Many people find themselves on the backside of 40 without a substantial nest egg to rely on when they retire. Luckily, if you’re in this situation, there are some things you can do to boost your 401(k) savings and get back on track for a comfortable retirement.
1. Run the Numbers
To start getting back on track for retirement, you’ll need to do some calculating. Estimate how much you’ll need to live comfortably in retirement, then calculate your income sources. Use a retirement calculator and a tax calculator to help you get a more accurate figure of how much you’ll need and how much you have coming in to achieve that level of savings.
2. Set Goals for Savings
Once you’ve figured out how much you’ll need to live comfortably during retirement, you can begin setting goals for reaching that amount. Consider your social security payments, tax refunds, pensions, and any other income sources you may have as potential tools for reaching your retirement savings goals.
3. Max Out Your 401(k)
Most 401(k) plans include an employer match that equals free money. If you’re already contributing to a 401(k) but aren’t at the maximum contribution, consider changing your contribution to the highest level immediately. If your employer matches 50 percent, you’ll be sitting on a tidy nest egg when you retire. Remember, you get tax savings on your deductions, so it’ll make contributing the maximum less of a blow.
4. Sign Up for a Roth IRA
If your income falls below the allowed threshold, you may be able to sign up for a Roth IRA plan in addition to your 401(k). While a Roth plan isn’t tax-deductible, any earnings you receive during retirement will be tax-free. There are restrictions on max contributions depending on your age, but contributing the maximum each year will give you a nice sum of money to fall back on in retirement.
5. Consider Downsizing or Relocating
If your kids have left the nest, you may want to consider downsizing to a smaller house to save money. The money you save on things like the mortgage, utilities, homeowner’s insurance, property taxes, and maintenance can be invested in stocks, or better yet, in mutual funds and the profits added to your retirement savings. If you do decide to relocate, be sure to speak to a property investment advisor to ensure you make a wise choice.
6. Pay Down Debt
If you’re making only the minimum payment on your credit card each month, you’re throwing your retirement savings right out the window. It takes years to pay off credit card balances when you only pay the minimum, so commit to paying as much as you can toward those balances as you can. Once your credit card balances are paid off, pay the full balance each month to avoid paying high-interest charges.
7. Over 50? Play Catch-Up
If you’re over 50 and don’t have much by way of retirement savings, don’t fret. You still have time to grow a nice-sized nest egg. Fortunately, current tax laws allow people aged 50 and older to contribute extra to retirement accounts like 401(k)s and IRAs to catch up as they near retirement age. Don’t let these tax benefits pass you by without taking advantage if you meet the age requirements.
As you get older, it gets harder to amass a decent nest egg for retirement, but it’s not i