If you’re between the ages of 55 and 64, you still have time to increase your retirement savings. Whether you’re planning to retire early, late, or never, saving an adequate amount of money can make all the difference, both financially and psychologically. Your focus should be on building — or catching up, if necessary.

It’s never too early to start saving, of course, but the last decade or so before retirement can be especially crucial. By then, you’ll likely have a pretty good idea of ​​when (or if) you want to retire, and most importantly, still have time to make adjustments if you need to.

If you find you need to save more money, consider these six time-honored retirement savings tips.

1. Fund your 401(k) to the max

If your workplace offers a file 401(k)—or a similar plan, such as A 403(b) or 457– and because you are not already funding your contributions to their fullest, now is the time to increase your contributions. Not only are these plans an easy and automatic way to invest, but you’ll be able to defer paying taxes on that income until you withdraw it in retirement.

Since your 50s and early 60s are likely your peak earning years, you may also be in a higher marginal tax bracket now than you will be in retirement, which means you’ll face a smaller tax bill when that time comes.

This applies, of course, to traditional 401(k)s and other tax-advantaged plans. If your employer offers Roth 401(k) As you choose this option, you will pay taxes on the income now but will be able to make tax-free withdrawals later.

The maximum amount you can contribute to your plan is adjusted each year to reflect inflation. In 2023, the amount will be $22,500 for anyone under the age of 50. But if you are 50 or older, you can make an additional compensation contribution of $7,500 for a grand total of $30,000.

2. Rethink your 401(k) assignments

Conventional financial wisdom says that you should invest more conservatively as you get older, putting more money into bonds and less into stocks. The reason is if your stocks have been crashing for a long time Alcohol marketYou won’t have many years to recover the prices and may have to sell at a loss.

How conservative you are is a matter of personal preference and risk tolerance, but few financial advisors recommend selling all of your stock investments and moving entirely to bonds, no matter your age. Stocks still offer growth potential that bonds don’t. The point is, you have to stay Diversified in both stocks and bondsbut in an age-appropriate way.

A conservative portfolio might consist, for example, of 70% to 75% bonds, 15% to 20% stocks, and 5% to 15% cash or an equivalent, such as money market funds. A moderately conservative person might reduce the bond portion to 55% to 60% and increase the equity portion to 35% to 40%.

If you’re still putting your 401(k) money into the same mutual funds or other investments you chose back in your 20s, 30s, or 40s, now’s the time to take a closer look and decide if you’re comfortable with that allocation as you move toward retirement age.

One useful option that many plans now offer is Target date funds, which automatically adjusts your asset allocations as the year you plan to retire approaches. Target date funds can have higher fees, so choose carefully.

3. Consider adding an IRA

If you don’t have a 401(k) plan available at work–or if you’re already funding your plan to its fullest–another retirement investment option is an Individual Retirement Account (IRA). The maximum you can contribute to an IRA in 2023 is $6,500, plus another $1,000 if you’re 50 or older.

IRAs come in two types: traditional and Roth. with Traditional IRAThe money you contribute is pre-tax, which means it’s tax-deductible that year. with Roth IRAYou get your tax break at the other end in the form of tax-free withdrawals.

The two types also have different rules regarding contribution limits.

Traditional IRAs

If you or your spouse don’t have a retirement plan at work, you can deduct your entire contribution from a traditional IRA. If one of you is covered by a retirement plan, your contribution may be at least partially deductible, depending on your income and Deposit status.

Roth IRA

As mentioned, Roth contributions are not tax deductible, regardless of your income or whether you have a retirement plan at work. Taxes will be paid on that money that year.

However, your income determines whether you qualify to contribute to a Roth in the first place. Allowable contribution is reduced in steps through the income range, reaching zero at the top of the range. The numbers are revised annually.

For the 2023 tax year, the income phase-out range for taxpayers making contributions to a Roth IRA is between $138,000 and $153,000 for individuals and heads of household. For married couples filing jointly, the range is $218,000 to $228,000. For a married individual filing a separate return, it is $0 to $10,000.

Also note that married couples who file their taxes jointly can often fund two IRAs, even if only one of the spouses has a paying job, using what is known as IRA Doubles. IRS Publication 590-A provides the rules.

4. Know what you have coming for you

How aggressive you need to save also depends on what other sources of retirement income you can reasonably expect. Once you get into your mid-50s or early 60s, you can get a much closer appreciation than you would have earlier in your career.

traditional annuities

If you have Defined benefit pension If you plan to be a current employer or former employer, you must receive an Individual Benefits Statement at least once every three years. You can also request a copy from your plan administrator once a year. The statement should show what benefits you gained and when you became earned (This is when they completely belong to you.)

It is also useful to know how your pension benefits are calculated. Many plans use formulas based on salary and years of service. So you may earn more benefit by staying in the job longer if you are in a position to do so.

social Security

Once you’ve contributed to Social Security for 10 years or more, you can get a personalized estimate of your future monthly benefits using Social Security retirement estimator. Your benefits will be based on your 35 highest years of earnings, so it could go up if you keep working.

Your benefits will also vary depending on when you start collecting them. You can get benefits as early as age 62, although it will be permanently reduced from the amount you’ll get if you wait until “full” retirement age (Currently 66 or 67 for those born after 1943). You can delay receiving Social Security until age 70 to get the most benefit.

While these estimates may not be perfect, they are better than blind guessing – or optimism. A 2019 survey conducted by two University of Michigan researchers found that people tend to overestimate the amount of Social Security benefits they are likely to receive.

To put it in some perspective, the average monthly retirement benefit as of October 2022 is $1,630.93, while the highest possible benefit — for someone who paid the maximum every year starting at age 22 and waited until age 70 to start collecting — is $4,194. In 2022 the 2023 maximum is $4,555.

5. Leave your retirement savings alone

After age 59½ you can begin making penalty-free withdrawals from traditional retirement plans and IRAs. With a Roth IRA, you can withdraw your contributions — but not any earnings from them — without penalty, at any age.

There is also an IRS exception, known as the IRS Article 55which waives the early withdrawal penalty on retirement plan distributions for workers 55 and over (50 and over for some government employees) who have lost or quit their jobs. It’s complex, so it’s best to speak to a financial or tax advisor if you’re considering using it.

But just because you can make withdrawals doesn’t mean you should – unless you’re desperate for cash. The longer you leave your retirement accounts (until age 72, when you should start). minimum distributions required than some of them), you were likely to be better off.

6. Don’t forget about taxes

Finally, as you increase your retirement savings, remember that not all of that money is yours to keep. When you make withdrawals from a traditional 401(k) or traditional IRA plan, the IRS will tax you at your rate of ordinary income (not the lower rate for capital gains).

So if you’re in the 22% bracket, for example, for every $1,000 you withdraw you’ll only get $780. You may want to Strategize to hold on to more of your retirement money – for example, by moving to a tax-friendly state.

bottom line

Retirement should be an enjoyable period in life, yet it can be stressful for those who have to worry about money. Planning for your retirement early and understanding the retirement plans and strategies available can help make retirement a fulfilling time in your life.