Fully Fund your 401(k)
An employee in this age category who is offered a 401(k) at work should consider funding it to the maximum amount. To provide you with a sense of how powerful maxing out a 401(k) can be, consider the following:
An individual who is 40 years old and who contributes $17,500 annually to a401(k) could accumulate more than $1.3 million in savings by age 65. This assumes an 8% return and no employer contributions. Note the annual contribution limit for 401(k)s is $20,500 per year for 2022 and$22,500 for 2023. That’s a powerful savings tool, and it’s evidence that workers nearing retirement should seriously consider funding their 401(k)s as soon and as much as possible.
The total allowed catch-up contribution for those 50 and older is $ 6,500 per year for 2022, for a total of $27,000. The catch-up contribution increases to $7,500 for 2023, for a total of $30,000. “Factoring in no growth at all, if you can sock away $24,000 a year from age 50 to age 60 (11 years), that’s $250,827 more saved for even the earliest unpenalized retiree. An extra $250,000-plus saved prior to retiring can make or break an income-producing portfolio lasting throughout retirement,” says Martin A. Federici, Jr., AAMS®, MF Advisers, Inc., Dallas, Pennsylvania.
In addition, to earning the highest return on investment in your 401(k), check or view your 401(k) account periodically for performance. Oftentimes, workers have a tendency to set it and forget it. Unfortunately, that is a recipe for losing out on thousands in lost profits and gains.
If you would like more information on catch-up retirement strategies or on what funds to choose to fully fund your current 401(k), call us for a free, private no cost-obligation consultation or call and ask for Rick at 1-866-745-2295.