Employee Guide to Retirement Contributions and Tax Savings!

Every payday, you decide how much of today’s income will build tomorrow’s security. Choosing the right retirement contributions can also shrink this year’s tax bill, letting you keep more of what you earn. Here’s a clear, step‑by‑step guide to make both goals work together.

1. Know Your Plan Options

Most U.S. workers meet their savings goals through a 401(k) or 403(b). A 401(k) is common in private firms, while a 403(b) serves schools and nonprofits. If your employer provides both traditional and Roth options, you have a clear choice regarding when to pay taxes.

2. Grab the Free Match First

Many employers match part of your contribution—often 3–6 percent of pay. Contribute at least enough to collect the full match; it is an instant, risk‑free return. Leaving match money on the table is like turning down a raise.

3. Traditional vs. Roth: Timing the Tax Break

Traditional contributions lower taxable income now and grow tax‑deferred. Roth contributions do not cut today’s tax bill, but withdrawals in retirement are tax‑free. If you expect to be in a higher bracket later, the Roth may win. A mix can hedge that guess.

4. Use Catch‑Up Contributions After Age 50

Turning 50 unlocks extra room—currently an added $7,500 a year in a 401(k) and $1,000 in an IRA. These bonus dollars can close gaps in savings without overhauling your budget.

5. Don’t Overlook the HSA

If you have a health plan, a Health Savings Account offers triple tax perks: pre‑tax input, growth and withdrawals which is usually tax‑free for qualified medical costs. In retirement, unused funds can even act like an extra IRA.

6. Automate Annual Increases

Small, automatic bumps—say 1 percent of pay each year—keep your saving rate growing with your income. Because you never “see” the money, you rarely miss it.

7. Run a Year‑End Checkup

Confirm you are on track to hit contribution limits and avoid penalties for excess deposits. A payroll or an accountant can help finetune the numbers quickly.

Tax codes change, but the core idea stays the same: the sooner you channel dollars into the right account, the more those dollars and the tax savings can multiply. A brief chat with your payroll team and us can turn these simple moves into a lifelong advantage.