Lower your taxable income as you save for retirement

April 16, 2019
As another tax season comes to a close, consider how the tax advantages of the Retirement Savings Plan can help you save more for retirement.

When you participate in the Retirement Savings Plan of the Presbyterian Church (U.S.A.) (RSP), you can set aside money for retirement and take advantage of favorable tax treatment offered under the plan.

Consider these advantages:

  • Tax-deferred contributions. When you save on a pretax basis in the RSP, your contributions — along with employer contributions and any investment earnings — are tax deferred.* So you can put off paying taxes on your contributions and any earnings until you withdraw them from your plan account. Compare this to a traditional brokerage account, where investment earnings are taxable each year.
  • Lower taxable income. By lowering your taxable income, you have more money to set aside for your nest egg. For example, if you earn $50,000 annually and contribute $200 monthly (or $2,400 a year) on a pretax basis to the RSP, your taxable income is lowered to $47,600. Based on a federal tax rate of 22 percent, you might have an additional $44 a month (or $528 a year) to contribute to the RSP. Over 20 years, at a 6 percent rate of return, you could have an additional $22,000 for your retirement.**
  • Higher contribution limits. Contributions limits for the RSP are significantly higher than those for individual retirement accounts (IRAs). In 2019, you can contribute up to $19,000 to the RSP (plus a $6,000 catch-up contribution, if you’re age 50 or older). Compare that to saving in an IRA, with a 2019 contribution limit of $6,000 (and an additional $1,000 catch-up contribution for those 50 and over).
  • Lower tax rate. Many people are in a lower tax bracket when they stop working, and distributions from their RSP account will be taxed at a lower rate than when the contributions were made. If you anticipate being in a higher tax bracket at retirement, you might want to contribute to the RSP on a Roth (after-tax) basis, in which case withdrawals are distributed tax-free if certain conditions are met.

Learn more about the Retirement Savings Plan

Find out more about the Retirement Savings Plan. If you have questions, call the Board of Pensions at 800-773-7752 (800-PRESPLAN), or call Fidelity Investments, the plan record keeper, at 800-343-0860 (mention plan #57887).

If your employer offers the Retirement Savings Plan and you’re not contributing, ask how to get started.

If your employer doesn’t offer the Retirement Savings Plan, ask them to contact the Board of Pensions for more information. All employees who work for a PC(USA)-affiliated employer are eligible to participate in the Retirement Savings Plan if their employer offers the plan to them.

*Investing involves risk, including risk of loss. The value of your investment will fluctuate over time and you may gain or lose money.

**This is a hypothetical example. It does not predict or project the actual performance of an investment or investment strategy, and is not a guarantee of future results.