It’s important to check your retirement accounts regularly to ensure they are accomplishing your goals. Are you seeing the kind of growth you want? Are you comfortable with how much risk you’re taking? You never know when something may need to be changed or updated and you don’t want to miss out on an opportunity. It is up to you and your financial adviser, if you have one, to actively optimize and manage your retirement plans to help work towards your dream retirement.
Various techniques and strategies can help you maximize your retirement savings. You might be familiar with some basic concepts or common methods, but many less obvious tactics may significantly improve your plans. These can vary from adjusting investment portfolios to taking advantage of tax-saving methods. A thoughtful and strategic plan can greatly impact your retirement savings.
1. Take the company match.
There are usually two ways you can contribute to your 401(k): what you contribute yourself and, if available, the match from your employer. If you are not participating in your company match, you are leaving free money on the table. I tell my clients it’s similar to taking a voluntary pay cut and most of us would not want to do that. Unfortunately, despite this benefit, many Americans are missing out. As many as one in four couples fail to take full advantage of matching 401(k) contributions from their employer.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
A company match isn’t only good for the employee, it’s good for the company as well. Employees who invest in their future through their 401(k) plan may be less likely to move on to other companies which reduces turnover. Ideally, companies want employees to keep growing their 401(k) in the same place for as long as possible.
I recommend contributing 10% to 15% of every paycheck to your 401(k). If you can’t manage that, you should be contributing at least enough to get the company match.
2. Pay yourself first.
Whenever you get a little extra money, whether it’s a tax refund or a raise at work, it’s tempting to splurge on something fun for yourself. You deserve it! However, you might consider putting at least some of that money toward your financial future first. What does this look like? From the amount of money you make each month, take a look at how much of that you are putting into a savings account. Can you increase that amount? Even an extra $10 per paycheck can make a big difference over the span of your career. You want to ensure you have enough money in your savings account to cover any unexpected emergencies.
You could also consider opening another retirement account such as Roth IRA. This can have a big impact on your overall tax situation in the future. In contrast to a traditional IRA, anything you put into a Roth IRA comes from after-tax dollars. While you don’t get an immediate tax deduction, earnings grow tax-free and withdrawals are tax-free in retirement.
3. Leverage your catch-up contributions.
Catch-up contributions are among the most valuable tools to help boost retirement savings. These are additional contributions allowed beyond the normal limits that retirees can contribute to their accounts. These are especially vital for those nearing retirement.
To qualify for these catch-up contributions, you must be 50 years or older during the calendar year you want to start taking advantage of this added benefit. Catch-up contributions apply to many different accounts like a 401(k), 403(b), 457(b) and a SIMPLE IRA. However, the amount you can contribute depends on the type of account. For a 401(k) or a 403(b), catch-up contributions are limited to $7,500. The maximum catch-up contribution for an IRA is $1,000.
Catch-up contributions can also be made to Roth IRA accounts. You can put it all towards your Roth or split the money between that account and your traditional 401(k).
Adults have spent all of their lives paying for children, a house, or both, and now that they are older most can afford to put more money away for retirement, which is what makes catch-up contributions so valuable.
With Americans living longer than ever before, you must take a closer look at your retirement accounts and adjust accordingly to help make your savings last. If you are serious about retiring and living comfortably, make sure you are saving as much as you can while still earning a paycheck. Whether you are close to retirement or years away, it’s never too late to optimize your retirement savings.
Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.
Related Content
- Scams in Retirement: How to Get Fraudsters to Scram
- Four Things to Know About Managing a Loved One’s Finances
- Three Mistakes to Avoid in Retirement Tax Planning
- Six Financial Actions to Take the Year Before Retirement
- Stages of Retirement: It’s Not Just About Your Savings
-
Savings Goal CalculatorTools Want to know how much you need to save each month to reach your financial goals? Our calculator helps you build a realistic savings plan.
-
Cash vs. Mortgage: How to Pay for Your Second HomeShould you buy your second home outright or finance it with a loan? Weigh the pros, cons and tax implications before making the leap.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to KnowIf you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both WorldsBefore investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client ReviewsFinancial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop InvestmentsTruck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
