7 Steps to Take Now to Catch Up on Retirement Financial savings

Another option is to apply for coverage through the Affordable Care Act, which offers a range of plans even for those who are still unemployed.

Make catch-up contributions. If you’re 50 or older, the Internal Revenue Service offers you some savings: you can save up to an additional $ 6,500 annually on your defined contribution plans (including 401 (k) s, 403 (b) s, and 457 s). If you have a SIMPLE Individual Retirement Account (Employee Savings Incentive Match Plan) or a SIMPLE 401 (k), the catch-up fee is $ 3,000 per year. It’s $ 1,000 for a Roth IRA

Automate your savings. If you work and offer a 401 (k) with automatic payroll, there is an easy way to increase your contribution. Would you like to save even more? Many plans allow you to grow your 401 (k) savings when you receive a boost. Say you’re 50 years or older and save the maximum annual amount – $ 26,000. That’s $ 19,500 plus a $ 6,500 catch-up fee. Also take the appropriate contribution from your employer, if one is offered. This is the low hanging fruit of retirement planning that most financial planners recommend – even if you have access to it.

Customize your portfolio. Just putting more money in a bank money market account doesn’t help you much catching up. After all, the S&P 500 index has risen quite a bit: more than 40 percent this year. Returns in the money markets are terrible – according to Bankrate.com, the national high was 0.60 percent. The best way to meet your goals is to invest in unencumbered mutual or exchange-traded funds, preferably with an annual expense ratio of less than 0.30 percent.

Most mutual fund companies offer dividend growth and income funds, as well as exchange-traded funds. Also, avoid the trap of thinking money in the bank is safe money. If it doesn’t outperform inflation, which is currently running at an annual rate of just under 3 percent, you will lose purchasing power. “Don’t keep too much money in a bank account,” warned Ms. Price. “You get paid very little to keep it there.”

Retire later. If you are able, a simple strategy is to retire after the “normal” age for social security benefits, which for most Americans is 66. This gives you more time to save. In fact, Social Security will pay you more each month if you wait until 70 to get benefits. With “late retirement”, you increase your pension payments by 8 percent each year if you wait from 66 years to receive benefits at 70 for those born in 1943 and later.

Make your own plan. Small business owners or the self-employed can make their own plans, from IRAs for simplified employee benefits up to 401 (k) s. Ms. Price suggests that people over 50 consider a Roth 401 (k) if your employer offers it. Contributions are taxed, but withdrawals are not. “They are taxed on money, not profits,” she said. “If you can’t afford to pay tax on withdrawals later, this is a good idea.”

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