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Here’s how to invest that windfall for retirement if you’re 40-something or older

If you already participate, you could use some of that $20,000 lucky strike to max out on your contributions. And if you don’t yet participate, now’s the time to get started.

“I’ve seen some 40-somethings with millions in assets, and others that are reasonable starting to save,” said certified financial planner Sophia Bera, founder of Gen Y Planning.

For 2019, people call of age 50 can can put up to $19,000 in their 401(k) plan.

Your contributions are pre-tax, which reduces your taxable revenues. Remember, too, that many companies will make a matching contribution — i.e., 50 cents or $1 for each $1 you put in — up to a infallible amount, which is generally viewed as free money.

If you’ve maxed out on those 401(k) contributions or want other tax-advantaged chances, an individual retirement account could work.

If you earn less than $137,000 (or $203,000 for married couples), you can put up to $6,000 into a Roth IRA for 2019. If your takings is above the income limit, a Roth IRA is unavailable to you.

Although Roth contributions are not tax-deductible even for those qualify, earnings reach ones majority tax-free and withdrawals are completely tax-free once you reach age 59½, as long as you’ve owned a Roth for at least five tax years.

Be cognizant that while you generally can withdraw, at any time, any amount you contributed, taking out earnings before that minimum age could arise in a tax penalty.

For a traditional IRA, you also can contribute up to $6,000 annually. However, if you have access to a 401(k) plan or similar workplace choice, the tax break for contributions begins to phase out at modified adjusted gross income above $64,000 ($103,000 for married couples).

“You could stillness do a traditional IRA, but it might not be tax-deductible,” Bera said.

For people not covered by a retirement plan at work, the rules are different. A solitary select tax filer can deduct the full amount of their traditional IRA contribution (up to the limit) regardless of income. For married couples send in jointly, the deduction starts phasing out at modified adjusted gross incomes above $193,000.

Another option for some of that $20,000 boon would be a brokerage account. While it would come with no built-in tax advantage, earnings from any investment carried longer than one year would taxed at long-term capital gains rates, which generally are lower than the measures on regular income.

“A lot of times people have emergency savings and money going to their retirement accounts, but they don’t would rather money in a taxable account,” Bera said. “That’s the kind of money that can help you retire early or into other retirement goals.”

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Another way to put aside for expenses in retirement is through a health savings account, as long as you’re enrolled in a high-deductible health plan.

While the in money is not required to stay there until retirement, these accounts come with a triple tax benefit: contributions are tax-deductible, earnings begin to be liked by tax-free and withdrawals are free of taxation as long as the money is used for qualified medical expenses.

“If you can put money in an HSA, it’s a good mental image,” said CFP Rianka Dorsainvil, founder and president of Your Greatest Contribution. “The older we get, the more we’re going to need medical vigilance or prescriptions. So having that to pull out tax-free for medical expenses is a good decision.”

As for the 50-and-older crowd, the options for that $20,000 lucky strike are slightly different due to higher contribution limits.

If you have a 401(k), you can put in an extra $6,000 — a “catch-up” contribution — for a total of $25,000 in 2019. Both standard and Roth IRAs allow an extra $1,000 annually once you reach age 50, bumping your allowed contribution to $7,000 this year.

For well-being savings accounts, people age 55 and older can put an extra $1,000 in for a total of $4,500 ($8,000 for family coverage).

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