A Special Retirement Savings Opportunity for Workers Over 50

In your twenties and thirties, retirement planning probably seemed like an abstract exercise. It can be difficult to picture your life many decades in the future, much less plan for it.

But after we reach our forties or so, most of us start to feel concerned about retirement. We wonder if we’re saving enough, will we be able to retire on time, and is there anything else we can do to better prepare for the future.

As it turns out, yes, there is one positive step in particular, that you can take after you reach age 50. Doing just this one thing can significantly boost your retirement savings. But according to the TransAmerican Center for Retirement Studies, only 46 percent of self employed workers and 60 percent of traditionally employed workers in their fifties even know about it!

So what is it? It’s called catch-up contributions. Here’s how it works: You might already know that the IRS allows you to contribute a set amount to your qualified retirement account each year (and occasionally raises that limit). Currently, you can save $19,000 each year, while enjoying the benefit of deferring taxes on the amount contributed. That means you don’t pay taxes on the money until you begin taking disbursements in retirement.

But because many Americans fell behind on retirement savings in their younger years, and need to play catch-up in their fifties, the IRS allows these “catch-up contributions”. Once you reach age 50, you can contribute an additional $6,000 per year to your retirement account, with the same tax benefits as regular contributions.

If you’re already maxing out your contributions each year, catch-up contributions can help you save an additional $60,000 over one decade – plus the compounding interest you could earn on that money.

Of course, if you’re not already contributing the maximum allowable amount, this news might not seem to matter to you. We can help with that. If you’re interested in saving more for retirement, schedule an appointment with us. We can help you analyze your financial situation and devise a strategy to better prepare for the future.