Retirement Catch-Up Tips

Everyone wishes to lead a comfortable retirement life. But unfortunately, there seems to be more people who come unprepared for retirement or considerably fall short in coming up with the needed funds for retirement. This results in a retirement that is just as full of worries and concerns for the retiree.

What may be fortunate for those who are about to retire in a few years is that there is always some time available to play catch up on retirement. As long as there is still time, people may still have some options available in order to put them in a better position come their retirement. Here are some of the possible retirement catch-up tips that might help.

Fund The Maximum Amount In Your 401(k)

The key to having a better retirement life even while playing catch-up is to save more. Working individuals may consider funding the maximum amount in their 401(k). This might help provide the necessary funds that future retirees might need for a ore comfortable retirement. The maximum amount allowed by the IRS for contributing to a 401(k) is $16,500 per year. Maxing out on this contribution can give people in their 40’s around $1.3 million in savings by the time they reach 65, assuming an 8 percent annual return with no employer contributions involved.

Aside from that, the IRS also allows an additional catch up amount of $5,500 on their 401(k) by the time they reach 50. If people takes further advantage of this, there would be an additional savings of $271,000 waiting for them by the time they retire.

Consider A Roth IRA Contribution

People doing some retirement planning catch-up would need to save up as much as possible. Another possible option may be to contribute to a Roth IRA. A 40-year old that contributes to a Roth IRA to the tune of $5,000 per year with an annual rate of return of 9 percent, can accumulate around $461,000 by the time they reach 65 years old. Even people who only started saving up on a Roth Ira in their 50’s at $6,000 per year can still accumulate around $192,000 by the time they are 65 years old. This is possible because a Roth IRS works on a tax-deferred basis.

Consider A Reverse Mortgage

For homeowners who may have discovered it late to save up for their retirement still has an option available for added retirement funds. They might consider borrowing on their home equity to come up with funds. A reverse mortgage may probably be the best option for retirees. In a reverse mortgage, the homeowner is not required to pay for the mortgage until the borrower dies or until the home is sold. The retiree can still consider living in the home for the meantime, or he or she might prefer relocating to a smaller and more convenient one.

Cashing Out On An Insurance Policy

Another possible option for a retirement fund is cashing out on an insurance policy. While this may be an available option for future retirees, it should be considered as a last resort. An insurance policy still provides its owners some level of protection. Cashing out on it may lead to retirees losing that protection. But if a certain insurance policy may have already outlived its use to a retiree, it may be sensible to cash out on it.

 

Posted by Ardent Editor on Aug 23 2011 in Financial Planning Tags: , , , , , , ,

  • Sponsors