A new survey by PNC Financial Services Group discovered members of Generation X are working harder to avert a retirement crisis. Meanwhile, many baby boomers in their 50s and 60s are falling behind. Although it’s not a competition to see who retires with the most cash, it is important to get motivated so you don’t outlive your retirement money. By making catch-up contributions to a 401K or IRA, you can protect yourself and your family. According to a piece by mainst.com, 51 percent of people ages 35 to 49 are making a concerted effort to save more for retirement. In comparison, only 37 percent of baby boomers are saving more. As members of Generation X turn 50, they can start making catch-up contributions to their 401(k) and various other qualified retirement accounts.
Build on your foundation
If you are 50 or older, you likely already have some money put aside for retirement. If you aren’t currently contributing to a 401(k) at your work, start contributing at least up to the amount the company matches. If you are already maxing out a 401(k) or an IRA, take it up a notch by making the catch-up contributions. For a 401(k), you can contribute up to $24,000 if you are 50 or older versus the $18,000. For a Roth IRA or traditional IRA, the catch-up contribution amount is $1,000 extra beyond the $5,500 everyone with earned income can contribute.
Take advantage of lower rates
Another way to avert a retirement crisis is to evaluate your current loans including mortgages and automobile loans. If you have high interest-rate credit cards, try the debt snowball approach to pay off the debts. The strategy is to pay off the smallest balance first and then knock of the other credit cards until the one with the highest balance is also paid off. If the mortgage rate on your house is above 6 percent, you could refinance to save thousands of dollars in interest. For people underwater on their mortgages, the government extended its Home Affordable Refinance Program or HARP for at least one more year. If you lower your monthly mortgage payments, you free up money to make those catch-up retirement contributions.
In addition to saving more for retirement, people who are 50 also benefit by looking into long-term health insurance, estate planning and overall financial fine-tuning. It’s a good time to consolidate orphaned 401(k) plans from old jobs, re-balance a portfolio and work out a retirement spending plan. Try living on your projected retirement income, which could motivate you to save more.