Retirement was once a far-off dream, but now it’s a fast-approaching reality. Your 40s and 50s are an important time to review your retirement savings strategies, says Richard Kopcke, a visiting scholar at Boston College’s Center for Retirement Research. “This is the time when most people start to seriously consider whether they’re saving enough.”
Whether you’ve been prudently saving for retirement, or you need to catch up, there are important steps to consider today.
If you’ve fallen behind:
Adjust your spending. One way to free up more money for retirement is to spend less. “That doesn’t mean your lifestyle needs to change dramatically,” Kopcke says. “It just means spending smarter and more effectively on the things you enjoy, without overspending.”
If you don’t already have a household budget, draw one up. Then review it to find places where you might be able to tighten up a bit. Kopcke suggests taking a hard look at your housing situation: Downsizing might save you some serious money.
Max out your savings potential. When employers match a portion of your 401(k) contributions, they’re essentially offering you free money. If you’re not already taking advantage of this benefit, you’re losing out.
Furthermore, 401(k)s and traditional IRAs are tax-deferred savings plans. That means they’re a good option for anyone looking to build retirement assets while saving on taxes today. Figure out what your contribution limits are (they depend on the type of account you’re using, and in some cases your age and income level) and try to hit that mark.
If you’re on track:
Assess your asset allocation. A stocks-heavy investment plan that made sense when you were in your 30s could put your retirement savings at risk now that you have less time to recover from investment losses. But just because you’ve reached middle age, that doesn’t automatically mean you should abandon the stock market altogether.
If you’re 50 years old and planning to retire at 65, you still have 15 years to grow your savings. A SunTrust financial advisor can help determine what kind of asset allocation makes sense for this stage of your life.
Don’t slow down your saving. If you’ve done a good job of meeting your savings goals so far, keep it up! Now is not the time to take your foot off the gas pedal. In fact, consider accelerating your savings, if you can afford it: Once you reach age 50, you can take advantage of “catch-up” contributions to your 401(k) and IRA. You can save an additional $5,500 each year in your 401(k), or an additional $1,000 in your IRA. You’ll thank yourself later for taking the effort to free up the additional cash and achieve the retirement you want.