Imagine you’re in your late 50s and have only about one year’s salary saved in your 401(k).
That’s reality for a Florida woman — and many others her age.
Generally, people in their mid-50s to early 60s should have six to nine times their salary saved in retirement accounts to be able to maintain their standard of living in retirement, Real Deal Retirement editor Walter Updegrave writes at CNN.com today.
Despite the seemingly unbridgeable gap between one year’s worth of salary and up to nine years’ worth, there’s no need to panic, he says:
You’ve got plenty of time to improve your retirement outlook, provided you’re willing to embark on a bold catch-up plan starting right now…
People age 50 and older who can discipline themselves enough to set aside 15 percent to 20 percent of their income in retirement accounts will have more savings options for that money because the limit for 401(k) contributions is higher. It is generally $18,000 plus $6,000 in catch-up contributions.
Regular and catch-up contributions can also be made to a traditional or Roth IRA. (For help navigating these options, check out “Confused By IRAs and 401(k)’s? Roth And Regular Accounts Made Simple.”)
Investments like stocks can help your account grow faster, although they also present you with more risk.
Unsure of your risk tolerance? Money Talks News founder Stacy Johnson offers a simple formula in his 2003 book “Money Made Simple” that incorporates not just stock and bond investments but money market or other safe savings as well.
Here’s how he recently broke it down in “Ask Stacy: Do I Need a Financial Adviser, or Can I Manage My Money Myself?”
- Decide how much you can put into long-term savings.
- Subtract your age from 100 and put that percentage of your long-term savings into a stock index fund.
- Put half of the remaining part of your long-term savings into a risk-free savings account, and the other half into a bond mutual fund.
To learn more, check out “Afraid You’ll Have To Work Into Retirement? It Could Be Good For You.”
How much have you saved for retirement? Sound off on our Facebook page.