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How Retirement Contributions Affect your Taxes

How Budget Calculators Can Help Guide Your Spending

Very few people have a good grasp of their spending habits or how much money they could save by simply eliminating a purchase or two every week. That’s when home budget calculators can help you spend less and save more.

A budget is especially important during times of inflation, job loss, or even saving for a major purchase or life event. Only 32 percent of the U.S. population regularly budget. A variety of budget calculators are available that can make a significant difference in spending habits and they’re easy to use.

Financial Stability

Maintaining a budget is the pathway to financial stability. Instead of buying things that catch your eye with no thought to when the rent is due, it can help you plan for long- and short-term goals. That may include a down payment on a home, purchasing a car, or even starting a family.

Pay Bills on Time

Living within your means is a phrase that’s gained renewed popularity. It means don’t spend money you don’t have. People that don’t budget have to worry about taking from one area to pay for another. Don’t rely on credit cards to bridge the financial gap you’ve created. It’s easy to overspend and find yourself drowning in debt. Budgeting enables you to pay the bills on time, which will also help build your credit rating.

Emergency Fund

A home budget calculator can help you establish an emergency fund. You’ll be better prepared in the event of an injury, illness, job loss or other unfortunate event.

Retirement

Most people qualify for Social Security in their later years, but the program was never designed to be your only means of support when you stop working. That’s what a retirement fund is for and a budget enables you to save enough to have a safe and happy retirement.

Spending Habits

Everyone has bad spending habits that result in budget deficits. It may be dining out too often, expensive coffee, video games, or trips to the spa. A budget calculator will show you how you’re spending your money, the amount, and easy ways where you can cut back and save.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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How Retirement Contributions Affect your Taxes

The COVID-19 pandemic underscored the need to save for retirement and highlighted how many individuals are living paycheck to paycheck. Many individuals were unable to continue their contributions, while others were forced to withdraw funds due to pandemic-related situations. The following are some of the ways in which retirement contributions will affect your taxes.

Filing Status

Navigating tax-deductible amounts can be highly complicated and depends on your filing status, age, and the type of retirement plan you have. The best option to ensure accuracy on your income tax return is to seek the services of a professional accountant or tax preparer that will be knowledgeable in the tax laws governing multiple types of retirement accounts.

Roth IRA

Contributions to a Roth IRA are not deductible. You’ll pay the full amount of taxes on any money placed in the account. The trade-off is that you won’t pay taxes on contributions or investment returns after you retire and begin drawing money from the account.

Traditional IRA

Contributions to a traditional IRA reduces taxable income in direct proportion to the amount contributed. There’s a limit of $6,000 that can be contributed to the retirement plan. However, if you’re aged 50 or over, you can contribute up to $7,000.

Retirement & the CARES Act

The CARES Act in response to the COVID-19 pandemic added some changes to retirement funds and how they’ll affect your tax liability. The Act removed the 10 percent penalty on withdrawals if you’re under 59.5 years old. The tax liability can be spread over three years and an amended tax return can help regain money paid on the distribution if you’re paying back the account.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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