Your 401(k) At 50: What You Should Be Doing
If you’re in your fifties and have a 401(k) retirement account, now is a good time to do some housekeeping. You’re getting close to retirement, and it’s a good idea to make sure everything is buttoned up and running smoothly. The last thing you want is to retire and then find out that you missed some important details that left you with less money than you planned for.
Ideally, at this stage of the game, your retirement account should have approximately six times your annual salary saved up. When you hit sixty, your account should be at eight times your annual salary.
If your 401(k) is shy of those figures, don’t lose hope. There are things you can do to make up some of the difference and put yourself back on the right track.
Utilize Catch-Up Provisions
If you’re not already making the maximum contribution each year to your 401(k) account, you should start doing that immediately if possible. When you turn fifty, you are eligible for what’s called “catch-up” contributions.
Catch-up contributions allow you to contribute more than the standard amount those under fifty are allowed to contribute each year. In 2018, for example, the maximum annual contribution for those under fifty is $18,500. For those fifty and older, it’s $24,000 – a significant amount more.
Limit Your Company Stock Investment
Generally speaking, it’s not a good idea to have too much of your investment portfolio concentrated in any one company stock, including your employer’s. Companies can and do merge, go out of business, or simply drop in value.
If your employer is a publicly traded company, it’s a good idea to start limiting your exposure to company stock in you 401(k) plan. Ideally, you want to keep that investment to no more than ten percent of your total retirement portfolio.
Rebalance Your Portfolio at Least Once a Year
As you get closer to retirement, it’s a good idea to rebalance your portfolio at least once a year to ensure that you’ll meet your financial goals. While some 401(k) plan administrators will automatically balance your portfolio for you, it’s not necessarily the best strategy to maximize your account.
If you’re unfamiliar with what portfolio balancing is, or how to do it, it may be worthwhile to speak with a reputable financial advisor who can provide help and guidance.
Create An Exit Plan
It may sound obvious, but when you stop working, your savings and retirement accounts will be your only income. Now is the time to start thinking about reducing your financial overhead.
Car payments, insurance, credit cards, and even things like expensive cable television plans can take a huge bite out of your monthly withdrawals if you’re not careful. This is the time to start making decisions about what your monthly budget is going to look like when you do finally retire.
Don’t Be Afraid To Ask For Help
There are plenty of people out there who having been putting money into their retirement accounts for years and haven’t really kept track of what’s been happening in the interim. If you’re one of those people, you may want to get a financial professional to take a peek under the hood and make sure everything is in good shape.
Getting help with your 401(k) account, especially in your fifties, is a good way to ensure your goals will be met. Just as you would go to the doctor every year for a checkup to make sure you’re in good health, making an appointment with a financial planner once or twice a year will help keep your retirement account healthy and secure.
Complimentary Financial Planning Consultation
Would you like to speak with a financial planner about your specific needs? If so, we'd love to hear from you! You can book a free phone consultation with us right now by clicking "Schedule An Appointment".
Once you've picked an available day and time, and provided your contact information, your appointment will be booked. If you have any questions, or need to change your appointment, please call us at (707) 595-8702. We look forward to speaking with you.
Choose a day and time
Provide your contact info
Get professional advice