Blog
We keep you up-to-date on the latest tax changes and news in the industry.
Prioritizing and Maximizing Retirement Savings - Social Security Alone Won't Be Enough
Article Highlights
- Social Security
- Traditional IRA
- Roth IRA
- Spousal IRA
- 401(k) Plans
- SIMPLE Plans
- Simplified Employee Pension Plans (SEPs)
- Overall Contribution Limits
This should be a wakeup call for still-working individuals who are living (and spending) for the moment and have no, or minimal, retirement plans or retirement savings. It’s almost imperative that individuals include contributions into retirement savings in their budgets, in one form or another, or the inevitable golden years won’t be so golden.
Retirement Plan Options – The tax code includes a number of tax-favored ways to put away money for your retirement. However, in all cases, the amount that can be contributed is limited (except as noted) to an individual’s compensation for the year. The most popular plans include:
- Traditional IRAs – These allow individuals to contribute up to $5,500 in 2018 ($6,500 for those age 50 and over). The contribution is tax-deductible for individuals who are not active participants in an employer’s plan. For those who are active participants in an employer’s plan, the deductibility of the IRA phases out at adjusted gross incomes (AGIs) between:
UnmarriedMarried Filing JointlyMarried Filing Separate$63,000 - $73,000$101,000 - $121,000$0 - $9,999
Once the AGI exceeds the upper amount, none of the contribution is deductible.
Distributions from a traditional IRA are taxable (except for contributions that were not deductible because of the AGI phase-out of deductibility). The annual contribution limit applies jointly to both traditional and Roth IRAs, so no more than the annual limit can be contributed to a combination of the two types of IRA accounts. - Roth IRAs – These allow individuals to contribute up $5,500 in 2018 ($6,500 for those age 50 and over). Contributions to Roth IRAs are not tax-deductible but provide the benefit of being tax-free when qualified distributions are taken. Contributions can be made even if the individual is a participant in a qualified employer retirement plan. However, allowable contributions are phased out for higher-income taxpayers in the AGI ranges shown below.
Unmarried Married Filing Jointly Married Filing Separate $120,000 - $135,000 $189,000 - $199,000$0 - $9,999 - Spousal IRAs – Spouses with no compensation for the year may contribute to their own IRA based upon their spouse’s compensation. If the unemployed spouse chooses a traditional IRA and the working spouse participates in an employer’s plan, the contribution’s deductibility phases out between $189,000 and $199,000; if a Roth IRA is chosen, the contribution limit also phases out between $189,000 and $199,000, even if the working spouse isn’t covered by an employer’s plan.
- 401(k) Plans – These are typically available through employers and allow an elective contribution of up to $18,500 for 2018 ($24,500 if age 50 or over). The employee funds the plan by choosing to have a portion of his or her wages deposited into it. Some employers will match a portion of an employee’s contribution, and when that benefit is available, it behooves the employee to contribute at least enough to get the maximum employer match. The amounts contributed to the plan, as well as the earnings and gains on the funds in the plan, are not taxed until withdrawals are made at retirement.
- SIMPLE Plans – SIMPLE (Savings Incentive Match Plan for Employees) plans, which are not that frequently encountered, can be utilized by employers with 100 or fewer employees. The plans require a 2% or 3% employer match, and the maximum annual contribution for 2018 is $12,500 ($15,500 if age 50 or over). These may be set up as either IRAs (but not Roths) or 401(k)s.
- Simplified Employee Pension Plans (SEPs) – These are plans that are relatively easy for a self-employed individual to establish. They are quite commonly used by self-employed individuals without employees and may also be used by self-employed individuals who are willing to make contributions on behalf of their employees. The contribution limit for the self-employed individual is the lesser of 25% of their compensation (which equates to 20% of the net profits from self-employment, after deducting the SEP contribution) or $55,000, for 2018. Contributions made on behalf of employees are deductible as a business expense, while the contributions for the self-employed individual are deducted as an above-the-line deduction on the individual’s income tax return.
- 401(k)s – It is not uncommon for individuals to have multiple employers, each with a 401(k) plan. This can possibly create a situation in which the employee makes an excess elective deferred compensation contribution. The annual maximum limit applies to all 401(k) contributions combined.
- Combinations of Deferred Income Plans – There is also a $55,000 limit for 2018 on the aggregate amount of all elective deferrals made by an individual during the year. Plans affected by this limit include:
o 401(k) plans,
o SEP plans,
o SIMPLE plans, and o Tax-sheltered annuities (TSAs, also referred to as 403(b) plans)
However, Code Sec. 457 plans (government plans) are not included in the overall deferral limitations
- IRAs – The IRA limits apply to the aggregate contributions to traditional and Roth IRAs. However, an individual can have both an IRA and deferred income plans.
We specialize in helping service-based businesses—contractors, mechanics, insurance professionals, IT firms, electricians, and other hardworking entrepreneurs—gain clarity, control, and confidence in their finances.
Our Ideal Clients:
Tech-Savvy – They’re comfortable with digital tools and cloud-based solutions that help us serve them faster and more efficiently.
Proactive Business Owners – They don’t wait for things to fall apart. They plan ahead, seek advice, and take action.
Growth-Oriented – Whether they're just starting or scaling, they’re serious about building a strong and sustainable business.
Responsive and Respectful – They reply promptly, respect timelines, and understand that mutual success depends on strong communication.
Win-Win Thinkers – They believe in partnerships that benefit everyone—not just transactions, but real collaboration.
Rooted in Faith and Integrity – Many of our clients share Christian values, operate with integrity, and appreciate working with a firm that honors those principles.
Open to Learning – They’re eager to learn more about their finances, taxes, and how to make smarter decisions for their future.
Community-Oriented – They like to network, refer others, and support local and fellow service-based businesses.
Invested in Their Business – They see accounting, tax planning, and advisory not as expenses—but as essential tools for success.
Family-Focused Entrepreneurs – They care about legacy, teaching the next generation, and creating opportunities for their families.
Let Us Help
Get in touch
Enter your question below and a someone will get right back to you via text message.
Please fill out the form and our team will get back to you shortly
The form was sent successfully