How to Make the Most of New Tax Law (revisited)

Viewed as "the most sweeping reform of America's pension laws in over 30 years," by President Bush, the new tax act gives you plenty of ways to save on your income taxes, and put aside money for retirement and college. One message is clear—if you make the effort to save, the federal government will give you a hand, in the form of tax advantages.

The tax act is good news if you work for an employer who offers a retirement savings plan such as a 401(k), 403(b), 457(b), or SIMPLE IRA. Now you may be able to take advantage of the higher annual pretax contributions made permanent by the new law to increase your savings. And, because these pretax contributions can effectively reduce your current taxable income (thereby lowering your overall income tax bill), you've got an even greater incentive to contribute more to your plan.

What's more, if you're age 50 or older and your plan allows it, you can make additional catch-up contributions. If made on a pretax basis, these extra contributions can usually lower your tax bill as well. The table below summarizes the limits for individual contributions to most retirement plans.

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• Workplace Roth 401(k) and Roth 403(b) features become permanent
• Automatic enrollment eliminates savings inertia
• Qualified plan rollovers to Roth IRAs simplified
• Income limits for Roth rollovers gone in 2010

from Morningstar:

1. How to Save on Taxes Using a Traditional IRA
2. Tips for Managing Your Roth IRA