How to Chose the Best Retirement Plan Late in Life
Approaching retirement and realizing you don't have enough saved assets to support your retirement income needs can lead to some to panic. Fortunately, there are many retirement programs available to help those nearing retirement maximize savings in the years closest to retirement. These same programs are also beneficial to those saving for retirement all along. Defining the best is contingent on a person's personal needs and objectives. Regardless of what plan you choose, all savings towards retirement is beneficial, though the primary goal is to save as much as possible as soon as possible.
Other People Are Reading
Instructions
-
-
1
Call your human resources department and ask if your company sponsors a retirement plan such as a 401k or 403b plan. If your company does, confirm that you are eligible for the plan and request the enrollment paperwork.
-
2
Meet with a tax adviser to review Individual Retirement Account (IRA) options. Basic IRAs allow maximum $5,000 annual contributions where the other plans allow much higher maximum limits. Self-employed individuals or business owners may qualify for Simplified Employee Pensions IRA, SIMPLE IRA or solo 401k plans.
-
-
3
Ask whether you qualify for "catch-up contributions" and ask for these contribution limits. IRAs, 401k and 403b plans allow those over the age of 50 to contribute more each year, increasing overall savings. Different plans have different catch-up limits.
-
4
Meet with financial advisers about the type of investment that best suits your savings needs. While people closer to retirement tend to invest more conservatively, if you are coming to the game late, you may want to develop a slightly more aggressive strategy with some or all of the money.
-
5
Open employer-sponsored plans before IRA plans because they allow a higher annual contribution. Employer plans often have matching programs where the employer places money in the plan matching every dollar you put in up to a predetermined limit. Contribute as much as you can afford to.
-
6
Open IRAs with any extra savings you can afford on top of the employer plan. Traditional IRAs grow deferred while Roth IRAs grow tax free. Keep in mind that you get a deduction on income with traditional IRAs that you don't get with a Roth and you must hold the Roth for at least five years before distributing it to avoid a tax penalty.
-
1
Tips & Warnings
Traditional and Roth IRA plans allow $1,000 in annual catch-up contributions.
Employer plans such as 401k and 403b plans allow $5,500 in annual catch-up contributions.
There are income qualifications for IRA contributions. Those who participate in an employer's plan must fall below income thresholds to qualify for a traditional IRA. To contribute to a Roth IRA, investors must fall below a different set of income limits, regardless of whether they are participating in an employer's plan. To see if you qualify, visit IRS.gov or speak with a tax professional.
