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401(k) Investing at Age 50 and Over

Preparing for Retirement With 401(k) Investing

 

Once you hit the big 5-0, there are some financial advantages that can be beneficial for everyone who hits this milestone, including some tax breaks and perks where your retirement investments, like 401(k) investing, are concerned.

As of 2017, you can contribute $18,000 a year to your 401(k). However, once you hit the age of 50, you can put an extra $6,000 into your 401(k) each year. These are referred to as “catch-up” contributions, which can offer people with less time until retirement to contribute more to their plan.

If you’re turning 50 or have already hit that milestone, it can be beneficial for you to take advantage of that extra $6,000 investment. There are also advantages for business owners who have yet to establish their retirement investments. For example, say a couple in their mid-50s wants to finally get the ball rolling on their retirement accounts. They can open a self-employed 401(k), which is also referred to as an individual or solo 401(k), and sink the full regular contribution plus the “catch-up” $6,000 into this account.

For those who would rather go with an IRA investment, there are some options here as well. While traditional 401(k) contributions are tax-deductible, any withdrawals from the 401(k) are taxed as income. A traditional IRA works similarly, but the maximum annual contribution is $5,500, with an extra $1,000 “catch-up” contribution. With a Roth IRA, however, no deduction may be taken for contributions, but then withdrawals in retirement are not taxable. IRAs can be extremely advantageous for extra savings, especially when used in conjunction with employer-sponsored plans. 


According to a recent Forbes article, 50 percent of investors age 50 to 69 took full advantage of catch-up contributions in 2015. For those putting their investments into a Roth IRA, 45 percent did the same.  

 

The rules are different depending on the type of plan to which you’re contributing, so be sure to ask an advisor for the applicable rules. Aging into 50 and beyond can be an exciting and rewarding time. At Family Investment Center, we know a lot about the various ways that age has advantages when it comes to investing. Come in and talk to us today about your investment goals. If you’ve yet to establish a strategy, we’ll discuss the options available to you and get you started on the right path.

 

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