Financial Planning For Retirement When You Start Late

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The hardest part of sticking to any financial planning for retirement is keeping your eye on the ball when retirement happens to be so far away and there are pressing needs right here, right now every day. Today’s unexpected expenses always seem a lot more urgent than falling short 40 years down the line. Things no longer seen as far away and removed from your reality when you are into your 40s or 50s though. You just need to pull yourself together and save as much as youcan to minimize your risk of running out of money in old age. If you are in your 40s,  and you are still 20 years away from stopping working. And that is a lot of time to make up.

Embarking on your financial planning for retirement, the first place you want to turn to is your 401(k) or 403(b) plan. If your company has a policy where they will match your contribution, it’s a no-brainer – you absolutely need to take advantage of their matching contribution to double your savings. It’s like right away getting a 50% return on your investment or better. Ask about what the largest matching is that they’re willing to come up with, and make sure that you take advantage of it. Whatever contribution you put down on the form, it’ll go straight out of your paycheck. That’s a good way to save – never seeing the money that you’re supposed to save. If you are starting late, socking away 20% of your income in your retirement fund is a good idea. The most you can put away every year is $16,500 under the age of 50. That’s what you should be contributing.

But that’s not all there is to successful financial planning for retirement when you start late. Once you’ve reached the limit of what you can put into your company sponsored retirement plan, you need to look for other places to save a little money away and if you can manage it. You could consider setting up an IRA or even a Roth IRA. You could cut back on your daily needs and on the little luxuries to put away extra money. For instance, if you get a bonus, you could straight away fund your IRA with it. Every month, you could set things up so that your IRA automatically receives $250 from your account before you get to see the money.

Over the age of 50, financial planning for retirement becomes somewhat easier because you’re allowed to make catch-up contributions. For those company sponsored programs, you can contribute up to $22,000 a year. And on an IRA, you don’t top out until you reach $6000 a year. If you didn’t save enough before, this is a great chance to play catch up.


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