Five Steps To Play Retirement Catch-Up

Is 50 too late to get serious about saving for retirement?

“Obviously, that’s late since we all know that time is a big determinant in growing that nest egg,” says Morris Armstrong, an enrolled agent and financial planner in Cheshire, Conn.

But he tells new clients: “You have to start somewhere.”

One client, a 53-year-old school custodian, wanted to retire but had made a series of bad investment choices, leaving him without a nest egg beyond a pension. Armstrong showed him how he could afford to max out his 403(b) plan, and even make catch-up contributions since he was 50-plus.

The secret: “He was willing to forego some immediate gratification,” Armstrong says.

Only 18% of American workers 55 or older say they’re “very” confident they’ll have enough money for a comfortable retirement, and another 49% are “somewhat” confident, according to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey.

If you’re unsure of your prospects, it’s time to play retirement catch-up.

Update your financial plan. First things first. You’ll need a good estimate of your spending needs in retirement as well as the resources you expect to tap (Social Security, a pension, savings) to see just how far behind your savings goal you might be. “Your savings might be on one trajectory, when in reality, it needs to be something much different,” says Tim Steffen, a financial planner and CPA with Baird & Co. in Milwaukee, Wisc.

Maximize your tax breaks.  Stuff tax-favored retirement accounts. Workers 50 and older can save up to $24,500 in a 401(k) or 403(b) and up to $6,500 in an Individual Retirement Account for 2018. Note, there’s still time to make 2017 IRA contributions if you haven’t yet. The deadline is April 17th, 2018, the due date for 2017 returns.

Save what you spent on your kids.  Boston College study found that after kids fly the coop, empty nesters increase their 401(k) contributions only slightly. That’s a missed opportunity. Save most of what you were spending on the kids and tell them the bank of mom and dad is closed.

Swap debts for savings. Similarly, once you’ve paid off any large debts, such as your mortgage or a car loan, consider using that money to fund a savings plan, Steffen says. To make certain you stick with the plan, set up an automatic withdrawal program so the money is taken directly out of your paycheck or your checking account.

Practice retirement. Were you planning to downsize after retirement? Do it now. Try living on the monthly income you expect in retirement. You’ll save more, and if it’s too painful, you may decide to work longer.


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