Revive your 401(k) now that kids have gone
Financial planner Jonathan Knapp says it’s not uncommon for recent empty nesters to realize they’re not on track for a secure retirement after years of funding the lifestyles of their departed kids.
Bolstering a bare or depleted nest egg tops Knapp’s list of things to do for parents once all their children have moved out and can support themselves.
“If your retirement savings are not on track, this is the time to turbocharge your 401(k),” says Knapp, director of financial planning at Creative Planning in Kansas City, Kansas.
He adds: “The majority of families have not put away enough. People tend to under save when the kids are at home. Now’s the time to play catchup.”
1. Bump up your savings
If your 401(k) balance is skimpier than it should be at your age, now’s the time to “bump up” the percentage of your pay that is invested in your retirement savings account, says Mark Lamkin, CEO and chief market strategist at Lamkin Wealth Management in Louisville, Kentucky. The maximum amount you can set aside in your 401(k) in 2019 under IRS rules is $19,000 and workers 50 and older can save $6,000 more in so-called catchup contributions. The limit on annual IRA contributions is $6,000, with allowable catch-up contributions of $1,000 if you are 50 or older.
2. Get the match
Don’t pass up free money from your employer, advises Tony Ogorek, founder and CEO of Ogorek Wealth Management in Buffalo, New York. That means at least saving enough on your own in your 401(k) to take advantage of your employer’s full matching contribution.
3. If possible, max out
The more you save, the quicker you can replenish and rebuild your nest egg, says Diahann Lassus, president of Lassus Wherley, a wealth management firm with offices in New Providence, New Jersey, and Bonita Springs, Florida.
4. Play catch-up
If you’re over 50, the IRS lets you save an additional $6,000 in your 401(k) with before-tax dollars in what is dubbed “catch-up” contributions. Saving more will help you reach your goal of having enough cash to retire.
5. Keep spending in check
Sure, you’ll likely have more money leftover at the end of the month now that you’re no longer supporting kids. But if you blow all the cash on vacations, you’re just going to dig yourself into a deeper financial hole, according to researchers at the Center for Retirement Research.