Starting 2022 Off Right
Welcome to Saving Money with Andrew!
As 2022 begins, we’ve started to emerge from our run-in with Omicron. Despite some lingering congestion and fatigue, my thoughts have returned to SMwA. Each new year brings new money-saving opportunities. Some tips:
College Savings
We try to contribute to a 529 college savings account as early as possible each year.
In our state, contributions are tax-deductible from state taxable income (saving us 10 cents for each dollar in our state) and withdrawals are tax-free as long as used for qualified educational expenses.
Retirement Accounts
Each dollar saved in a traditional 401(k) saves 40 cents on taxes, assuming a 40% tax rate (federal + state).[1]
If your company offers an employee match, it’s also great to contribute as much as you can early in the year to get those additional dollars working for you.
IRAs are also a great option if you are eligible.
For couples with joint income below $68,000 (or individuals below $34,000), the Saver’s Credit offers as much as a 50% federal tax credit on every dollar you contribute, in addition to other tax benefits.
Savings Bonds
If you purchase US government savings bonds, the $10,000 per person per bond limit resets each year.
Series I bonds currently yield over 7% and adjust every six months based on the current rate of inflation, which is quite high right now.[2]
Tax Planning
The new year is a great time to start thinking about your taxes for the year, much like Ned Flanders does every January 1st.
If you’re like most people, you likely have a refund waiting for you, so it’s worth thinking about the forms you need to be able to file your taxes as soon as possible. Especially with the IRS facing a lengthy backlog.
And, if you’re eligible (household income $72,000 or below), the IRS offers many free or heavily discounted filing options.
And now…Andrew’s pick(s) of the week:
I just watched the premiere of the newest adaptation of Around the World in 80 Days (first episode free on PBS Masterpiece), starring the dependably excellent David Tennant. This one is a lot of fun, with lots of action and an Indiana Jones feel.
On a more serious note, Zvi Mowshowitz at Don’t Worry About The Vase writes an incredible weekly recap of developments in the pandemic, with more frequent updates during Omicron. If you read his stuff, you won’t miss anything important.
And finally, the Wordle craze has swept the nation. For those in the know, this achievement was the highlight of my last week:
Wordle 200 3/6
🟨🟨⬜🟨🟨
⬜🟨🟨🟩🟨
🟩🟩🟩🟩🟩
I hope this has been helpful. If you liked it, please share it on social media! Also, please send me your feedback, requests, and success stories.
[1] To put it simply: if you put $1000 in a traditional 401(k), it won’t be taxed at all, whereas if you did anything else with the $1000, you’d be on the hook for $400 in income tax, so that $1000 is really worth $600 to you after taxes.
[2] Note, this is not investment advice!