Once you reach the big 5-0, it pays to take a close look at your retirement savings picture. An array of retirement calculators available online can help you analyze how your current pace of saving and investing positions you for the future. Numbers not adding up? There is still time to make headway. Here’s how.
Make up for lost time
The IRS allows those age 50 and over to funnel an additional $6,000 a year to a workplace retirement plan, and an extra $1,000 annually to an IRA, for a total of $6,500.
This portfolio padding can significantly improve your retirement prospects. Saving $6,500 instead of $5,500 in an IRA from age 50 to 65 at 6%can add an extra $25,000 to your savings by retirement.
Stay with stocks
You have years — decades, even, if you are in good health and have a family history of longevity — to ride out the stock market’s ups and downs. Consider that fund manager Vanguard has 78 percent of assets in its 2035 target-date retirement fund invested in stocks, with the remaining 22 percent in bonds.
Within the stocks and bonds portions of your portfolio, your money should be further diversified across asset classes. For equities that means having exposure to large, small and midsize companies, established and emerging international markets, and real estate. With bonds it’s allocating money in short-, mid- and long-term U.S. and international bonds.
Consider taking an asset allocation shortcut
Purchasing a target-date mutual fund or using a robo-adviser makes the job of creating and managing an appropriately balanced portfolio a cinch. Target-date funds automatically adjust the investment mix of stocks and bonds based on what’s appropriate for someone who plans to retire within a specified year. Robo-advisers create and manage a portfolio based on your goals and risk tolerance.
Use a Roth IRA
Investing in a Roth IRA provides older savers flexibility down the road to withdraw from pools of money with different tax treatments. Don’t qualify to contribute to a Roth IRA? If your employer offers a Roth 401(k) option, there are no income limits on eligibility. Consider splitting your contributions between Roth and traditional accounts.