1st Mistake: Not Contributing Enough
Thanks to a survey by Natixis Investment Managers made in 2019, we know how much money younger folk and seniors alike contribute to their company-sponsored defined contribution plans.
It may come as no surprise to find out that older people in general, due to their higher income, contribute a lot more. Their rate sits at around 8.5%. Comparatively, yes this is a good number, but it still may not be enough for a comfortable retirement.
After all, it mainly depends on what your plans are. If you’ve crunched the numbers and found out you don’t really need to contribute too much you might think you’re safe. But you have to keep in mind that nobody can predict the future, so it’s always better to have more than you think you’ll need, just in case.
What You Should Start Doing Now
So after factoring in how much you want to save to live comfortably, plus the money you’d need for retirement, what should you do?
Maxing out your 401(k) is key, especially since it means taking advantage of your employer’s match which is essentially free money. Furthermore, since boomers are over the age of 50, you can start focusing on catch-up contributions too.
In 2020, you may add up to $19,500 annually. Those over the age of 50 can follow up with an additional $6,500 per year. This is great news if you’re a little bit behind on your savings or if you’re just realized that you forgot to take a particular retirement expense into account.
