If you are in your 50s and 60s and haven’t saved enough for retirement, there are 3 short words that will kill all of your future dreams… “It’s too late.” In reality, there is plenty that we can do in the years leading up to retirement to give our 401K a boost. We just need to know where to start!
So, to look into this issue, I recently invited financial expert, Pam Krueger, to sit down with me for a quick chat. For those of you who aren’t familiar with Pam and her work, you are in for a treat!
Pam Krueger is the creator of MoneyTrack, a TV series about personal finance and investing. She is also the founder of Wealthramp, a website that helps savers to connect with Fiduciary Advisors in the U.S.
Please join Pam and me as we discuss what you can do to light a rocket under your 401K in your 50s or 60s.
It’s Never Too Late! So, Don’t Bury Your Head in the Sand!
Pam points out that, if you are in your 50s or 60s, this is the perfect time to invest in your future. It’s never too late! Everyone talks about the importance of investing early, but, in fact, there are several secret advantages that older savers have. We’ll get to those a bit later.
The sad truth is that many of us don’t look at our retirement accounts, including our 401K, until we actually retire. Instead, we bury out heads in the sand and hope for the best… or we just avoid the psychological pain of learning the truth about our financial situations.
As Pam says, “To not look at what you have available, while you are still working, is like walking away from free money. You want to look at how you can turbo-charge your 401K in the years before retirement. At the very least, make sure that you are getting the full, matched contribution, if your employer does offer a match… which about half do!”
Find Out About Health Savings Accounts
Not every company offers this, but, some do. If you haven’t heard of a Health Savings Account before, you’re in for a treat. Not only are they tax efficient, like an IRA, but, withdrawals made to cover medical costs are, typically, not taxed. Unlike what I (and many others) thought… you don’t have to use the money in one year. This is a big deal!
According to Pam, “If you have an HSA (Health Savings Account) this is a potential game-changer… and I’ll tell you why. This is my favorite benefit. It lets you put away money for retirement in a super tax-efficient way.”
Are You Ready to “Catch-Up?”
Many people don’t realize that, in the U.S., the government gives you a way to legally, “catch-up” and put more away for retirement, as you get a little older.
According to Pam, “If you are over 50 and you meet the qualifications, which isn’t difficult to do, you can put an extra $6,000 into your 401K plan, per year. This is called the “catch-up” prevision. For IRAs, it’s an extra $1,000… not much, but, still important!”
Look Into a Roth IRA
Not everyone will be eligible for a Roth IRA, but, if you are, Pam says that this is definitely something that you should look into. As always, these financial concepts can be a bit complicated – and you should definitely talk to a financial advisor – but, the basic idea is that a Roth IRA lets you pay post-tax income to fund a retirement account. This means that, when you retire, you won’t need to pay tax on the growth of your Roth IRA.
Of course, the big question here is whether your tax level will be lower or higher when you retire… this could make a big difference on whether a Roth IRA makes sense for you. But, as I said, this is definitely a powerful option to discuss with a Financial Planner.
Pam and I covered so many topics regarding the best ways to supercharge your 401K and IRA in the years leading up to retirement. I hope that you will take the time to watch the interview and that it has a positive impact on your financial life.
What are you doing to boost your retirement savings in your 50s or 60s? Did you know about Health Savings Accounts and the other options mentioned in this video? Let’s have a conversation!