So You’re 50 and Haven’t Saved Enough for Retirement…

 June 22, 2017

The most common question we receive from our clients is “When can I retire?”  For many, distractions like a mid-life crisis, busy careers and kids have dominated their focus only to find out retirement isn’t far down the road.  If you fit in this category don’t panic because you are not alone.  The good news is you still have time to save, but it will take some effort and discipline.

First, look within your company for any sponsored plans offered such as a 401k or 403b.  These plans usually have a match component that is free money so fully funding this amount will ensure you are not leaving money on the table.  If you have the ability to buy company stock at a discount through a stock purchase program, this is another plan we would consider utilizing to improve your retirement scenario.  The key is to keep the allocation of company stock down to less than 10% of your overall portfolio.

The second place to save for retirement is in a personal IRA or Roth IRA.  For 2017, the contribution amount for those turning 50 by the end of the year is $6,500.  We suggest funding these every year.  If your income doesn’t allow you to contribute directly, consider a back door Roth Contribution which is done by funding a non-deductible IRA, then immediately converting it to a Roth IRA.  This conversion is taxed pro-rata so be careful if you have other IRA money that hasn’t been taxed.

The third place to save is in after-tax brokerage accounts.  Today, capital gain rates are at a maximum of 20% so buying and holding long term assets for retirement can be an effective strategy.  The best asset class to hold in a brokerage account is equities (stocks).  If you prefer mutual funds or ETFs, consider those with a low turnover and low expenses.

The key to “catching up” is saving.  Start by reviewing your cash flow and come up with a spending plan that carves out extra cash for retirement.  Any adjustments you can make today, compound throughout retirement so be aggressive.

“So You’re 50 and Haven’t Saved Enough for Retirement…” was published in the June 2017 issue of Life on the Green magazine, a social publication for the residents surrounding The Woodlands, Country Club, Player Course, where Dan is a resident and is a featured monthly contributor.