As you get closer to retirement age, you may wonder whether or not you have enough money saved for everyday expenses, travel, increased medical costs, and other expenses you’ll likely incur in your post-career life.
Whether you got a late start, or started saving early in your career, the answer is that it is never too late to contribute toward your retirement – even in your 50s. Read below to learn how to maximize your retirement savings and reach your financial goals.
Utilize Catch-Up Contributions
As a 401(k) plan participant, you’re probably familiar with the maximum contribution limit set by the Internal Revenue Service (IRS) every year. While the maximum continually increases to meet the financial demands that pair with rising inflation, increased cost of living, and other expenses, it’s important to max out (if you can afford to) every year.
If your employer offers company matching with their 401(k) plan, your chances of reaching the maximum set by the IRS every year increases. But if your employer doesn’t offer that benefit, or if you’re looking for additional ways to maximize your savings, you can utilize catch-up contributions.
Catch-up contributions were designed for 401(k) plan participants over the age of 50 to contribute additional funds to their 401(k) plans each year that exceed the standard maximum set by the IRS. While a catch-up contribution is still regulated and has a maximum limit, it’s a great way to boost your savings in the years leading up to retirement. Learn about this year’s contribution limits for both a 401(k) and catch-up contribution.
Rethink Target Date Funds
Target date funds are associated with 401(k) plans and structured to automatically change the investment strategy and reallocate funds as you get older. For a first-time enrollee in their early 20s, a target retirement date would be determined for approximately 40 years later and follow an aggressive investment plan. However, as you turn 30, 40, and 50, your plan would reduce to a more conservative strategy.
While target date funds are a good idea in theory, they make the assumption that every investor is created equal – and as we know, that is not true. Target date funds cannot take into account changing lifestyles, family additions, financial changes, and more.
If you can, it’s important to avoid this type of plan, or rebalance your funds so they match your current budget, lifestyle, and future financial needs.
If you were automatically enrolled in a target date fund by your employer, speak with someone from HR to determine what your options are and how you can move away from this type of account.
Get a Financial Advisor
Navigating retirement savings can be overwhelming, but experts exist to help you along the way. In your 50s, it’s important to meet with a financial advisor to ensure you’re on track to retire in your 60s or 70s (depending what your goal is) and make changes to your strategy to ensure you stay on track.
Financial advisors are great resources because they watch the market closely and can help you make informed financial decisions for your account. While there are often fees associated with this type of service, some employers have an advisor on staff who can provide detailed information and strategic recommendations for you and your plan.
As you navigate investment changes, it’s important to have someone who regularly tracks trends so you can make decisions that benefit your budget today, tomorrow, and in retirement.
Use Extra Income to Boost Retirement Savings
If you’ve made financial changes to your account, but still find yourself falling short of your retirement goals, remember, it’s never too late to boost them. There are additional ways you can enhance your accounts, including having a strategy for additional funds you receive from annual raises or bonuses, but other, more consistent income avenues as well, including:
Turning your hobby into a side hustle (i.e. art, tutoring, becoming a dance or fitness instructor, graphic design, etc.)
Assess your budget and determine where you can make reductions, then use the extra cash for retirement accounts
Retirement should be an exciting time, and if you find yourself worrying about your financial future, utilize your resources and speak with a financial advisor to learn how you can make positive changes over the next few years.
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