The final sprint to retirement
How Have Your Priorities Changed Over Time? As you move through life, it’s not uncommon for goals and priorities to change. What you imagined retirement to be when you were in your 20s and 30s may not be at all what you’re imagining in your 40s and 50s. And you’ll probably continue to fine-tune your plans as retirement continues to come into focus.
It’s Not Too Late to Contribute More
If you’re just five to 10 years out from retirement, the finish line is within sight. With each lap around the sun, you should take the pulse of your retirement goals, savings strategy and account balances. And if you feel that you are trailing behind on your financial plans, you still have time to bump up your account with increased contributions.
If you began preparing later in your career, only been contributing a small percent or not taking advantage of your company’s matching contributions, if available, you might find yourself with a shortfall in your retirement account. if this sounds like you, don’t despair! Consider taking the following actions to help you retire confidently:
- Increase your contribution, even if it’s just by 1% per year
- Max out your contributions if you’re able
- Make catch-up contributions if you’re over age 50
For additional tips, watch Pete the Planner’s It’s Never Too Late to Start video.
If you’ve been contributing regularly to your retirement account over the years, taking advantage of any company match, if available in your plan, and maxing out your contributions, consider working with a financial professional to explore other retirement preparation options.
2023 Salary-Deferral 401(k) Contribution Limits
- Individual plan participants can contribute up to $22,500 of their wages in 2023.
- Those age 50+ may have the ability to contribute an additional $7,500 as a “catch-up” contribution.
Each year the Internal Revenue Service (IRS) evaluates contribution limits for retirement accounts. As a result, cost of living adjustments may be made to retirement account contribution limits. As you plan for retirement, it may be helpful to understand the current contribution limits. If you can, maximize your retirement plan contributions. Your contributions, employer contributions, if applicable, plus compound growth on these amounts, can help you to make the maximum contribution amounts. That way you’ll maximize the income you’re able to receive when you start taking distributions from your retirement account.
Because not everyone is able to contribute the maximum amount to their retirement plan in their 20s and 30s, and even into their 50s, concessions have been made to the contribution rules. Catch-up contributions allow anyone age 50 and older to kick in an extra amount above and beyond the maximum levels. If you are age 50 or older and maximizing your retirement account contributions, you may want to consider making a catch-up contribution as you enter the homestretch of retirement preparation. The important takeaway is that you can still increase your contributions, right up to the time that you retire.