Retirement savings are getting a boost next year

If you want a financially secure retirement, you have to save for it. But it’s hard to get an early start on your retirement savings, especially with all the demands on your money for immediate needs. Balancing current and future financial necessities can seem next to impossible.

Unfortunately, it’s all too common for people to hit their 50th birthdays before they get serious about building up a retirement nest egg.

In fact, 2020 will see a sizable increase in the maximum contribution limits that older Americans are allowed to make to 401(k)s. So if you’re fortunate enough to have a workplace retirement plan available to you, then you might be able to take an extra step toward your financial goals in the coming year.

What are catch-up contributions?

A number of different retirement plans allow for catch-up contributions:

❚ For IRAs, those 50 or older can contribute an additional $1,000 per year.

❚ Participants in SIMPLE IRAs and SIMPLE 401(k) plans get a $3,000 catch-up contribution annually at 50 or older.

❚ 401(k) participants who were 50 or older in 2019 were able to contribute an extra $6,000 beyond the regular contribution limits.

What’s happening to catch-up contributions?

Starting in 2020, those 50 or older will be able to set aside an extra $6,500 in their retirement plans. That gets added on to the new base contribution limit of $19,500, providing for as much as $26,000 in total retirement savings just in your 401(k).