Time flies by quickly. One moment you’re just 20, full of dreams and aspirations. Suddenly, you hit 50 and it dawns on you that your retirement savings are not quite where they should be. It’s a common scenario, so there’s no need for embarrassment—56% of Americans feel they’re not on track with their retirement savings, a BankRate survey reveals. Remember, it’s never too late to enhance your retirement fund, but procrastination is not your friend. “Turning 50 is a critical time,” notes Ryan McPherson, founder of Intelligent Worth in Atlanta. “You’re potentially 10-15 years from retirement, but there’s still time to make significant adjustments if necessary.” What steps should you take if your 401(k) is underperforming? We consulted several financial experts for their advice. Here’s their guidance:
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1. Maximize Contributions, Reap Free Money
First and foremost, ensure you’re fully utilizing your employer’s match on your 401(k) contributions. “Max out your employer’s match,” advises Jeff Dixson, a financial advisor in Vancouver, Washington, and host of the Retirement Coach radio show. “If the match is 3%, contribute at least 3%. If it’s 6%, aim for 6%. This is essentially free money, and you won’t find that just anywhere.”
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2. Experiment with a Retirement Calculator
To understand the benefits of compound interest, play around with a retirement calculator. These tools will require details like your age, your weekly savings amount, and your risk tolerance—conservative, moderate, or aggressive. They then estimate your potential savings by age 62. Experiment with different amounts and risk settings to see various outcomes—it’s quite enlightening.
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3. Beware of Sneaky 401(k) Fees
Over time, hidden fees can significantly reduce your retirement savings. To minimize this, utilize as many index fund options as available in your 401(k) plan. These funds generally have much lower hidden fees compared to actively managed funds.
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4. Take Advantage of Catch-Up Contributions
“People 50 or older by the end of the calendar year can make additional catch-up contributions,” says David McCormick-Goodhart, a financial advisor at Savant Capital Management in McLean, Virginia. The personal cap for 401(k) contributions is $23,000 in 2024. Those in their 50s and 60s can contribute an additional $7,500 annually.
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5. Develop a Strategic Plan
It’s wise to consult with a specialist in retirement income planning, suggests Dixson. “The ultimate goal of saving for retirement is to amass a fund that you can convert into a stable monthly income,” he remarks. “Wouldn’t it be better to know exactly how much you need to save rather than guessing?”
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6. Reassess Your Expenditures
Document every single expense. “Identify the discretionary purchases that bring you the most happiness,” suggests McPherson. “Then, identify what you could live without. If your income remains the same, cuts will be necessary to increase savings.”
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7. Balance Risk with Caution
As people age, they often shift their 401(k) investments from stocks to bonds to reduce risk. While stocks typically offer higher returns, they’re also more volatile. However, being overly cautious can be just as risky. The key is to find a balanced approach to risk. Here’s Citizen News Paper’s roundup of six lower-risk investment options to consider for your retirement portfolio.
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8. Explore Additional Income Streams
“Consider creating a secondary source of income,” suggests Nathan Garcia, a financial planner at Strategic Wealth Partners in Fulton, Maryland. “Even an extra $1,000 per month can help offset the funds now going into your 401(k). Plus, business owners can benefit from tax deductions on ordinary expenses like phone bills, internet, and transport costs.” Looking for ideas? Here are 15 work-from-home opportunities for retirees.
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9. Prepare for Tough Decisions
“Many don’t start saving seriously for retirement until their children have graduated college. Until then, retirement seems like a distant reality,” explains Garcia. “If you still have children in college, you might consider having them take out student loans, so you can focus on your retirement savings. There are loans available for education, but none for retirement.”
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This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can’t personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.
My name is Ethan and I am a passionate journalist at Sherburne County Citizen. With a keen eye for celebrity news, I bring you the latest updates and insider scoops on your favorite stars. One of my favorite moments in the newsroom was when we uncovered a wild story about a local politician’s secret rendezvous, shaking up the whole town’s political scene.As a valuable member of the Sherburne County Citizen team, I am dedicated to keeping you informed about major economic trends and providing practical tips for your home. Whether it’s investment advice or DIY hacks, I strive to equip you with everything you need for a successful and fulfilling daily life. Join me on this exciting journey as we uncover stories that shape our community and beyond.
