How to Catch up on Retirement Savings at 50 and Beyond
person with no retirement savings at 50 to accumulate over a Million at 8 percent annualized return. There is no question that it is hard to put yourself into that determined mode, but it can be done. Reduce Expenses It is hard sometimes to decipher between necessary and unnecessary expenses, but the fact is that we have an obligation to sit down as a couple (family) and review where our expenses are prominent and then collectively decide how the unnecessary expenses can be cut out. Good, nutritious food is one area where I would be reluctant to cut back especially with small children but there are many other areas where the expenses can be reduced. This habit and the idea of critically evaluating everything does come handy especially when the couple retires and learns to live on fixed income, the one that is not linked to inflation. After retirement, these days, we are looking at a life span of about 25+ years with sudden addition of unforeseen medical expenses during the last few years.
Personal Finances by Mo Vidwans
It is always a bit discouraging to find out, especially at 50 and beyond, that the balance of our retirement accounts is not where we thought it would be. This is not a stretched scenario; for a variety of reasons, many of which may not be under our control, it can happen. We just have to understand where we are, pick up the pieces and figure out how we can catch up. Afterall there is still time left to do that, albeit we may just have to tighten the belt a bit and get lot more determined and resolute.
Plan on Delaying Social Security Contrary to common belief of starting the SSA as soon as Help From Tax Code (IRS) possible (about 65 percent of Our tax code does give us a people do it), the best thing to helping hand once we cross 50 in do is to delay taking the social the form of being able to security payments as much as contribute much more to our possible; you can delay that 401K programs and IRAs; these until your age of 70. This allows are known as ‘catch-up’ to maximize your monthly contributions. Traditionally, we can payments to the fullest. Once you start the SSA, it does contribute a maximum of $6,000 to an IRA or ROTH IRA not change except for the annual inflation adjustment. or a combination of the two in 2022 but once you cross 50, you can make additional $1,000 contribution to that RMD Withdrawals every year until you stop working. Workers with access Many folks are inclined to think that they should to a 401K, 457 or 403b plan can contribute additional delay their required minimum distribution (RMD) as late $6,500 in 2022 on top of the regular $20,500 that they can as possible from their retirement accounts. It certainly contribute to. Everyone should make a point to depends on your total wealth accumulation, but much contribute to 401Ks especially when some of it is matched attention must be given as to when the distribution by the companies they work for. should be started between the age of 59.5 and 72. There is income tax consideration, Medicare premium and Personal Savings social security taxation consideration and capital gains It is said that you should start saving as soon as you taxes, too. If there is a sudden rise of taxable income on start working; this thought is perpetually ignored by your 1040 there is unfavorable implication about taxes many with the residing thought that there is no hurry (I that you may end up paying few years down the road. have plenty of time later). The fact is that even a habit of From the point of view of saving on taxes legally, all saving a small amount starting at your age of 18 or 22 can these are useful considerations. Congress is seriously make you a millionaire at 65 because of the compounding thinking of passing SECURE 2.0 which will delay effect of time, a subject I have discussed before here in minimum age for RMD to perhaps 75. Watch this space, these articles. The good news is that it is possible to we may have more on this subject later. accumulate $1 Million by retirement even if you haven’t started saving yet. Saving $20,500 per year (or $1,708 per Personal Finances continued on page 78 month) for retirement through the age 70 will allow a Saathee.com
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July 2022
