Easy Seniors Life

Increase Your Retirement Plan Contributions

The U.S. government understands the need for older Americans to increase their retirement savings, so it allows “catch-up” contributions to the retirement accounts of those age 50 or older:

If you contribute to an IRA, the standard contribution limit is $5,500 for 2018. If you’re 50 or older, you can contribute an additional $1,000 to your IRA, for a total of $6,500.
Elective deferrals to a 401k, 457, 403b or the federal government’s Thrift Savings Plan are capped at $18,500 for 2018. However, people 50 and older are allowed to defer an additional $6,000 into their plans.

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What You Can Save

It might seem difficult to jump from no savings to the maximum contribution level overnight, but starting somewhere gives you a base to build on for the future. For example, if you start contributing 5 percent of your salary into a retirement plan, try to increase that amount in small increments on a quarterly or even monthly basis. If you bump up your contributions by 1 percent per month, for example, you might not even notice the difference from one month to the next. But by the end of the year you’ll have increased your contribution rate from 5 percent of your income to 17 percent, at which point your retirement savings will really start to accelerate.

To help you stick with your plan, set up automatic deductions from your paycheck or bank account. If you can reach that 17 percent savings level and you earn $50,000 per year, you’ll be tucking away $8,500 per year in your retirement plan, or $85,000 in total if you’re 10 years away from retirement.