For Mark Roberts’ Use: At around age 40, most of us begin to think about retirement planning. As you look toward the future, one of your primary concerns is probably your savings plan. Are you saving enough for retirement? Will you be well prepared for retirement when the time comes?
There is no one-size-fits-all answer that works for everyone, but in general you should consider factors such as:
- your life expectancy
- your expected lifestyle in retirement
- how much debt you will carry into retirement
- any other income you might receive in retirement
- any unusual expenses that apply specifically to you, such as: supporting your own elderly parents, having several children in college, having a disabled adult child, and so on
- how much you can actually afford to save
Sometimes, asking yourself all of those questions can only lead to more confusion! You might still worry about whether you’re saving enough money for retirement. However, if you rephrase the question this way, you will come to a much more definitive answer: Are you saving all that you can?
As far as tax-advantaged retirement accounts go, there are limits to how much money you can contribute to them each year. We define “saving all that you can” as reaching these maximum contributions on a consistent basis. Maxing out your contributions helps you save more for retirement, but it can also help you earn significant savings on your tax bill each spring.
- For 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan, the limit is $18,000 in 2016.
- People aged 50 and older can make “catch up contributions” to the same retirement accounts, allowing you to save an additional $6,000.
- If you’re 50 or over, you can contribute a total of $24,000 to your retirement account in 2016.
- If you’re eligible for a health savings account, you can set aside even more pre-tax dollars that way. If you don’t use the money for medical expenses during your working years, you can roll over the money and use it later in retirement.
If you aren’t saving all that you can, contact your payroll department and ask them to increase your payroll deductions. Try to make the maximum contribution to your retirement account each year. If you still have questions about your retirement goals, or other financial planning issues, call us to schedule an appointment. We can help you analyze your goals and find a way to reach them.