Maximize Your Retirement Savings and Tax Benefits: A Guide for the Sandwich Generation

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You’re likely juggling a variety of financial responsibilities—supporting your children, assisting aging parents, and managing your own needs. With all these competing demands, planning for your own future might feel like an overwhelming task. But here’s the good news: contributing to your retirement savings not only secures your financial future but also comes with tax benefits that can ease your current financial burden.

Let’s break down how these tax benefits work and why they’re worth your attention.


The Double Advantage of Retirement Contributions

Contributing to retirement accounts such as a 401(k) or an Individual Retirement Account (IRA) doesn’t just build your nest egg for the future; it can also reduce your taxable income today. Here’s how:

1. Traditional 401(k) Contributions:

-- Contributions to a traditional 401(k) plan are made pre-tax. This means the amount you contribute is deducted from your taxable income, potentially lowering the amount of income tax you owe.

-- For example, if you earn $75,000 per year and contribute $10,000 to your 401(k), your taxable income is reduced to $65,000. This could place you in a lower tax bracket or reduce your tax liability significantly.

2. Traditional IRA Contributions:

-- Similar to a 401(k), contributions to a traditional IRA may be tax-deductible, depending on your income level and whether you’re covered by a retirement plan at work.

-- This is particularly helpful if you’re self-employed or don’t have access to an employer-sponsored retirement plan.

3. Catch-Up Contributions:

-- If you’re 50 or older, you’re eligible to make catch-up contributions to your retirement accounts. In 2025, you can contribute an additional $7,500 to your 401(k) and $1,000 to your IRA, increasing your savings while maximizing your tax benefits.


How the Tax Savings Add Up

Tax benefits from retirement contributions might seem small in the short term, but they can add up over time, especially if you reinvest your tax savings. Let’s look at an example:

-- Scenario 1: You contribute $10,000 to your 401(k) and save $2,200 on taxes (assuming a 22% tax rate). You can use that $2,200 to pay down debt, invest, or cover unexpected expenses.

-- Scenario 2: If you continue making similar contributions annually, the compounded growth in your retirement account—combined with the annual tax savings—can create a significant financial cushion for your future.


Additional Tax Benefits to Explore

While retirement contributions provide immediate tax advantages, there are other strategies that may further benefit members of the Sandwich Generation:

1. Health Savings Accounts (HSAs):

-- If you’re enrolled in a high-deductible health plan (HDHP), you can contribute to an HSA. Contributions are tax-deductible, grow tax-free, and can be used tax-free for qualified medical expenses—a triple tax advantage!

-- Given the likelihood of medical expenses for both you and your loved ones, an HSA can be a valuable tool.

2. 529 College Savings Plans:

-- If you’re saving for your children’s education, contributions to a 529 plan may qualify for state tax deductions or credits.

-- Though not a retirement strategy, 529 plans can free up your resources for other priorities, including your retirement.

3. Tax Credits for Caregiving:

-- If you’re providing financial support for aging parents, you may qualify for tax credits, such as the Child and Dependent Care Credit or medical expense deductions.


Take Action Today

Here are three actionable steps you can take now to maximize your retirement savings and tax benefits:

1. Review Your Contributions:

-- If you’re not already maxing out your 401(k) or IRA contributions, consider increasing them before the tax year ends.

-- Many employers allow you to adjust contributions at any time, making it easy to boost your savings.

2. Talk to a Financial Advisor:

-- A financial advisor can help you assess your current financial situation and create a plan that balances retirement savings with other obligations.

-- They can also guide you on strategies to minimize your tax liability while maximizing your savings.

3. Educate Yourself:

-- Stay informed about contribution limits, tax laws, and other financial opportunities. The IRS updates contribution limits annually, so make sure you’re taking full advantage of what’s allowed.


Planning for the Future While Managing Today

As a member of the Sandwich Generation, it’s easy to feel stretched thin. However, taking proactive steps toward securing your financial future can reduce stress and provide peace of mind. By maximizing your retirement contributions and leveraging available tax benefits, you can take control of your finances and build a more secure future for yourself and your family.

Remember, every little bit counts. Start today, and your future self will thank you.

Looking for personalized advice on balancing your current responsibilities and planning for retirement? Let’s connect. Together, we can create a strategy tailored to your unique needs.


The concepts illustrated here have legal, accounting and tax implications. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your individual circumstances. For more information about Janney, please see Janney's Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

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