Retirement Saving Ideas After 50
It’s never too late to sock away cash for retirement. If you are over the golden age of 50, a couple of increased savings benefits kick in.
One of the benefits that should catch your eye is the ability to contribute more to your company retirement plan and individual retirement account.
In 2019, you can contribute up to $7,000 to your IRA ($1,000 more than if you’re younger than 50). This is the first increase since 2013. This amount is federally tax deductible if you are not eligible for a company retirement plan.
If you are eligible for a company retirement plan (whether you participate or not), the IRA contribution is deductible – or partially deductible - if your adjusted gross income is less than $74,000 if you are single or $123,000 if you are married.
If you are eligible for a company retirement plan, I recommend using it first. The money goes into these plans on a federally pre-taxed basis and sometimes your company will match a percentage of what you contribute. A company retirement plan allows you to contribute much higher amounts than an IRA.
In 2019, those older than 50 can contribute an additional $6,000 into a company retirement plan – 401k, 403b, and 457- for a maximum of $25,000 for the year. There are ways to even get more into savings than this by using a combination of plans.
The total employer and employee contributions for people over 50 for 2019 is $62,000, or 100% of employee compensation, whichever is lower.
If you own a small business (100 or fewer employees), you can set up a Savings Investment Match Plan for Employees (SIMPLE IRA) that allows your employees over the age of 50 (and you probably are considered an employee too) to contribute a maximum of $16,000. Usually, on a SIMPLE, the company matches the first 3% you contribute.
If you are a one-person business owner over the age of 50 (or what I call an Ultra Small Business Owner), you can set up a Solo 401(k) - also called a Single k or an Individual 401(k) – and you can save up to $62,000 per year.
All these plans can be set up at a reasonable cost – sometimes even no cost. The investment options are wide-ranging and customizable.
There is also a retirement plan that is designed for after-tax contributions that you shouldn’t forget about - the Roth IRA.
The contribution amounts are the same as the IRA. You can put the full amount or a partial amount of money in a ROTH if you have a modified adjusted gross income (MAGI) of less than $137,000 if you are single and less than $203,000 if you are married.
Even though what you put into a Roth IRA is not currently federally tax-deductible, the earnings are tax-free if you leave the money in the Roth for five years. If you wait to withdraw money from the ROTH until after you are 59½, you will avoid a 10% early withdrawal penalty.
By the way, you can use both an IRA and a ROTH but the total maximum amount you can contribute in a year is $7,000.
To really boost the amount you save for retirement, if you can qualify, you may want to use a combination of these plans – such as a 401k and a Roth.
There is a list of rules you must follow for each of these plans, but the hassle may be well worth it, allowing you to have more money for your retirement years.
So, don’t worry about turning 50. Just smile and take advantage of your new benefits.