Do You Need to Play Catch-Up on Your Retirement Savings?

Filed under: Retirement

According to a recent survey, only 24 percent of baby boomers felt confident that they would have enough money to last throughout retirement. An alarming number (45 percent) had no retirement savings at all, and 42 percent had saved less than $100,000.

Whether you fall into the confident group, or one of the not-so-confident groups, everyone can benefit from making catch-up contributions to their retirement plans. Chances are good, however, that you actually need to be playing catch-up, so here’s a quick guide to contribution limits.

Once you reach age 50, the IRS recognizes that you should be entering prime savings mode. So, in addition to your regular annual contribution of $18,000 to 401(k) plans, you can also set aside an additional $6,000 in these accounts each year. If you have an Individual Retirement Account (IRA), the regular contribution limit is $5,500, and you can add an extra $1,000 per year after age 50.

You might be wondering how much difference these extra catch-up contributions can really make. Consider these theoretical examples:

  • A 65-year-old worker could save $128,018 in their IRA… But by maxing out catch-up contributions after age 50, could save $151,294.
  • By age 70, a worker could have saved $202,321 in his IRA … But with catch-up contributions, that amount climbs to $239,106.

The difference is even more dramatic for 401(k) accounts.

  • A worker could accumulate $418,697 by age 65 …. Or $558,623 with catch-up contributions after age 50.
  • A 70-year-old worker could save $662,141 … Or $882,854 if he chose to make catch-up contributions.

The above examples are just theoretical scenarios, assuming a 6 percent average annual return on savings, and do not represent any specific investment scenario. The point is that, from age 50 onward, additional catch-up contributions (combined with compounding interest) can make a significant difference in the size of your retirement account.

Whether you are behind on savings, or feel reasonably confident about your retirement preparation, everyone can benefit from catch-up contributions. For more information on making these additional contributions, or on retirement planning in general, give us a call. We can help you assess your plans and make any necessary adjustments, so that you can more forward feeling more confident about the future.

If you would like more information or have specific questions, please contact us using the following form. We would be happy to assist you.

This information has been provided by a licensed insurance professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting the insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax, trust and estate, or investment advice. Infinite Wealth Advisors is not an investment advisory firm.  Investment Advisory Services provided by NAMCOA® – Naples Asset Management Company®, LLC, a federally registered investment advisor, website: .