There are particular retirement "catch-up" plans which you could take improvement of to jumpstart your savings, but even in the event that you’re late to this sport.
QI’m 50 years old and harbor ‘t start saving for retirement yet. What are some retirement catch-up strategies? Should I change my lifestyle dramatically now? What about how I approach my 401(k) or IRA? Are there other investment accounts I can take improvement of? I’m hoping it isn’t too late I’d like to retire .
First of all, you’re not alone. Approximately 25 percent of U.S. adults don’t have any retirement savings, as stated by the Federal Reserve.
Next, don’t worry just yet. You still have time to catch up, even if you have no retirement savings at 65. "It’s never too early or too late to begin rescue," says Katharine Perry, Associate Financial Consultant at Fort Pitt Capital Group in Pittsburgh. How easy or challenging it will be to obtain where you want to be depends how you want to live in retirement.
How to Start Saving Now If You Have No Retirement Savings
- 401(k)s and IRAs
- Other Investment Options
- Should I Change My Lifestyle?
- What About Social Security?
401(k)s and IRAs
How you approach your 401(k) or IRA is a major piece of the retirement puzzle.
The before all else step: "Maximize almost any business retirement program that’s provided," Perry says. "That usually means contributing the maximum to this strategy to obtain the business match – and then a number. " The contribution limit for 2020 is $19,500 per year into a 401(k) plan. If you’re 50 or over, you can contribute an additional $6,000. For 2020, the IRA contribution limits are $6,000, with an additional catch-up of $1,000 allowed if you’re over age 50.
Those catch-up provisions if you are over age 50 are key, especially if you are starting with no retirement savings at all: That’s not only more money you’re allowed to invest, but each dollar you contribution to a regular 401(k) or a traditional IRA lowers your taxable income for the year. That’s bonus savings!
Another major thing to keep top of mind? "Pay yourself before all else," says Kathleen A. Grace, a Certified Financial Planner, managing director of United Capital and author of "Prince Not So Charming: Cinderella’s Guide to Financial Independence. ""This usually means optimizing your yearly gifts. By beginning as soon as you can and taking improvement of the compounding impact (the time value of money), you have a larger prospect of getting sufficient to continue through retirement. "
Taking improvement of employer matching is also key.Contribute as many as possible to your company’s 401(k) or retirement plan – slightly to the point of meeting the matching number. When faced with the choice medially an IRA and 401(k), the most important factors to consider are which option has an employer match, allows you to defer the most, has the lowest expenses, and offers the best investment selection, she says.
For more, see:
- IRA vs. 401(k)
- Roth vs. Traditional IRAs
- How to Open an IRA
- Where to Open an IRA