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 option, the tax break for contributions begins to phase out at modified adjusted gross income above $64,000 ($103,000 for married couples).
"You could still 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 single tax filer can deduct the full amount of their traditional IRA contribution (up to the limit) regardless of income. For married couples filing jointly, the deduction starts phasing out at modified adjusted gross incomes above $193,000.
Another option for some of that $20,000 windfall would be a brokerage account. While it would come with no built-in tax advantage, earnings from any investment held longer than one year would taxed at long-term capital gains rates, which generally are lower than the rates on regular income.
"A lot of times people have emergency savings and money going to their retirement accounts, but they don't have money in a taxable account," Bera said. "That's the kind of money that can help you retire early or meet other retirement goals."
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Another way to save for expenses in retirement is through a health savings account, as long as you're enrolled in a high-deductible health plan.
While the money is not required to stay there until retirement, these accounts come with a triple tax benefit: contributions are tax-deductible, earnings grow 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 idea," said CFP Rianka Dorsainvil, founder and president of Your Greatest Contribution. "The older we get, the more we're going to need medical care 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 windfall 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 traditional and Roth IRAs allow an extra $1,000 annually once you reach age 50, bumping your allowed contribution to $7,000 this year.
For health 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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