Behind on Retirement Savings? Catch Up Now

Early in your career, you might have been focused on paying down student loan debt, saving to purchase your first home, getting married, or having children. But at some point, reality hits: I’m going to retire someday, and I haven’t saved nearly enough! When you first started working for your employer, retirement savings might have been a low priority for you, and so you didn’t elect to set aside much of your paychecks in a retirement plan. But now you need to play catch-up!

Eliminate your debt. Most of us have house and car payments, and those things might seem like an inevitability of modern life. But if you’re paying interest to credit card companies, you’re just wasting money every month. Make a plan to get out of debt, and you will have more income to set aside for retirement. Plus, staying out of debt from now on can help you retire more comfortably when the time comes.

Divert more of your paycheck to a retirement account. Take a look at your retirement plan contributions. Are you diverting $18,000 per year to your 401(k) plan? That’s the maximum allowed by the IRS, and it earns you a big tax deduction. If you can’t save that much, at least save enough to meet your employer’s match amount. Otherwise you’re turning down free money for retirement.

Make catch-up contributions. Once you reach age 50, you can make additional catch-up contributions to your retirement plan. This year the additional contribution limit is $6,000.

Open an IRA. An Individual Retirement Account can be a good option for those who aren’t eligible for an employer-sponsored retirement plan, are self employed, or have maxed out their 401(k) contributions and want to save even more for retirement. You can set aside $5,500 dollars each year in an IRA, or $6,500 if you’re age 50 or older, and earn the same tax benefits provided by a 401(k).

Adjust your lifestyle. Want to save more for retirement, but feel like you can’t afford to? In many cases you just need to make adjustments to your lifestyle. Each time you get a raise from work, try not to see it as a lifestyle increase; view it as a retirement savings increase instead.

Delay your retirement. If you’re seriously behind on your retirement savings, you might need to delay your retirement by a few more years. You will have more time to pay down debts, and delaying your Social Security benefits allows them to grow larger. Plus, you can keep saving via your 401(k) or IRA during this time.

For more information on establishing a stable stream of income during retirement, call our office to schedule a consultation. We specialize in helping you find the retirement solutions that fit your needs.