The Great Recession was hard on many Americans’ portfolios. For Gen-Xers and Baby Boomers the blow to account balances was particularly painful, keeping many in jobs longer than expected.
Don’t fret if retirement is on the horizon but you’re still playing catch-up with your accounts. The following moves can help get your retirement savings plan back on track.
1. Take advantage of a company match
According to Bureau of Labor statistics, 53 percent of workers at small businesses and 86 percent of employees at medium- and large-size companies have the ability to set aside a portion of their paychecks in an employee-sponsored retirement account, such as a 401(k). These accounts allow you to build retirement funds quickly, since you don’t have to pay taxes on any of the cash you stash in them.
What’s even better? Some employers will match your contributions — essentially giving you free money — and that’s an offer you can’t refuse. Say your company offers a one-to-one match, up to 6 percent of your salary (which we’ll imagine is $100,000). If you have $6,000 withheld from your paycheck, you’ll receive an additional $6,000 from your employer simply for participating in the savings plan. Pretty good deal, huh?
2. Make catch-up contributions
If you are fifty or older, you’ve probably got retirement — and your nest egg — on the brain. Fortunately, the federal government understands and allows you to make what’s referred to as “catch-up contributions.” These deposits, which can be made once you max out your regular annual contributions, allow you set aside additional funds in your retirement accounts each year once you hit the half-century mark.
The IRS’ rules on catch-up contributions can change from year to year. Check out the guidelines for 2017 on the IRS website.
3. Consider carrying some debt
Financial experts have always stressed the importance of paying off your mortgage before retirement. That’s because if you’re no longer earning a paycheck, making monthly mortgage payments could quickly deplete your nest egg.
After all, if you currently have a fixed-rate mortgage at 3.5 percent, but you believe that your retirement accounts can earn more, it may be better for your bottom dollar to allocate the extra funds from the mortgage for your retirement portfolio instead.
However, just because it’s the financially savvy move doesn’t necessarily mean it’s right for you. If carrying a mortgage after saying goodbye to the working life will keep you awake at night, focus on paying off your house as soon as possible, then turn your full attention to building your retirement savings.
4. Avoid excess fees
Whether you’re being charged a flat fee or a percentage of your account balance, too-high portfolio or advisor fees can, in essence, wipe out any earnings your retirement investments make.
When researching your investment options, be sure to find out exactly how much any potential fees will cost you before making your selections. In general, index funds and ETFs offer the lowest fees. Aside from charges associated with your actual investments, make sure that you’re not being dinged with expensive general account costs, like administrative or paper statement fees. Paying a couple bucks a month to receive your statement in the mail (as opposed to online), for instance, may not seem like a big deal, but it could add up to hundreds of dollars lost by the time you reach your golden years.
5. Allocate assets accordingly
If your departure from the working world isn’t too many years down the road, now’s the time to maximize your earnings so that you meet your long-term investment goals — and putting your savings on autopilot just isn’t going to suffice.
Automating your investment plan can also help you resist those knee-jerk reactions to economic news that can derail your long-term goals. Finally, take heart! Many Americans now regard retirement as less of an all-or-nothing proposition. Some choose to work part-time or switch into a “third act” career that fulfills a long-held dream in addition to providing supplementary income in their golden years. Whatever steps you ultimately take, you’ve already taken the most important one: sitting up and paying attention.