There are benefits to turning 50, and one of those is an IRS rule allowing you to invest even more in your tax-advantaged retirement savings accounts. Now that you’ve reached your peak earning years, this is the time to put even more money away each year as you look ahead to retirement and the golden years. The general consensus is that by age 50 you should have 4-6 times your annual salary in your retirement account. If you didn’t get off to a strong start in your 20s and 30s and find that you are falling short of that mark, this is the time to catch up. Even if you have done a great job and are on target for retirement, the extra savings can add a lot to quality of life in retirement. These are some ways you can take advantage of this opportunity to “catch up” on your retirement plan.
- Do you have a traditional IRA or Roth IRA account? You can now increase your contribution by $1,000 each year. The maximum contribution limit as of 2019 is $6,000 per year, so you get a 16.67% increase in your savings each year.
- Do you have a 401(k), 403(b), 457(b), Roth 401(k), or Roth 403(b) account? If your employer allows you to make catch-up contributions into your account, you can increase your annual contribution limit by $6,000. Since you can generally contribute up to $19,000 per year into your account, the catch-up allowance is a significant increase in your savings. Maximizing your annual contribution means increasing your annual savings by 31.5%.
- Do you have a SIMPLE IRA account? In 2019, the contribution limit on these accounts increased to $13,000 per year. After age 50, you can make a catch-up contribution of $3,000 per year into these retirement accounts. That means you can increase your contribution by 23% annually.
With higher contribution limits in 2019 and the catch-up contribution allowances, you have a great opportunity to increase your retirement savings and lower your tax burden. Being over 50 has its perks.