4 Financial Products that Can Improve your Finances

 Thanksgiving is a time for relaxation and joy. It is also time to reflect on life’s many blessings – family, friends, shelter and so on. However, we can also give our thanks to some of the investment vehicles that can shape our finances for the better. Here are four plans which prove very useful when it comes to managing your finances.

Let’s begin with 401(k) plans

Those who have access to an employer-sponsored 401(k) plan have a solid opportunity to build savings for retirement. For workers under fifty, 401(k) contributions max out at $19,500 a year, while those fifty and over can contribute up to $26,000. The limits will remain at those levels during 2021.

Furthermore, saving and investing with 401(k)s is seamless. Your contributions are taken automatically from your paycheck pre-tax after you set up your plan. As a result, you don’t have to think about your 401(k) if you don’t plan to make changes to it. In addition, many employers offer a company add on your contributions up to a certain percentage of your salary.

What are IRAs?

IRAs are Individual Retirement Accounts. For those who don’t have access to a 401(k), they can be a vital long-term savings tool. You can contribute up to $6,000 a year with an IRA if you’re under fifty, or up to $7,000 if you’re fifty or older.

These tax-advantaged accounts, both Traditional and Roth, offer a wide range of investment choices. Want index funds in your retirement plan? You can go for it. Prefer individual stocks? That’s also an option. Having all these choices gives you an opportunity to choose the right investment mix to meet your goals.

What about HSAs?

While lots of people can have access to IRAs or 401(k)s, that’s not true when it comes to a health savings account (HSA). To open it, first, you must be enrolled in a high-deductible health insurance plan. However, if you do qualify, you’ll be able to reap a host of tax breaks. Not only HSA contributions are tax-free, but withdrawals are also tax-free, only if they’re taken to pay for qualified medical expenses. Furthermore, investment gains accrued in an HSA are tax-free.

HSAs offers flexibility, meaning you can withdraw funds to cover immediate healthcare bills, or you can carry that money forward for as long as you’d like. Presently, a consumer can contribute up to $6,900 a year to an HSA on his/her own behalf, or up to $13,800 on behalf of his/her family. However, in 2021, these limits will rise to $7,000 and $14,000, respectively. Besides, people 55 and older can save an extra $1,000 annually.

Are 529 plans useful?

Collage education is usually very expansive. Thus far, there is no federal tax break on contributions to 529 college savings plans, but some states offer incentives for funding one. Additionally, a 529 plan’s gains and withdrawals are tax-free if they’re used for qualified education expenses.

In the past, 529s could only be utilized to pay for college-related expenses. However, recent tax code changes have made it possible for these plans to be used to pay for private education for children beginning from grade-schoolers. Furthermore, 529 plans also allow you to change their beneficiaries. For example, if you have a child who opts out of higher education, you can use the funds you set aside for them for their sibling, or you can hold them in reserve for a grandchild.

These tools can help you meet your financial goals. If you’re not taking advantage of any of the products mentioned above, you can consider them to reap more benefits in the future. It always pays to be prepared.