Ray’s Take: There aren’t a lot of benefits to getting older, but when it comes to saving for retirement, there are a few. If you’re 50 or older and feel like you haven’t saved quite as much as you would like for your retirement plan, you could be in luck when it comes to contributions.
This savings bonus is called catch-up contributions. These are special provisions that allow you to contribute additional funds to your retirement accounts as you get closer to retirement. These contributions have the double benefit of helping beef up your retirement savings while deferring taxes.
The IRS allows those who will turn 50 or older by the end of the 2017 calendar year to make an additional $6,500 in elective contributions. And you can make those contributions each year as you move closer to retirement. The amount of catch-up contributions, historically, has increased approximately every 24 months. Catch-up contributions can really add up over time to a tidy additional amount of funds in your retirement accounts.
There are – of course – some rules relating to what kind of accounts you can use to make these catch-up contributions, and there are specific amounts that can be contributed to each type of account. Additionally, catch-up contributions only come into play if you max out the elective deferral amounts in your 401(k) or reach the contribution maximums in your IRAs. Aiming to meet maximum deferral amounts is a good starting goal.
If you have a Health Savings Account-eligible insurance policy that meets deductible requirements, that HSA is also eligible for catch-up contributions at age fifty-five and older. This can be an asset for saving additional money for health care expenses.
A financial adviser can assist you with determining the best plan for your circumstances. Time is a non-renewable resource and a critical factor to successful retirement planning.
Dana’s Take: Having the opportunity to get caught up on any of the important things in life is a great opportunity. Funding our retirements dreams are just one of those things. What about getting caught up on you? Are there things in your life that you’ve always wanted to accomplish? Or at least try?
Many of us come up with too many activities and pressures on ourselves in an effort to be everything to everyone in our lives and somehow never reaching our goals of perfection.
Take a little extra time to get to know you. When you get caught up on yourself, you see the best way to get the life you want for yourself and your family. Not just now, but all along the road of life.