Maximize your contributions
For investments to work efficiently, you need two things: money and time. That’s why it’s important for young people to start contributing as early in their careers as possible. But someone 10 to 20 years from retirement can also take advantage of time, especially if they are able to maximize their contributions.
If your employer matches a portion of your contributions to your retirement account, you should, at the very least, take advantage of this “free” money. For example, if your employer matches 50% of up to 6% of your salary, that means that if you can contribute 6%, you’re getting an additional 3% from your employer.
To refresh your memory, watch Pete the Planner’s Matching Contributions video.
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.
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 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.
You maxed out your retirement plan contributions, now what? There are additional retirement preparation tools available, such as an Individual Retirement Account (IRA), Roth IRAs, Health Savings Account (HSA), taxable account or insurance offerings. Consider working with a financial professional to determine which retirement preparation solutions may be best for your situation.
By maximizing your retirement plan contribution and taking advantage of catch-up contributions when eligible, you can have confidence that you’ve not left any money on the table when it’s time to retire.
Retirement checklist reboot
For investments to work efficiently, you need two things: money and time. Make increases While Time Is Still on Your Side.