Ramp up your savings
If life got in the way of you saving for your golden years, you can still do something to ensure you have a comfortable, worry-free retirement. Do you want to know if what you are saving is enough? Then tick these three things off your to-do list:
- Plan your retirement
- Evaluate your financial situation
- Estimate your retirement income
If you discover a potential gap between your savings and your retirement needs, number four on your list should be: Boost your savings. Aim to put aside at least 20% of your income. If it’s too much, start with a lower percentage and gradually increase it. For instance, if right now you can only afford to save around 10 percent of your income, start with that and add 1 percent extra every three or four months or 2 percent extra every year. By the time you retire, you’ll have gathered a nice amount.
Make sure you also read 10 Crucial Things to Consider If You Plan on Retiring in the Next 5 Years.
Maximize retirement plan contributions
One thing you should do, regardless of your age, is to take advantage of your employer’s matching contributions. After all, why leave that free money that you are entitled to on the table? If this extra form of compensation is offered to you, don’t hesitate in taking it to ramp up your overall savings rate and reach a better outcome, not only in retirement.
For instance, if your employer matches up to 3 percent, you need to put at least the same percentage towards your 401(k) or IRS accounts. You can always increase your contributions, as long as you’re complying with the Internal Revenue Service’s rules designed to stimulate and incentivize 50+ savers to boost their savings for retirement.
Here’s how you can make the most of these rules and ramp up your savings:
- Maximize your workplace retirement plan contribution: IRS allows workers to put up to $19,500 into workplace retirement plans such as the 401(k), in 2020 and 2021.
- Maximize your workplace retirement plan “catch-up” contributions: 50+ savers are also allowed to put an extra $6,500 into the plan in 2020 as well as 2021.
- Maximize individual retirement account (IRA) contributions: When it comes to IRAs, you are allowed to contribute $6,000 in both 2020 and 2021. Those aged 50 or more can also make a $1,000 catch-up contribution.
