Retirement is on the horizon, and if you want to secure the comfortable retirement you’ve been dreaming of, now is the time to get serious about planning.
Nearly one third of Americans aged 55 and older have saved less than $10,000 for retirement, according to the Employee Benefit Research Institute.
With major expenses—such as a down payment on a home and college tuition—are behind you, it is time to secure the retirement of your dreams. Here are a couple of tips to help you retire wealthy.
Take Advantage of Catch-up Contributions
Are you over 50? If so, you can contribute thousands more to your 401(k) plan than your younger colleagues. For 2022, your individual 401(k) contribution limit is $20,500, or $27,000 if you’re age 50 or older. For 2023, 401(k) contribution limits for individuals are $22,500, or $30,000 if you’re 50 or older.
That means that if you're 50 or older this year and contribute the maximum amount to your retirement plan every year until retirement at age 65, you'll be able to contribute nearly $200K more than someone who's younger than you!
Individuals above the age of 50 are also eligible for catch-up contributions to their 401(k). This means that these individuals can contribute above the $22,500 limit. The IRS increased the catch-up contribution value in 2023, from $6,500 in 2022 to $7,500. In total, employees above the age of 50 can contribute up to $30,000 to their 401(k).
Consider Long-Term Care Insurance
The average American spends $7,908 a month on nursing home care. That’s why it’s so important to have long-term-care insurance before you need it. If you don’t, your retirement savings could be decimated in a matter of months.
Long-term-care insurance can help you avoid this fate by covering the cost of in-home care and nursing homes when you need them. Unfortunately, Medicare doesn’t cover the cost of long-term care, and Medicaid isn’t available until you’ve spent down most of your savings.
Luckily, there are ways to protect yourself from this situation. One way is by purchasing long-term-care insurance. However, make sure it fits your budget! Instead of a policy that provides lifetime coverage from the day you enter a nursing home, consider a policy that will cover a specific period—for example, up to five years (the average stay in a nursing home is two and a half years). Adding a waiting period—for example, 90 to 120 days—will also lower your premiums.
Reassess your Spending in Retirement
As you get older, your needs & interests may change. One of the most important things to consider is how much money you'll need to live comfortably when the time comes to retire. Most people seem to underestimate how much they'll spend in retirement—and there are a lot of reasons for that...
First, most elderly couples greatly underestimate how much they’ll spend when they retire. While you may save on dry-cleaning and commuting costs, you’ll still need to pay for groceries, utilities and gas. You might also be surprised at how expensive health care can be even after you're eligible for Medicare. According to Fidelity, an average retired couple age 65 in 2022 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement.
One of the best ways to reassess your spending is by trying to live on your projected retirement income while you’re still working. This exercise will force you to cut back on spending, which means you’ll be able to save more. And at this point in your distribution phase of retirement, preserving what you’ve saved is still in your control.
Invest with the Best
The most important advice about saving for retirement is this: Start now. While it is wise to create a plan early in life, it is not too late to secure the retirement you aspire to.
Much like your goals & needs change with time, the tools to secure your portfolio are ever-evolving. It is time to ensure we are using the correct tools for the job at hand so that the health & longevity of your retirement portfolio are something you can rely on.
In general, the closer you are to retirement the more risk averse you should be when building a portfolio. However, the right asset allocation will depend on a number of factors. Consider how true diversification can buffer potential risks and weigh a variety of options. Our expert here at NJM Wealth Preservation Strategies can help you administer an MRI of your portfolio to discover the route to a thriving retirement for you & those you love.
Retirement is a time for celebration. It's the end of your working life, and you've earned this time of rest and relaxation.
While these tips are just a few of the many money saving strategies you can apply to your situation, having the help of a true & trusted fiduciary is key to retiring wealthy.
At At NJM Wealth Preservation Strategies, we strategize on crafting the perfect retirement plan that meets all of your needs. We will work with you to create an action plan that ensures you're getting the most out of your savings while also preparing for an enjoyable retirement.
Retirement planning requires some forward thinking, and it’s never too early or too late to get started. For more information on our services, schedule a call with us today.