BOSTON (CBS) – I thought we would spend the week looking at the important birthdays that are key to retirement success.
These birthdays slowly creep up on you. If you’re 35 years old these birthdays seem far away, but time marches on.
One morning you wake up and you are 50! That seems to be the wake-up call for retirement planning.
When you reach the big 5-0 most individuals begin to seriously think about retirement and they soon realize they have not saved enough to retire comfortably. But the good news is most 50-year-olds are in their prime earning years.
So for starters you need to review your retirement savings and figure out how much more money you will need to save to have that comfortable retirement. And for each of you comfortable may mean something different.
Congress made it a bit easier for you to save more once you reach that magic age of 50. You can use the catch-up provision in your retirement plan to actually sock away more dollars for retirement. The retirement plan limit for this year is $18,000 for your 401(k), 403(b), a 457, which is the state’s deferred compensation plan or a Thrift Savings Plan which is for federal employees.
If you celebrate your 50th birthday any time this year, you get a bonus and can contribute another $6,000 to your account. Both the 403(b) and the 457 plans have additional catch up provisions. Sounds great, you can contribute $24,000 to your retirement nest egg this year, but where do you get the extra dollars.
Only about 12% of workers are able to max out their retirement plan. But if you can you will greatly benefit from the additional savings.
Your IRA can also benefit if you turn 50 this year. The maximum contribution is $5,500 and the catch-up provision here is $1,000. A Spousal IRA and the Roth IRA are also eligible for the catch up provision.
One more thing: So what exactly would the extra dollars mean for you? Well if you are able to contribute $6,000 to an IRA for the next 17 years, until you start Social Security at 67, and we assume a 8% return you could have close to a quarter of a million dollars ($216,000) in your nest egg.
There are many financial calculators out there to help you. Check out your employer’s retirement plan website or try the American Savings Education Council’s website and use their Ball Park Estimator to see how much more you need to save each paycheck to reach your retirement goals.
You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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