As you enter your 50s and beyond, retirement becomes a looming reality instead of a distant goal. But it also can bring a bit of panic, wondering if you have saved enough for a comfortable lifestyle. Thankfully, you can boost your retirement savings fairly quickly by taking advantage of these five saving techniques.
- Catch up on your savings. “Just for turning 50, IRAs (Individual Retirement Accounts) let you shelter an extra $1,000, and 401(k)s let you shelter an extra $7,500 each year,” said Herman “Tommy” Thompson Jr., CFP, ChSNC, ChFC, a certified financial planner with Innovative Financial Group in Alpharetta. Another option for big savings could be paying off your mortgage while you still have a regular paycheck. Consult with a financial advisor to find out the advantages of paying off your mortgage early versus continuing to make payments as agreed. Remember that you could have extra cash each month when paying off the mortgage, but you also will lose your annual tax deduction for mortgage interest. Therefore, it’s important to discuss the pros and cons before making such a move.
- Combine your 401(k) accounts. “Consider consolidating your old 401(k)s for benefits such as diversification, investment selection, cost, and consolidation of investments,” said Mike Sehringer, financial advisor at COUNTRY Trust Bank in Marietta. “At this point in your career, you may have changed jobs a few different times. What happened to those old 401(k) s you invested in? A financial advisor can help track down and consolidate those old plans to an IRA and make sure you are invested in the right funds for your goals.”
- Examine your assets, and make changes to maximize your retirement savings. For example, Stephen B. Dunbar III, financial advisor with Equitable Advisors in Atlanta, recommends shifting a portion of after-tax assets such as cash or investment accounts that generate an annual 1099 into corporate-owned life insurance (COLI). “This approach allows these assets to continue to grow with no annual taxation and will be distributed through retirement on a tax-advantaged basis,” he said.
- Stash money straight from your paycheck into savings. “Have your paycheck sent to two separate accounts, one for checking and one for saving,” Thompson said. “Money that sits in a checking account will find a way to get spent.” If you’re unable to direct your paycheck to two separate accounts, set up an automatic deposit from your checking account to your savings account once your paycheck is deposited.
- Plan ahead for your long-term health and care needs. “If you have a high-deductible health plan, open and max out on a health savings account (HSA) to build additional tax-advantaged assets for health expenses or general retirement expenses once you reach age 65 or older,” Dunbar said. This is also the best time to search for and get long-term care insurance for expenses not covered by health insurance. “Put together a fully funded long-term care plan so you can handle this expense on your terms as opposed to reacting to the occurrence of a long-term event at the time,” Dunbar said. “Waiting to react will mean less flexibility and much more expenses to address a long-term care need.”
Talking with a financial advisor could provide additional insights to help you save enough for retirement. Even though you may be 50 or older, there’s still time to build up your retirement funds.