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Not saving enough for retirement? The tax code can help

April 2, 2016

The hubby and I took a day trip today to check out a cool exhibit of a William Shakespeare First Folio. The book, produced in 1623, seven years after Shakespeare's death, includes 36 of his plays, 18 of which had never been before published.

Shakespeare First Folio title page_Folger Shakespeare LibraryTitle page of the First Folio collection of Shakespeare's works, courtesy Folger Shakespeare Library, Washington, D.C.

It was a great spring day, so we were treated to gorgeous wildflowers on the drive to and from College Station, where the Folio was on display at Texas A&M University.

Plus we topped it off with a great Tex-Mex meal.

This is the kind of thing we hope to do more, and on less crowded weekdays instead of weekends, when we retire. And we're hoping — and saving to help make sure — that's sooner rather than later.

Lagging retirement savings: Many Americans, however, apparently won't be able to retire as early as they like.

The ninth annual America Saves Week survey found that only 40 percent of U.S. households reported good or excellent progress in meeting their savings needs.

When it comes specifically to post-work years, the survey found that just more than half, or 52 percent, of folks who've yet to retire say they are saving enough for a retirement with a "desirable standard of living."

That figure was down three percentage points from last year's 55 percent and down six percentage points from the 58 percent who said in 2008 that they were saving enough to enjoy the type of retirement they'd like.

Retirement saving options: With the 2016 survey, people were asked for the first time for their thoughts on participating in retirement programs.

When asked the highest percentage of their salary that they would contribute to a workplace retirement plan, more than four-fifths (82 percent) indicated that they would contribute more than 3 percent, with 40 percent indicating 10 percent or higher.

If your employer offers a retirement contribution plan such as a 401(k), the money you put into your account is pretax. This will help knock a few dollars off the taxes that are taken out of your paychecks.

Many companies also match at least a portion of their workers' account contributions. Make sure you contribute enough to get the maximum employer match.

Poll respondents who didn't have access to a workplace retirement plan roughly split equally when it comes to being automatically enrolled in an IRA administered by their state with a default annual contribution of 3 percent.

Around 32 percent said they would contribute less than 3 percent. Another 31 percent said they would contribute 3 percent. The final substantial group, 28 percent, said they would contribute more than 3 percent to the IRA.

Savings tax tips: Are you saving for your retirement through a workplace account, an IRA or both?

Most of last week's Daily Tax Tips focused on tax-favored retirement options. The other two tips published the week of March 28 to April 1 looked as unfortunate tax surprises and mistakes. They are:

  1. 5 terrible tax surprises (Monday, March 28, 2016)
  2. Roth IRA rules (Tuesday, March 29, 2016)
  3. Traditional IRA rules (Wednesday, March 30, 2016)
  4. Retirement savers credit (Thursday, March 31, 2016)
  5. Don't make these 5 foolish tax mistakes (Friday, April 1, 2016) 

Check them out. They could help you save on your taxes now and again when you're through working.

And that, to borrow a phrase from The Bard, could make your pre- and post-retirement time "as merry as the day is long."

In addition to these end-of-week tax tip roundups, you can find all of the 2016 Daily Tax Tips posted so far on their special January, February, March and April blog pages. The tips will continue, highlighted each weekday in the upper right corner of the ol' blog, through the April 18 filing deadline.

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The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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