If you’re approaching retirement in the next fifteen to twenty years, it may be time for you to focus on saving more. Playing ‘catch up’ by contributing more can make a big difference. It’s never too late even if the time line is getting closer. It’s always better to try to put away more than to not try and face the reality of working longer, which may not be what you wanted. Many situations can cause early retirement even if you’re not financially ready, so make a plan to be proactive.
Catch up on additional payments now by increasing your contributions to your company retirement savings plan, and Roth IRA; even adding 2% can make a difference over time. If you’re contributing the maximum allowed contributions, congratulations! If you’re not contributing your ‘max’ start with small steps and the 2% this year. Remember you can increase your contributions at any time, you don’t have to wait until the next benefit meeting! If you have the ability to set your contributions on auto-increase, set that into play so that next year and going forward you’re increasing 1%-2% each year.
Utilizing the IRS’s ‘catchup provisions’ if you’re 50 or older is in your best interest, if you’re not already doing so. You’re allowed to contribute an additional $1000 into IRAs, and an extra $6000 into 401(k)’s. Other self-employed and solo 401(k) type accounts also have increases this year, so consult with me to determine if you qualify to contribute more.
Playing catch up can benefit you once you start putting into motion steps to increase your savings. For a basic calculator on how it can benefit you, utilize Bankrate’s Traditional IRA calculator to give you an estimate of how your increases can impact your savings. Use a lower, realistic rate of return on your initial calculation.
Additionally, plan for us to meet for a financial planning meeting if we haven’t already done so. Planning for contribution increases can be applied into the financial plan, and seeing how that can benefit you with no increases versus increased contributions, can be a motivator to get your game started.