Concerned About Your Retirement Savings? Tips on How You Can Catch Up

You had perfect plans for your perfect retirement. But at some point, life may have gotten in the way.

Here’s the good news. Even if you have gotten behind on your goals for retirement savings, it’s not too late.

Individuals after the age of 50 are eligible to make additional contributions to some of the most common types of retirement accounts. You can also consider working longer, working part-time during retirement, taking equity out of your home, and more.

Try to catch up on contributions

By definition, making a catch-up contribution requires that you first save the maximum annual amount allowed under your retirement plan. Through the use of catch-up contributions, you get all the tax benefits of your retirement account while being able to make up for lost time.

The Internal Revenue Service (IRS) allows people aged 50 and over to save up to an additional $6,000 in their 401(k), 403(b), 457, or Thrift Savings Plans (TSP).  That means older workers can contribute up to $24,500 in these plans in 2018, as opposed to $18,500 for workers under 50.

For both traditional and Roth Individual Retirement Accounts (IRA), workers age 50 and older can contribute up to $7,000 annually, compared to younger workers whose contributions are capped at $6,000.

Increase your rate of savings

It’s not uncommon for people in this situation to look for a quick-fix in the form of a high-yielding investment. It might be a promising stock that could double or triple in value over a few years, or maybe an exchange-traded fund that could produce large returns year-over-year.

However, high-reward investments are also high-risk, and such a strategy could wind up putting you in a more troublesome position than you were in to begin with.

The Securities and Exchange Commission provides a useful tool called a compound interest calculator that can be used to help you see how much you can grow your money over time.

Learn more about The Stash Way. 

Consider working a little longer

Working for an extra two or three years can go a long way toward your retirement. You’ll have additional time to save and earn greater returns on savings you already have. Not to mention the fact that those years spent working are years that your savings may not  have to cover (since you’re still earning income).

An additional benefit to delaying retirement is receiving more in monthly Social Security benefits. Postponing your collection of Social Security can potentially increase your benefits. Married couples also have the opportunity to coordinate when either of them starts collecting, maximizing their benefits as a household.

Think bigger picture

There are also other ways to create a better retirement. While working a little while longer before retiring can help, so can working part-time, or freelancing.

One caveat to remember here is that if you receive Social Security benefits before reaching full retirement age, your monthly payments might be reduced in the event that you earn above a certain threshold.  Consult a legal or financial professional to weigh your options.

Your home can be another factor in the retirement equation. If you have enough equity, you can always add some of it to your savings by downsizing to a less-expensive property.

Consider moving to a state or country with a lower cost of living (unless you have kids or grandkids you want to stay close to, of course). If you choose to stay in your present home, it may be possible to pull out equity by using a reverse mortgage. But you should understand that reverse mortgages come with risks.

Doing some or all of the above may not allow you the kind of financial security that you would have achieved had you been saving more from the get-go.

However, if you begin planning and carrying out a thorough catch-up plan today, you will have a good chance at making up for lost time and will unquestionably be better off than you would have been otherwise.

Want to start saving for your retirement?

It’s never too early to start

With Stash Retire, you can start planning your retirement right now. With as little as 15$, you can create a balanced portfolio with an IRA or Roth IRA.  We can help you make catch-up contributions and more.