Women, more than men are often guilty of neglecting their financial goals, especially retirement
planning. If you are about to hit 50 or already are in your 50’s and still haven’t started on or are lagging
behind on your retirement saving goals, these tips can help you.
Increase Your Contribution to 401(k)
The 50’s is a good time to increase contributions to your 401(k). Since you are most likely to enjoy
peak earnings in your 50’s and early 60’s, you may also fall in a higher marginal tax group than
you will be during your retirement time frame. Simply put, you will have to pay less tax when
the retirement time comes. This is also applicable to your 401(k) and other similar plans. Hence,
if you choose a Roth 401(k) offered by your employer, you need to pay taxes on the income now
but can later enjoy tax-free withdrawals.
In 2019 for anyone under 50, the contribution limit is $19,000, but those aged 50 or above can
make an additional contribution of $6,000. So if you are about to turn 50 or are already in your
50s, you can save more under your retirement investment plans.
Consider an Additional Investment Tool
If you are already funding your 401(k) to the max, consider an additional retirement investing
option such as an Individual Retirement Account or IRA. In 2019, the maximum you can
contribute to an IRA is $6,000. Those of you who have hit 50 or are older have the advantage of
being able to contribute $1,000 more. There are two types of IRAs – Roth and traditional. A Roth
IRA gives you tax-free withdrawals whereas a traditional IRA gives you tax-deductible
contributions. Both these IRAs also have different rules when it comes to contributions.
Try to Create Multiple Income Streams
It is advisable for late starters to find ways to create additional income streams to boost
contributions to their retirement pool. Be it getting started on a business idea or writing a book;
there are numerous options to explore.
Build Your Health-care Savings
Women on an average need health care longer as compared to men. If you are about to turn 50
or already are, it’s a good time to think about how will you pay for long-term health care in your
later years. A health savings account is a good option to put away extra tax-advantaged money
as a part of your retirement planning.
Revisit Your Investment Portfolio
Two critical factors can affect your investment portfolio in your 50s. One is your risk tolerance. It
means how well you can take the hit if the value of your investments goes down. Second is
when you expect taking distributions from your portfolio. Hence, you might want to consider
switching your contributions to safer investments to protect your funds from market volatility.
So revisit your investment portfolio and check how exactly your retirement savings are allocated
among different saving vehicles.
Whatever your reason might be for starting late or lagging behind on your retirement planning, it is
never too late to start or catch up. Also make sure to boost and develop your financial literacy. With
proper guidance from a professional and some solid research, you can easily build a good pool for your
golden years. So get going!