Planning Account Contributions for 2019
Trying to save a few bucks at tax time can be confusing. Here are some guidelines to help you figure out which type of account you should fund first.
Financial experts recommend earning any available matching contributions first. UMPIP and the Horizon 401(k) Plan allow before-tax and/or Roth contributions; you may need to determine which type (or which combination) is best for your future financial plans. Check with your conference, church or employer to determine your matching formula, if any. Roth’s benefits are long term—you pay taxes today but may save when you make withdrawals. However, before-tax contributions can result in higher take-home pay.1 And having a little more money available could make it possible to utilize other tax-advantaged accounts like Health Savings Accounts (HSAs). View a comparison of Roth and before-tax contributions at wespath.org/roth.
Second priority considerations
HSAs are special savings accounts available to people who enroll in account-based health insurance plans (also known as high-deductible plans). The “triple tax” benefit refers to the fact that contributions, earnings and withdrawals are all tax free when used for eligible health expenses. HSA funds over $1,000 can be invested—but don’t invest funds you will use for current year medical expenses—and HSAs can be retained through retirement.
If you don’t have an HSA plan, contribute more to UMPIP or Horizon. If you have expected health expenses, consider using a flexible spending account (FSA). FSA tax benefits are less generous. These accounts are use-it-or-lose-it, meaning that if you don’t use the funds you set aside by year end, you may forfeit your money to the plan.
Retirement and health accounts aren’t the only options for saving at tax time. You might also want to look into Dependent Care and 529 accounts if you have a school-aged child. Your strategy could vary based on your personal situation.
Consult a tax advisor or call EY Financial Planning Services for guidance at no additional cost at 1-800-360-2539.2
1Tax savings depend on tax rates now and in retirement.
2Costs for EY Financial Planning Services are included in Wespath’s operating expenses that are paid for by the funds. Services are available to active participants and surviving spouses with account balances, and to retired and terminated participants with account balances of at least $10,000.
From the January 2019 issue of Hark!