Saving at Any Stage: Nearing Retirement


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If you’re closing in on retirement, your main goals are to keep contributing to your retirement account and deciding how and when you will step away from work. Through the years you may have cut back on retirement saving because of other obligations, making now a crucial time to catch up. Even if your retirement account is well-funded, you shouldn’t lull yourself into thinking that you have enough and can scale back now. For women especially, who may take time away from the workforce, you may now be looking to increase your retirement savings.

1. Play catch up.

Many retirement accounts are structured to give a boost to people who are close to retirement, by letting them save even more money during these critical final years. For example, as of 2014, the annual maximum contribution for a 401(k) or 403(b) is $17,500, but if you’re older than 50, you can put in an additional $5,500. Individual retirement accounts (IRAs) let you put in an additional $1,000 at age 50 for a maximum of $6,500. If your other financial priorities may have eased by this point—maybe your kids are already out of college, and your house is paid off—consider sending as much money as possible to your retirement portfolio.

2. Save your pay raises.

If you’re fortunate enough to get a pay raise at work, don’t spend it—save it. That doesn’t mean you have to live sparingly. But if you can get by on your current monthly income and you suddenly bring home an extra $300 each month, keep a small portion of that for yourself and direct the majority of it to savings.

3. Pay off debt.

Any debt is going to be a larger burden in retirement, because your income will likely drop. Try paying off as much as possible before you get there. You could make extra payments on a mortgage, or college loans, and definitely consider paying off your credit card each month and not carrying a balance.

4. Be realistic.

Some people consider retirement based on external factors like when their company’s benefits kick in (typically 65), or when they can claim full Social Security payments. But that approach may not be realistic depending on how much they’ve saved to that point.

To learn when you can step away, you need to put together a solid retirement plan that looks at how much you’ll need in retirement and how much you’ve currently built up to that point. And you need to review that plan every few years, based on changes in your life and in your portfolio. Consider working with an advisor to build the best plan for you.

It’s also worth noting that retirement doesn’t have to be an all-or-nothing decision, in which you work fulltime until the day you stop. Many people phase into retirement by cutting back on work, or by shifting to a consulting role that allows them to continue earning money but working fewer hours each week. This approach can give you a bit of a financial cushion and some peace of mind.

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