Broker Check

How Home providers can save for retirement

March 27, 2023

Home providers have a meaningful and important job as they take care of others. Taking care of a disabled individual is no easy task and it comes with a lot of responsibility. With that being said, once you and your spouse are starting to discuss how you will take care of your home when you are approaching retirement age, it may be time to discuss how you will save for retirement.  

We receive a lot of questions regarding how to invest or what to invest in. While it is important to invest and put money back for future needs it is important to know why you are putting your money in certain investment accounts. 

If your main income is from being a home provider, contributing to certain retirement accounts may be more complicated for you. 

To contribute to these tax-advantaged accounts you have to meet specific guidelines. One of them is you must have earned income to contribute and you cannot exceed the contribution limits or 100% of your earned income. As a home provider, your payment is from a Medicaid waiver and is tax-free if the home is your primary residence. You may be wondering how you can contribute to a traditional IRA to get tax-deferred growth without breaking the IRS guidelines and getting penalized. 

Forntually there is a solution, Section 116 of the Secure Act allows for difficulty-of-care payments to be used to make non-deductible contributions to an IRA. This allows you to put money into an account that grows tax-deferred, unlike a taxable account where you would pay tax on any realized gains in the account every year.

The IRS has updated the contribution limits for 2023. The current maximum you can contribute to an IRA account if you are under 50 and meet the income guidelines is $6,500 annually per person. If you are over 50 and are under the income limitations you can contribute an additional $1,000 totaling $7,500 annually.

When making a non-deductible contribution to an IRA keep in mind you must file form 8606 on your tax return. Seek a tax professional for further guidance. This is one of the vehicles you can use to save for retirement, if you would like to learn more or what options are available to you, reach out to us at 276-601-2640 for any questions you have!