Don't Mess With Taxes

I love what I do for a living. But I'd love it even more if I could write just because I wanted to and didn't have to depend on it to pay the bills.

The hubby shares my wish for quitting work sooner rather than later. And since our win the lottery retirement plan is probably not going to pan out, we contribute regularly to our post-career savings accounts.

I can tell that my loving husband is really starting to think about our eventual exits from the 9-to-5 because this week he upped his 401(k) contribution.

I am so proud! My years of nagging reminding have finally paid off.

While I can't personally nag remind all y'all like I do the hubby, I did want to offer his wise money move as a good example.

And as a bonus, here are some suggestions to make the most out of your retirement contributions.

Contribute enough to get your employer's maximum match. Yes, some companies are once again contributing to workers 401(k) plans. Take advantage of it.

You won't really miss a few more percentage points of pay coming directly out of your checks. Honest. And the added money from your boss will really pay off in the long run.

You can use this 401(k) contribution calculator to see what various percentages will mean to your take-home amount.

Don't forget your IRA: Even if you have a 401(k), you can open and/or contribute to an individual retirement account, too.

Some folks choose a traditional IRA because they want the tax deduction. Others have this original IRA plan because they make too much to contribute to a Roth.

Like a 401(k), taxes on a traditional IRA's earnings are postponed until you take the money out. The goal is to be in a lower tax bracket by the time you take out the money so that the IRS won't take such a big bite out of it.

Or if you qualify, you can keep Uncle Sam's sticky fingers totally out of your retirement account by opening a Roth IRA.

With a Roth, you put in already-taxed dollars, but your earnings grow tax-free. You won't pay any taxes on your distributions as long as you've had the Roth at least five years and you're taking out the money once you turn 59½.

While there are income restrictions on opening a Roth, there no longer are any limits on converting a traditional IRA to a Roth account. Check out the conversion option.

But remember that as wonderful as the accounts can be for many, a Roth is not for everyone.

Save your self-employment earnings: If you work for yourself, either as your main full-time job or as a side job to earn a few extra bucks, you can sock some of those earnings away for retirement, too.

There are several self-employment plan options, the most popular being a SEP-IRA, a Keogh or a solo 401(k).

Not only will you add to the eventual total you'll have available in retirement, you'll get a tax break on your 1040 (it's in the above-the line deductions section) for your contributions.

A Roth at work: Speaking of Roths, some companies now offer a Roth 401(k).

Like its IRA cousin, Roth 401(k) contributions are made with after-tax dollars and the full account is free from tax as long as you meet the age requirement and have it for least five years.

Check with your benefits and payroll offices and see if you can open or convert your existing plan to a Roth 401(k).

Take it with you: If you've changed jobs, make sure you didn't leave something behind at your old office. Take your 401(k) with you.

This is one of the few times you can get to your workplace retirement money early, but be sure that you're not personally involved in the money move. If you take it out even to put into another retirement account, you'll be hit with a ton of taxes and penalties.

Have the transfer either to an IRA or your new workplace's 401(k) program done trustee-to-trustee. Get the appropriate paperwork, or more likely website addresses, to make this move quickly and smoothly.

This rollover calculator will give you an idea of how transferring your former workplace plan to an IRA can pay off.

That's it for now. I've got to get back to work (yes, even on Saturday; the joys of self-employment … and letting deadlines creep up on you!) to make more money so I can contribute as much as possible toward my dreamed about retirement.

You also might find these items of interest:

• 2010-2011 retirement plan contribution rules, limits
• Handy retirement plan rollover chart
• 401(k) Do's and Don'ts