5 Ways to Catch Up on Retirement Planning Later in Life

Retirement is a significant investment, which is why so many financial experts recommend establishing goals and starting when still a younger adult. However, circumstances may prevent some people from initiating retirement planning until their 50s or 60s. At this point, you may feel your retirement dreams are unattainable, but there are steps you can take to catch up on the years you lost. Consider how these techniques can help you experience a more fulfilling retirement.

1) Establish Your Retirement Needs 

The first step for any retirement plan is figuring out your goals. Understanding what you hope to achieve in retirement enables you to determine how much money you will need and an appropriate time to retire. Will your retirement consist of frequent travel, or will you live more modestly? Will you work part-time, and do you wish to move closer to your grandchildren or other family members? Whatever your specific wishes, make sure you know what it will cost and how much you will need to save to get to that amount in a shorter period. 

If you are unsure exactly how much you will need in retirement, consider the 4% rule. This principle provides an estimated amount people should have for retirement. Namely, if you withdraw 4.5% from your retirement investments during the first year, then adjust the percentage to account for inflation in subsequent years, you should have enough resources for approximately 30 years. While not perfect, the rule offers a helpful starting point. 

2) Investigate Possible Retirement Income Sources 

Groceries, utilities, car payments — you will continue to factor these bills and others into your budget even after you retire. Therefore, it is essential to identify your income streams and other benefits during retirement planning. Some income sources include: 

• Pensions or employer-sponsored retirement plans, such as 401(k)s 
• Social Security benefits 
• Traditional or Roth IRAs 
• Military service benefits 

You may also include healthcare benefits, such as Medicare and health savings accounts, as well as dividends from investments. 

3) Take Advantage of Catch-Up Contributions 

There are some retirement planning strategies that most benefit those who wait until later in life. The Internal Revenue Service (IRS) allows people 50 and older — or those meeting this age requirement at the end of the calendar year when the plan ends — to make yearly catch-up contributions to their retirement accounts. 

Catch-up contributions can have a considerable impact on your retirement savings. Your benefits may be greater than what retirement plan participants under 50 receive because you can add more to your accounts. This benefit is extended to those with the following plans: 

• 401(k)s 
• IRAs
• 403(b)s 
• SARSEP 
• SIMPLE 401(ks) and IRAs 
• Governmental 457(b)s 

Please note: The catch-up contribution dollar limit differs depending on the specific retirement plan. 

4) Convert to a Roth IRA 

Many people choose Roth IRA conversions to experience tax benefits during retirement. With a Roth IRA, you can attain tax-free income and make tax-free withdrawals from the account once you meet certain requirements. Once you pass the five-year holding period, you can access Roth IRA funds without penalty, except for earnings. 

Switching to a Roth IRA can translate into significant returns by retirement. Furthermore, these assets do not come with required minimum distributions — unless you need the funds at 72, they will remain tax-free.

The primary disclaimer with Roth IRAs is while your future earnings with these accounts are not taxed, you will need to pay for pre-tax assets in the year you make the conversion. If you have a sizable retirement account, these taxes can be expensive. Additionally, converting to a Roth IRA can pose complications if you keep other retirement accounts. Individuals should weigh if this option is advantageous for meeting their retirement goals before making the change. 

5) Work with a Certified Financial Planner 

A key component of the best retirement plans for older adults includes consulting with a knowledgeable financial advisor. These professionals have the expertise and resources necessary to help you define your retirement goals and pinpoint the best strategies for making them a reality. 

At Park Place Financial, our team of certified financial planners (CFPs) is committed to working with clients to help them create and follow a financial plan that provides the flexibility and peace of mind they need. We work collaboratively, combining our various experiences and skill sets to make informed recommendations. Since we observe our fiduciary duty, you can trust you will receive the utmost transparency when you partner with our team. 

If you are exploring the different ways to retire and are starting later in life, contact Park Place Financial for help achieving your short-term and long-term financial goals. You can also schedule your complimentary financial checkup today.

**We have reviewed this material with the understanding the firm disclosure and
registered branch address and phone number is included with the material. Additional disclosures
are required if you are located in a bank or credit union. See firm policy for additional information.