Life has a way of sneaking up on you. The days may be long, but the years can feel short! Balancing all your life’s goals may have caused you to fall behind in your retirement savings journey and you may worry if you can catch up or not. The average American household aged 55-64 has $185,000, which is far below the $1 Million many aim for. This gap can feel daunting. But with the right strategies, it’s possible to close it and retire successfully, and confidently!
Step 1: Assess your current savings and calculate how much you need. A common rule is to aim for 25 times your annual expenses. For a$60,000 per year retirement lifestyle in Arizona, that’s $1.5 Million. Factor in Social security, and pensions and identify the shortfall. Look at your cashflow and determine how much discretionary income you have each month. If you don’t have much, figure out which expenses you can reduce. You may have to prioritize long term security over short term gratification. Once you know how much you need to save and how much you have available to save, you can move to Step Two.
Step 2: Leverage catch up contributions. If you’re in your 50’s, you can add $7,500 more to your 401k in 2025, making the total contributions $30,500 for the year. If you save into an IRA, you can save an additional $1,000 for a total of $8,000. These extra savings can add up in your qualified accounts.
Step 3: Consider saving into a non-qualified account. Different account types have different tax consequences, now and in the future. As CFPs, the financial advisors on our team help our clients have some flexibility with taxes in retirement by encouraging them to save in qualified, non-qualified, and Roth accounts.
Step 4: Stay disciplined. We help our clients close their retirement gap by creating a tailored plan and helping them stick to it. Emotions can get in the way when it comes to investments. Having a savings and investment strategy and sticking to it can be the difference maker. It’s just like diet and exercise for weight loss and health!
If you’d like to create a tailored plan to catch up on your retirement savings, that aligns your values with your goals and risk tolerance, call us at 602-923-9800.
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