaining $2,500 into your IRA for you. And this contribution won’t count against their own $5,500 IRA limit. Score!

Deferred annuity

As its name implies, with a deferred annuity, you put money in now and start receiving payments later. The longer you wait, the bigger the payments. When considering this option, take a look at a deferred income annuity, which will pay you a set guaranteed amount for life. Deferred variable annuities are also an option, but again, the name says it all. Your payments will be variable. They are also typically accompanied by higher fees. The interest rates that are offered with annuities are based on the interest rate environment at the time of purchase, so some prefer to pay into an annuity a little each year to try to even out returns instead of putting a one-time investment into a single option.

Standard brokerage account

If the first three choices don’t interest you, you always have the option of picking up some long-term investments in a standard brokerage account. This includes tax-advantaged municipal bonds and treasury securities. You can also consider high-dividend stocks that you can hold onto forever. These can provide a little extra income in retirement, which everyone obviously wants.

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