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Ways to Catch-Up on Retirement Savings

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Ways to Catch-Up on Retirement Savings

Whether you are approaching retirement or want to take advantage of having extra time to save more, below are ways to catch-up on retirement savings as well as penalties to avoid.

1. Increase contributions over time

When first starting your career, you may only direct a small portion of your paycheck to retirement. As you earn raises and bonuses, it's important to consider increasing your retirement contribution rate. An increase in contributions can result in a big increase to your nest egg with the power of compounding.

2. Meet your company match (if available)

Consider contributing enough to benefit from a company match, if it is available through your employer. With a match, you automatically get a return on your investment.

3. Invest unexpected money

Whether from a tax refund, a bonus or inherited money, consider directly depositing new found money into a savings vehicle like an IRA. The extra savings will help boost your overall nest egg when you factor in the effects of compound interest.

4. Pay off debts

While saving and maxing out your retirement fund should feel like your top financial priority, your retirement will be jeopardized if you have high-interest debt that continues to build. You may want to consider paying down high-interest debt first, so you don’t have to bring it into retirement.

5. Eliminate an unnecessary expense

If you've signed up for any type of membership (gym, video streaming service, etc.) you no longer utilize like you used to, discontinue the service and funnel that money into your retirement account by increasing your contribution amount.

6. Plan to work longer

If possible, delay retirement to have more time to build up your retirement funds. In conjunction, delaying retirement can also mean delaying Social Security. This means you can receive a bigger monthly check in the future.

7. Max-out and/or make catch-up contributions

Employees who are 49 and younger in 401(k) plans can contribute up to $18,500. If it's possible, you can attempt to max-out the full allowed amount. In addition, those who are 50 and older can additionally make catch-up contributions of $6,000. (1)

8. Avoid penalties

Beware fees that come from withdrawing money too early or too late. There’s a 10 percent early withdrawal penalty if you take out money from your 401(k) account before age 55, and a 50 percent tax penalty if you are retired and fail to take distributions from the account after age 70½. (2)

While retirement may seem far off, you need an abundant amount of time and money to prepare for it. If you are feeling unsure if you are taking the necessary steps to reach your retirement income goal, let ProNvest’s retirement counselors help. Our team of retirement counselors are here to help guide you on ways to increase the likelihood of reaching your retirement goals. We are available via live chat, email (mysupport@pronvest.com) and phone (423-648-1878).

Citations. 

1 – https://www.thebalance.com/401k-contribution-limits-rules-2388221

2 – https://www.thebalance.com/what-you-need-to-know-about-401-k-early-withdrawals-2894147

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