Your 60th birthday is fast approaching and you’re on the cuff of retirement at your current job. You tried to save money over the years, but you are wondering if your savings accounts are significant enough to support your financial retirement goals.
Perhaps you are wondering if it is too late to start any new retirement investments at age 60?
The answer is no. It’s never too late to start investing to support your retirement. You can invest in your financial future via IRAs or 401(k)s. The best way to invest for retirement is to seek financial advice from an expert who can guide your financial endeavors.
This article highlights several retirement investment options that anyone can implement, no matter what age they are. Let’s dig a little deeper.
Long-Term IRA Investments
An IRA stands for an individual retirement account. It’s an account that can grow tax-free. Or, the account accumulates funds with a tax-deferred status.
There are three types of IRAs: Roth IRAs, traditional IRAs, and rollover IRAs. They break down as follows:
- Traditional IRA: You can deduct your contributions on your tax returns. The money grows tax-deferred until you withdraw from the retirement fund.
- Rollover IRA: A rollover plan carries funds from an existing retirement account, such as a 401(k) or an employer-based plan. The rollover funds will carry into a standard IRA.
- Roth IRA: You add taxed contribution funds to your account. As a result, your account could expand without a tax burden to worry about.
Consult with your financial planner about the best IRA choice for you. Regardless, an IRA account can help you compound or expand your retirement account faster.
An IRA is beneficial because of the savings you incur each year. If you’re over 50, you can contribute up to $7,000 annually to your IRA.
From there, you can subtract the contribution from your income when you file your federal income tax. This technique is especially useful if you’re in a high-income bracket.
You can also take advantage of deductions that allow you to save money. The deductions mean more money in your pocket that you can save for retirement.
Additionally, you don’t have to withdraw from your IRA account until you hit 70. An IRA allows you to accumulate funds until you turn 70 1/2 years. At this age, you must begin to make a minimum withdrawal.
As a 60-year-old, an IRA gives you a 10-year window to build a comfortable nest egg for yourself. If you’re earning 10% each year on your IRA account that has a balance of $200K, for example, you can have over $600K in funds when you reach 70.
When dealing with IRAs, the following factors can enhance your chances of a sizeable retirement fund:
- Leave your IRA alone
- Contribute to it as much as you can
- Contribute consistently
You may be tempted to withdraw from the fund early. However, you should only withdraw the money unless you encounter an emergency. Allowing your account to grow without touching it will increase your chance of a sizeable sum in the future.
Take Advantage of 401(k)s
For stellar retirement investing, determine if your employer provides a 401(k). A 401(k) is an account created by employers, allowing employees to contribute to the account.
You may also encounter similar plans in the form of 457s or 403(b). With a 401(k), you can contribute to the fund via payroll withholding.
Additionally, employers can match a portion of your contribution. Your employer may also be willing to match all of your contributions. The IRS usually won’t tax your account until you withdraw from the fund.
When it comes to taxation, 401(k)s work in the same way as IRAs. A traditional IRA is tax-deferred. A Roth IRA carries post-tax contributions. Speak to a financial planner regarding the best choice for you. Or, you can have both types of 401(K)s.
401(K)s are lucrative for people in their fifties and sixties because they’re more likely to be part of an upper marginal tax tier. As a result, you’ll pay a lower tax balance when you must pay it during your withdrawal period.
Or, if you have a Roth 401(k), you’ll pay taxes on the income presently. But you can make withdrawals tax-free when your retirement arrives.
For those who are over 50, you can make a contribution up to $19K as of 2019. You can also invoke a catch-up deposit of up to $6,500, bringing the total to $26K. If you have more than the maximum, however, you may want to stick with an IRA. However, check with a financial advisor on the best route for your retirement needs.
The best way to invest for retirement is to maintain a healthy balance of stocks and bonds. You may want to invest in bonds alone as you reach retirement. However, stock investments can be a vital part of your retirement portfolio.
Stocks are generally good hedges against inflation. And, stocks can still continue to expand your portfolio over time.
When it comes to 401(k)s and IRAs, you can use them both to your advantage. For instance, you can take out an IRA if you’re contributing the maximum amount of contributions to your 401(K).
Also, be sure to understand any additional income sources that will come in the future, such as Social Security funds or pension funds. You can use a free online Social Security calculator to determine how much you’ll receive when you’re eligible. If you have a pension plan, check your benefits statement to see how much you’ll receive.
How to Invest for Retirement at Age 60 the Right Way
One of the best ways to invest for retirement at age 60 is through an IRA, 401(k), or a combination thereof. All of these will allow you to save more money over time. And, you can use tax-free and tax-deferred advantages to pay less to Uncle Sam.
Avoid withdrawing money from your retirement account to allow your account to grow. And, maintain a healthy balance of bonds and stocks to secure your retirement future.
Are you interested in developing a plan of action to ensure a financially secure retirement? Contact us today to request a complimentary consultation.