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Off to a Late Start? Planning for Retirement Starts Today

Planning for Retirement Later in Life

 

It’s no secret – many Americans aren’t financially ready for life after a career. If you are 40 or older and unprepared for retirement, what steps can you take to start planning for retirement now?

Take Advantage of “Catch Up” Opportunities

If you are 50 or older, you are allowed to make “catch up” contributions to your retirement accounts. For example, if you have a 401(k), you can contribute an extra $6,000 per year to it. Younger investors are held to the $18,000 annual contribution limit.

If you have an IRA, you’re held to $5,500 annual contribution limit, then when you’re 50 or older, you can put in an extra $1,000 per year. That might not seem like a lot of extra money, but if you make those extra contributions over the 15-year period before you retire (assuming you retire at 65), you will be able to increase your retirement nest egg substantially.

Make Approximations for the Future

Good retirement strategies are based on goals. In order to establish goals, you’ll need to crunch some numbers, which means you have to approximate how much money you’ll need in retirement to cover all your expenses. Keep in mind many people will live ten to 15 years longer than they anticipate.

Once you know how much you will need to live comfortably, you can start adjusting your investment strategy accordingly. This might require some adjustments to the way you are currently living, i.e. making cuts in expenditures so you’ll have more money to put toward investments.

Put the Hammer Down

To use an automotive term for rapidly accelerating, this is exactly what you need to do with your investment accounts if you are 40-plus and haven’t started saving for retirement. You need to do everything you can to max-out your retirement accounts, such as your employer-sponsored plan and IRA.

You may have a lot of ground to cover in a short amount of time. Make cuts where necessary, such as vacations or new cars or buying a new house, and save vigorously.

Adjust Plans as Needed

If planning for retirement has been put on the back burner for you, for whatever reason,  it doesn’t mean all is lost. If your original idea of retirement was one of fun and relaxation, you might have to consider working part-time in “retirement.” This income will help cover the shortfalls that your investments won’t cover while still allowing you to live a lifestyle that fits your comfort level.

Also, if your idea of retirement was to begin at age 65, you might consider keeping that full-time job for a few more years. This extends the life of your investments, meaning you won’t dip into them as soon as you had planned, giving you more assurances for covering costs when you do finally hang up your career for good.

At Family Investment Center, we can help you navigate these complex waters. Don’t be intimidated by the process of planning for retirement. Let us help you make crucial decisions now that will help you later.

 

Here’s a little more food for thought: November 2017 is Millionaire’s Month at Family Investment Center. Why are millionaires wealthy? How do they think? What do they do (or not do) that you can apply to your own life? Is there a secret? Read more on our website or listen to Money is Freedom on SoundCloud or iTunes for a special four-part series.

 

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