Are you looking to secure a comfortable retirement but dealing with a 401(k) balance that’s behind schedule? Whether you’re just starting out or have been steadily contributing without hitting your savings goals, there are ways to give your balance a boost — even if you’re nearing retirement age. With some smart strategies, you can fortify your 401(k) and make steady progress on securing a sound financial future.
Crank up Contributions
In 2023, you can contribute up to $22,500 to your 401(k). For those 50 and older, the maximum allowance increases to $30,000 — that’s an additional $7,500 for “catch-up” contributions, which can help older workers fill any retirement fund gaps. But if maxing out all at once isn’t in your budget, increase contributions annually by 1% until you hit your limit. And if your employer provides a match, try to increase your contributions to qualify for the maximum match as quickly as you can.
Supplement Your Savings
Amplifying your savings by funding some additional types of accounts can provide an extra cushion to help you retire comfortably. A health savings account (HSA), for example, can be a great way to supplement your retirement savings because it comes with a triple tax advantage: Contributions are made on a pre-tax basis, the interest and earnings are not taxed and withdrawals for qualified medical expenses are also tax-free. For additional retirement funds beyond annual 401(k) limits, you can also consider opening a traditional or Roth IRA — especially if you have a side hustle or part-time job to help fund contributions.
Ferret out Found Money
If you’ve changed jobs and left your 401(k) behind, tracking down those funds and rolling them into your current plan could give you a more complete picture of your retirement savings. Even if you don’t have contact information for your old plan sponsor, you still may be in luck. The Secure Act 2.0 of 2022 establishes plans for a future government-maintained “lost and found” database for retirement plans to help workers find and access their old accounts.
Rethink Your Retirement Residence
If you’re significantly behind on retirement savings, you may need to rethink your plans a little. Maybe a waterfront beach house isn’t in the cards, but a cozy condo that’s a short drive to the boardwalk may still be within reach. It might be necessary to adjust your goals and expectations a bit to align with your current financial situation. But if you’re dead set on your destination, you could also plan to work a little longer or bring in some extra income to make your retirement dreams a reality.
Plan for Tomorrow, but Remember to Enjoy Today
Regardless of how you try to increase your savings, it’s important that your strategy is something you can stick with — and appropriate for your retirement time horizon. Avoid making excessively risky investments in an attempt to make up for a late start or insufficient contributions. Also, keep quality of life in mind — you’re trying to retire comfortably, but enjoying life now matters too. Pick areas in your budget to pull back, but don’t cut back on all the things you like doing.
A trusted financial professional can help you home in on a personalized approach that works for you and your goals. Your golden years will be here before you know it, so get your retirement plan on track today.
Sources
Nerdwallet.com, How much can you contribute to a 401(k)?
Money.usnews.com, How to Take Advantage of 401(k) Catch-Up Contributions
Investopedia.com, Retirement Uses for Your Health Savings Account (HSA)