Retirement planning shouldn’t start when you turn 65. In fact, the earlier you start planning, the better. Unfortunately, most people hold off on thinking about it as long as possible. If you’re in your 50’s, now is a good time to catch up on the years you might have missed. When you reach the age of 50, you reach a decade of transition. This is a time when you are most likely at your peak earning potential, you’ve found your career path and your children are beginning to move out. All these things combined indicate that you probably have more disposable income than ever before. But, at the time you enter retirement, you will no longer be earning that steady paycheck from your job. So, if you’ve held off on your retirement planning, now may be a good time to start playing retirement catch up.
Around the time you turn age 50, you may start thinking more seriously about retirement, which is why it’s a great time to start using your catch-ups. Luckily, the federal government knows that most people are a little late to save for retirement, so there are a few laws that allow you to start putting away more. For example, at age 50 you are able to give an additional $1,000 worth of annual contributions to your IRA. And, at age 55 you can contribute an additional $1,000 to your health savings accounts. Another example of ways you can use your catch-ups is at age 50, where you can give an additional $6,000 of annual contributions to your 401(k)s and similar employer-sponsored plans. These catch-ups can help give you some last chance savings for your life in retirement.
Next, it is important to know when you can get into your retirement savings, and begin withdrawals from your accounts. If you have used regular taxable accounts to invest your savings, then they will be accessible at any time. But with some accounts, like traditional IRAs and 401(k)s, your money might be a little more locked up. For example, if you try to withdraw from your traditional IRA before you are age 59 ½, you may be subject to a 10% penalty. However, there are certain exceptions to the withdrawal rules, which is why it’s important to talk things over with your trusted financial advisor before making any major decisions, like a withdrawal from one of your retirement savings accounts.
Ultimately, it is helpful to have the guidance of an expert professional who can help take some of the guesswork out of retirement planning. At Madrona Financial, our goal is work together to help figure out the best path forward for you and your unique situation. To schedule your complimentary, no obligation review, Click HERE! By taking this step forward, you can help set yourself up on the right path to play retirement catch up so you are ready and prepared for when the time to retire rolls around.