Skip to main content

How Married Couples Can Max Out Their Retirement Accounts

By U.S. News & World Report

Married couples can often claim twice the retirement savings tax breaks of single people. Couples can also strategically save in their respective workplace retirement accounts to get the best possible employer contributions and investment options. Here’s how to maximize the value of retirement accounts as a couple.

401(k) plans. If you and your spouse both have 401(k) accounts through your jobs, you can each defer paying taxes on $18,000 in 2016, or as much as $36,000 as a couple. And once you turn age 50 or older, you can each contribute an additional $6,000 to a 401(k). A married couple, both over 50 and with a 401(k) account at work, could potentially defer paying income tax on as much as $48,000 in a single year.

However, if you can’t afford to max out your 401(k) accounts through both of your employers, you need to be more strategic in your saving. First, look at the match each of your employers offers, and aim to capture any company contributions that are provided. Once you have gotten the match, compare the fees on each of your accounts, and do additional saving in the 401(k) account that provides the lowest cost funds. “If one person has a match up to 3 percent and another person has a match up to 10 percent, you probably want to try to get both of those matches,” says Katie Brewer, a certified financial planner for Your Richest Life in Garland, Texas. “It’s good to look at the plan fees and also the fees of the internal investments.”

IRAs. Workers can contribute up to $5,500 to an individual retirement account in 2016, and the limit jumps to $6,500 for people age 50 and older. Married couples can contribute that amount in each of their names and defer paying income tax on $11,000 if they are 49 or younger, and an additional $1,000 for each member of the couple who is 50 or older. If only one spouse works, the working spouse can make an IRA contribution on behalf of the non-working spouse. “If you don’t have income, you can’t put money in an IRA, unless you are a spouse of someone who has income. Then you can do a spousal IRA,” says Francine Duke, a certified financial planner for Aqua Financial Planning in Chicago. You can’t open a joint IRA in both of your names, but you can name each other as the beneficiary of the account.

However, your ability to claim a tax deduction for your IRA contributions is limited if you have a 401(k) account at work and your modified adjusted gross income as a married couple is $98,000 to $118,000. If only one member of the couple has a workplace retirement account, the ability to claim a tax deduction on an IRA contribution is phased out for couples earning between $184,000 and $194,000 in 2016. Couples who earn more than that can’t defer paying income tax on an IRA contribution.

Roth IRA. If you have a workplace retirement account and your income makes you ineligible to contribute to a traditional IRA, you may still be able to save in a Roth IRA. Couples are eligible to make a Roth IRA contribution until their adjusted gross income is between $184,000 and $194,000. While a Roth IRA contribution won’t get you an immediate tax break, the earnings in the account will grow without tax and you could qualify for tax-free distributions in retirement. “It’s beneficial to utilize the Roth account when your earnings are very low and the tax deduction is not going to be as necessary,” says Jamie Block, a certified financial planner for Wealth Design Retirement Services in Rochester, New York.

Saver’s credit. Married couples who earn less than $61,500 and contribute to a retirement account are eligible for the saver’s credit. This tax credit is worth between 10 and 50 percent of the amount contributed to a retirement account up to $4,000 for couples. “You put the money in your 401(k) pretax, and then you also get the saver’s credit, which offsets any tax that you owe,” Block says. “The government gives you this credit to incentivize people to save for retirement.”

More from U.S. News

10 Painless Ways to Save More for Retirement

10 Ways to Repair Your Retirement Finances

The High Costs of the Retirement Dream

How Married Couples Can Max Out Their Retirement Accounts originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote