Saving money and planning for your retirement is something that you should start as soon as possible. The earlier you’ll start to prepare for your retirement, the less burden you’ll feel later on, plus the more financial stability you’ll attain.
However, it does not mean that you cannot live a comfortable life if you start saving money in later stages of life, i.e., in your 50s. Understand that for any subject revolving around financial matters; it is never too late to start saving or seeking professional advice.
With that being said, below are a few ways in which you can reap the benefits of the compounding effects of investment. So, let’s begin!
If you are an employee, you must have heard about the “401(k)s” plan. It is basically a retirement saving plan that an employer provides, offering tax advantages to the saver. If you agree to this plan, you’ll have to pay a certain percentage of your paycheck to the investment account. The employer will also pay a part or in full to the investment.
The contribution amount for 2021 and 2022 has increased to $20,500, up from $19,500. Those individuals who are 50 or more can contribute an additional $6,500.
Note: 401(k)s investments are subjected to RMDs (Required Minimum Distributions) starting at 72. Non-compliance can cause penalties, so you must take care of this.
Traditional IRA provides similar benefits like 401(k)s plan. Generally, individuals invest in this on their own or after maxing out 401k contributions. IRA contribution limit for 2021 and 2022 is 6,000, along with a $1,000 catch-up contribution.
It is a great investment option in your 50s, as the penalty for any withdrawal before the age of 59 is 10%. It will ensure that you have a penalty of the amount saved to live a comfortable life after retirement.
Even so, for effective personal wealth management, it would be wise to get professional advice. They can help you understand your financial goals and advise you for better wealth management. Not to forget, if you wish to plan about estate planning or trust, they can help you with the same.
Tip: You can also invest in Roth IRA as an alternative to a traditional IRA. It allows you to invest and save your money for the future, in addition to tax-free benefits.
You can also look for some tax-advantaged products providing special benefits for retirement vehicles. For instance, you can invest in municipal bonds, especially if your risk tolerance is low. The return earned on these types of investments is often tax-exempted by the federal government.
Other tax-advantaged products include annuities and real estate. These will ensure that you enjoy your retirement in the best possible way.
To Sum It All Up
These are some ways in which you can start investing for your retirement, even if you are in your 50s. Nevertheless, to make sure to reap maximum benefits from your investments to enjoy your retirement fully, consult a financial or wealth advisor. They can help formulate a strategy to help you accomplish your financial goals.