How to play retirement catch-up
Monday, 14 January 2019
If you've been working for several years and have no retirement savings, you're unfortunately behind.
According to a new study released by the Federal Reserve , 31 percent of working Americans report that they have no retirement savings or pension. And many of those who have some savings don't have nearly enough to comfortably retire. The Transamerica Center for Retirement Studies recently found that 85 percent of Generation X workers believe that their generation will have a much harder time achieving financial security in retirement than their parents. The study also found that 83 percent are concerned that Social Security won't be there for them when they're ready to retire.
Any financial planner will tell you that putting away as much money as you can as early as you can is ideal, because the money will have many years to grow before you need it. If the lingering recession of the last decade got you off track on retirement savings, it's time to catch up.
Don't wait any longer to take action. If you're behind in your retirement savings, here are four simple, easy-to-implement tips for catching up.
Max out your 401(k)
If you have access to a 401(k) plan through your workplace, see if you can increase your contributions. If possible, try to contribute the maximum allowable amount —in 2016, that's $18,000, as well as $6,000 in catch-up contributions for people 50 and over. If your employer offers matching contributions, make sure you're contributing enough to receive the maximum match.
Find ways to save
More Even if you've maxed out your 401(k), look for places to save more. Some experts recommend saving at least 20 percent or more of your income if you're behind on retirement planning. In addition to your 401(k), you can save up to $5,500 (plus an extra $1,000 if you're over 50) in a traditional or Roth IRA in 2016. Of course, you can also save money in other types of accounts.
Consider delaying social security
You can begin collecting Social Security between the ages of 62 and 70. If you're nearing age 62, when you could opt to begin receiving Social Security benefits, consider waiting. For each year you delay receiving Social Security benefits between the ages of 62 and 70, your benefit increases by seven to eight percent. The longer you wait to begin receiving Social Security, the more you'll receive. The Social Security Administration's calculator lets you figure out how much you'll receive each year if you retire at any age between 62 and 85.
In addition to boosting Social Security payments by delaying disbursements, working longer can give you the opportunity to build more income—and sock more away in your retirement fund. And by supporting yourself with ongoing income for a few more years, you'll give your retirement fund a few more years before it has to provide for you.
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