These positive money habits can work overtime to help reduce your tax bill and build long-term retirement savings.
Give your money two jobs—to help you save on taxes and build retirement savings. Here are four ways.
1. Increase contributions to your retirement plan at work.
Your 401(k) deferrals—or what you contribute—come from income before it’s taxed, which means you lower your taxable income for the year. (You’ll pay income taxes when you withdraw funds in retirement.)
In 2025, you can contribute up to $23,500 in an employer-sponsored plan such as a 401(k).
Tip: If your budget doesn’t allow you to max your contributions right away, aim for small increases over time. Every dollar has the potential to help lower your taxable income and boost your savings.
2. Contribute to an individual retirement account (IRA).
If you meet eligibility requirements, contributions to a traditional IRA are made with pre-tax money and may lower your taxable income. In 2025, you can contribute up to $7,000 to an IRA.
If you open a Roth IRA, however, contributions are made with post-tax dollars. The tax advantage comes later in retirement when you can take withdrawals tax free.
3. Make catch-up contributions.
If you’re age 50 or older and still working, you can contribute even more to your retirement plan(s).
For those age 50-59, that’s an additional $7,500 to a 401(k) plan or 403(b) plan beyond standard limits (this applies for those age 64 and up as well). For savers aged 60-63, that increases to $11,250.
If you’re contributing to an IRA, you can squirrel away an extra $1,000 once you turn age 50.
This not only lowers your taxable income but also helps you fill in the savings gap if you had to decrease or stop saving for retirement in prior working years.
4. Check your eligibility for the Saver’s Tax Credit.
If you fall within certain income ranges, aren’t claimed as a dependent on someone else’s taxes, and contribute to an employer-sponsored retirement plan or an IRA, you may be eligible for the Saver’s Tax Credit.
The credit could be up to $1,000 for single filers or $2,000 for joint filers. Check out the details at IRS.gov.
What’s next?
Ready to increase your retirement plan contributions (and possibly reduce your taxable income, too)? Log in to your account and adjust your contributions. Don’t have an employer-sponsored retirement account? We can help you set up your own retirement savings with an individual retirement account (IRA).
