Even if you are juggling other financial goals, here are some steps from Merrill Lynch Wealth Management to help you get back on track.
YOU ARE BUSY WITH YOUR CAREER, maybe buying a home, having kids, saving for college — even starting a business. It is the stuff of life — and retirement often takes a backseat to all of those immediate financial priorities. Suddenly, you are hitting your 40s or 50s, and you realize you have fallen behind on planning for your future.
So how can you catch up? Debra Greenberg, director, Personal Retirement Strategy and Solutions at Bank of America Merrill Lynch, has the following five suggestions — each of which can help you get closer to your retirement goals. “Do not get discouraged,” Greenberg says. “Even seemingly small amounts can add up over the years, and taking action now increases the likelihood you will be better prepared to meet any unexpected challenges that come your way.”
- Max out your tax-advantaged accounts.
A 401(k): Be sure you are getting your full company match, if one is offered, so that you are not leaving money on the table. Do not forget: An annual “catch-up” contribution of $6,000 is allowed after age 50.
Roth IRA or Traditional IRA: No 401(k)? Or want to save more? Consider an IRA. If you are married and not working, you could contribute $5,500 to a spousal IRA. Catch-up contributions of $1,000 are allowed after age 50.
Health Savings Account: If you have a high-deductible health plan, an HSA can be used for qualified medical expenses now, and after age 65 you may be able to pay Medicare premiums with tax-free distributions.
- Pay off costly debt.
Paying off high-interest credit card debt should be a priority. Doing so will give you more money to direct toward your retirement. Says Greenberg, “A financial advisor can help you figure out how to manage competing financial needs while still saving for retirement.”
- Work longer.
If you work past age 65 — or consult as you phase into retirement — “that can potentially give your assets more time to grow before you start drawing upon them,” Greenberg notes.
Working longer can also help you to defer your Social Security payments. Each year you delay taking Social Security after age 62, your monthly benefits grow by about 8%, until age 70.
By downsizing or moving somewhere less expensive, you could reap the benefits of:
* The equity you might have accumulated in your home
* Reduced living costs (like transportation, housing, maintenance bills)
* A smaller mortgage—or if you can buy a new place outright, eliminating a mortgage completely
* A tax advantage if you relocate to a town with lower property taxes—or to one of the seven states with no personal income tax
- Invest for growth.
Many people tend to shift to more conservative investments as they near retirement; others simply have a conservative investing bias. But today’s longer life expectancies mean that your money has to work harder and last longer. “Talk to an advisor about adjusting your asset allocation to pursue more growth, without losing sight of your risk tolerance,” Greenberg says.
For more information, contact Merrill Lynch, Franz Koch in the Boca Raton office at 561-393-4583 or firstname.lastname@example.org.
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