5 Ways To Catch Up On Retirement Savings

For a happy and stress-free retirement you want a maxed-out portfolio with retirement funds, savings accounts, annuities, and other income streams.

With that said, this is not something everybody can achieve in time.

Many individuals start their retirement planning at a later stage in life. If you are one of these late bloomers, use the following strategies to catch up and improve your odds of a secure retirement.

First, fund your 401(k)

If your job comes with a 401(k), you should use every opportunity to maximize your contributions to it. A maxed-out 401(k) can be an incredibly powerful retirement savings tool.

Extra catch-up contributions are allowed, but they come with age caps.

Judiciously invested, you can have up to $1 million by retirement by maxing out your 401(k) contributions starting at the age of 40. If you start your contributions at 50, you might not make it to that magic figure. But you’ll be in a better place for sure.

Use home equity

Ideally, you shouldn’t be looking to sell your home to fund your retirement income.

Another option at retirement age is to downsize your property holdings. Sell your bigger home if you don’t require the additional space and move into a smaller, more manageable space and put the difference into your retirement fund.

Put money in Roth IRAs

A Roth IRA is a special kind of individual retirement account. You add your after-tax dollars to Roth IRAs that then can grow into a tax-free retirement fund.

Roth IRAs do come with specific limitations based on your marital status and modified adjusted gross income.

If you start at a lower age, however, you could put away up to $6,000, money which can make a significant impact by the time you reach the age of 65.

Itemize deductions

Apart from earning a higher income and putting it into your 401(k)s and IRAs, there is one other tool you can use to boost your retirement fund: savings from lower taxes.

Itemized deductions can help here as they reduce your adjustable gross income (AGI). A lower AGI means lower income taxes.

If you take itemized deductions over the standard deductions, you could end up saving a considerable amount in the long run. Mortgage interest, charity gifts and donations, and unreimbursed medical expenses are all examples of itemizable deductions.

Always check to see if the standard deduction is lower than the value of all your itemized deductions. If that is indeed the case, itemize with the help of a CPA.

Don’t forget disability coverage

If you are lucky, you can reach your retirement age without any debilitating conditions, injuries, or worse.

But disabilities can happen, especially due to chronic health conditions, auto accidents, workplace injuries, and slips and falls. Nearly 40 million Americans suffer from some form of disability.

Disability coverage adds protection to your nest egg and savings should you end up out of work due to an injury or illness.

Check with your employer to see what kind of disability coverage is offered as part of your employment. Ensure that you have at least some kind of disability protection.