Getting close to Retirement?
Saving When You Are Nearing Retirement Age
If you are in your 40s or 50s, you likely feel the pressure of retirement looming just over the horizon. However, there are several actions you can take to ensure that you have saved enough to live comfortably in your golden years. Follow these tips in order to maximize your savings:
- Take advantage of catch-up contributions. Those who will be 50 or older at the end of 2016 are allowed to make catch-up contributions up to $6,000 for 401(k)s or $1,000 for IRAs. These contributions are added to the defined contribution limits of $18,000 for 401(k)s in 2016 and $5,500 for IRAs, for contribution totals of $24,000 for 401(k)s and $6,500 for IRAs.
- A minimum of 15 percent of your gross annual salary should be put aside specifically for retirement, assuming you have been putting 10 to 15 percent aside in your 20s and 30s. If not, you should increase your current contribution to at least 20 percent.
- It is commonly suggested that those in their 40s should have 80 percent of their portfolio in equities and 20 percent in bonds. Those 50 and older should put 60 percent in equities and 40 percent in bonds.
- Find out whether your company offers an automatic contribution escalation, in which an employer automatically increases an employee’s contributions by about 1 percent per year.
- Many financial experts recommend rebalancing your portfolio every few months. This way, as the market fluctuates, your investments will remain relatively stable.
- Be diligent about paying off any outstanding large debts, such as mortgages, student loans, weddings and high-interest credit cards.
It is likely you will need to work up to five years longer than you originally intended due to the fluctuating economy and constant inflation in the cost of living, so plan accordingly.