Saving money is always a good idea. Whether it’s for a rainy day or for a major purchase, saving now can help provide flexibility and security when big expenses come down the road.
April 8 through April 12 is America Saves Week, an annual initiative of the Consumer Federation of America, a nonprofit consumer advocacy organization. It promotes the value of saving money and the importance of making a plan to save.
Beyond peace of mind, here are some additional reasons to consider stashing away some more money this year, if you can.
Take advantage of high interest rates
The Federal Reserve started raising its key interest rate in March 2022 in an effort to fight inflation. Increases continued throughout 2023, and so far this year, the Fed is holding rates steady.
While the Federal Reserve rate mostly pertains to financial institutions, many banks have passed on those higher rates to their customers. That means interest rates on many savings accounts and certificates of deposit (CDs) are higher than they’ve been in years.
Some high-yield accounts, especially those offered by online banks, advertise rates of 5% annual percentage yield (APY) or higher. On a $5,000 account balance, 5% APY can result in $250 in interest earnings over the course of a year. That extra cash from interest could help you reach your goals faster or help you pay for an unexpected expense.
You may be eligible for a tax break
If you make pre-tax contributions to a retirement plan such as an IRA, 401(k), or 457 plan, you may already be reducing your taxable income. But you may also qualify for an additional tax break for a portion of your contributions, based on your income.
The Retirement Savings Contributions Credit, also known as the Saver’s Credit, offers a credit between 10% and 50% of eligible retirement plan contributions (for a maximum credit of $1,000 for single filers or $2,000 for joint filers).
For tax year 2023, the maximum income for a single filer to qualify for the Saver’s Credit is $36,500 ($73,000 for joint filers).
Boost your retirement security
PERA members are already setting aside money for retirement with every paycheck. Members in the PERA Defined Benefit Plan can count on PERA to provide monthly retirement income for life, but you’ll never regret having more money available in your golden years.
Whether you’re saving in a traditional savings account, an employer-based plan such as a PERAPlus 401(k) or 457 Plan, or even a health savings account (HSA) if eligible, additional savings can provide the flexibility to cover expenses that are hard to plan for. That could include costs like health care—one of the biggest (and growing) expenses—in retirement, long-term care, family needs, and housing.
Colorado PERA will be sharing more information and tips for America Saves Week on social media, so be sure to join the conversation on Facebook and Instagram.
Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.
Was wondering if PERA still allows people to purchase almost a whole PERA career or a partial career? I personally know people who have purchased 15 plus years and then worked just enough to get a retirement. Hope this isn’t still going on, it seems like it could strap PERAs shortfall even more!
Hi Linda, there are limits on how much service credit a member can purchase, with most members limited to purchasing five years based on nonqualified (private) employment or 10 years for qualified (public) employment but no more than 10 years total. You can learn more here: https://www.copera.org/purchasing-service-credit
Was wondering if the folks (politicians) who ruined the state pension plan and made it impossible to recruit or retain competent staff (since state wages are low), are contemplating restoring the COLA they stole from workers and retirees?
I receive a pension. I read PERA’s article about “The Retirement Savings Contributions Credit, also known as the Saver’s Credit”.
After a lot of research I found that I am ruled ineligible because I have a pension. It is the same thing as Social Security ruling me ineligible to receive benefits. This article was a waste of time. Hopefully no one else will fall for this misleading information.
We’re sorry for the confusion, Arthur. The Saver’s Credit is available to anyone (18 or older and not a dependent or student) who is saving for retirement and made $36,500 ($73,000 if married filing jointly) or less in 2023. As the IRS explains in the linked article, retirement contributions that are eligible for the Saver’s Credit can be reduced by any retirement plan distributions: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit