8 Proven & Practical Ways to Catch-Up with Your Retirement Savings Contributions

Those of you who started saving for retirement really late or have fallen behind with the contributions can consider the following options to make the most of their investments.

1. Capitalize on Contribution Levels

Contributing towards a salary deferral or investing in an automatic plan is a great way to fund your retirement. You can make the maximum permitted contribution under your IRA to maximize your long-term investment portfolio. You should take full advantage of the matching contribution made by your employer till you are fully vested. To qualify for a matching contribution from your employer, you need to make the minimum required contribution.

2. Alter Your Existing Investment Plans for A Profitable Mix

Based on your investment’s tolerance for instability and the time-frame, you can determine an investment plan that allows for maximum growth. If you haven’t saved enough to fund your retirement, you can consider investing your assets in growth funds.

3. Consider Investing Outside Your Existing Retirement Plan

Opening an IRA can give you the benefits of tax-deferred income. IRAs can be classified into two categories: Roth IRA and traditional IRA. You can consult an experienced financial advisor to find out which IRA suits your specific situation and best fits your financial needs.

If you are married, you can open separate IRAs and both of you can make maximum permitted contributions to fund your future needs. If you opt for a traditional IRA, you have the liberty to withhold a fraction or your total contributions from being taxed.

You can also invest in other tax-advantaged vehicles such as municipal bonds, minibonds, and annuities to fund your retirement. Be sure to consult a financial professional before you invest in any program to ensure that it is designed to meet your long-term financial goals.

4. Make the Most of the Available Tax Incentives

The maximum traditional and Roth IRA limits have been raised. You can now make more retirement saving contributions to support your golden years.

5. Participate in Salary Deferral Plans

  • From 2016, your plan allows you to contribute up to $18,000 towards your 401(k), 457, or 403(b) account.
  • If you have surpassed the age bracket of 50, you are eligible to put in an extra $6,000 to your existing retirement account over and above the contribution of $18,000.
  • The catch-up contribution limit of $24,000 also applies to SAR-SEP plans.Contribution limits may vary with the employer and hence you need to check with your company for specific changes in terms of pre-tax, after-tax and inflation adjustments.

6. Contribution Limits of a Simple IRA Plan

The contribution limit for those under 50 is set at $12,500. Those above 50 years of age can make a catch-up contribution of $3,000 which will raise the total contribution to $15,500. These limits are adjusted for inflation and are likely to increase in $500 increments.

7. Traditional and Roth IRA Limits

From 2016 onwards, the contribution limit for those under the age of 50 is set at $5,500 with a catch-up contribution limit of $6,500 for those who have crossed the age of 50.

8. Continue Investing Even After Your Retire

If you don’t use up all of your minimum distribution to fund your living expenses, you can reinvest the amount to make you more money. Investing a part of your annual distribution towards a regular taxable account will start making new money for you. You can consult an experienced tax advisor or a wealth management professional to build a tailor-made investment strategy that fits your budget.

If you couldn’t start saving early on life, now is the time. A happy and secure retirement can be well within your reach if you get started right away. Let a financial advisor set the right savings target for you so that you remain covered for the rest of your life. It is never too late to explore the opportunities that can increase the pace of your retirement saving goals. You can still rebalance your retirement portfolio and recover the time you have lost by getting on the right track.

Photo Source