Wed. Nov 30th, 2022

Set up your savings to get you to your goal

Now is the time to make sure your savings are working as hard as possible for you.

You’re almost there! Save as much as you can

Like a marathoner hitting the final stretch, now is the time to give your retirement savings all you’ve got.

Uncle Sam will make this easier for you after age 50, when you’re eligible to make catch-up contributions to employer-sponsored plans and IRAs. (For the 2022 tax year, you can contribute up to $7,000 to IRAs; for 401(k) and 403(b) plans, up to $27,000 for the 2022 tax year, if your plan allows catch-up contributions.)

If you’re able, this is also the time to begin maxing out your employer plan. In 2022, you can save up to $20,500 (plus any catch-up contribution) in a 401(k) or 403(b).

Sacrificing now to save more could pay off big in the long run. If you can save an extra $10,000 a year for the next 10 years, your balance could be about $140,000 higher when you retire.

Ramping up contributions in the next 10 years will make a big difference

A horizontal bar chart comparing a contribution of $5,000 per year to increasing contributions to $15,000 per year and how it impacts what you earn.

This hypothetical illustration assumes an annual 6% return as well as annual contributions of $5,000 for 40 years (potentially increasing to $15,000 for the final 10 years). The illustration doesn’t represent any particular investment, nor does it account for inflation.

Read chart description

GOOD TO KNOW Over 98% of the retirement plans covered in our recent report offer catch-up contributions. Source: Vanguard, How America Saves 2019. This study examined employer retirement plans (and their participants) managed by Vanguard.


Make sure your investments align with your goal

Do you know all the investments you own and how they fit together?

It’s an important consideration no matter what age you are or how long you’ve been saving, but your asset mix becomes even more critical when you’re only a few years from retirement.

It might be relatively easy to see what your allocation is for each account—by looking at your statement or checking your accounts online—but you’ll need to get a picture of your total retirement savings in order to know whether you have an appropriate asset mix overall.

And remember that the asset mix you settled on years ago might not be the best mix for you anymore. For example, you may want to consider moving some stock assets into bonds, to cushion your portfolio from volatility.KEEP IN MIND As you’re considering your complete picture of retirement assets, it’s also a good time to think about whether you’re diversified from a tax perspective. Converting some of your retirement money to a Roth IRA gives you a portion of income that won’t be subject to taxes in retirement.Find out more

Moving your assets can make your planning easier

Moving your retirement money to one place lets you view your savings all together, so it’s easier to see how to get where you’re going. And it could have other benefits, like lowering your investment costs and qualifying you for more personal attention, too.

Find out how Vanguard can help you reach your retirement goalNEED HELP? LET AN ADVISOR GUIDE YOU The last few years before retirement are critical to reaching your goal. We can tell you whether you’re doing the right things. Get your retirement plan

Where does retirement fit into your priorities?

See how to juggle multiple financial goals

SOURCE https://investor.vanguard.com/investor-resources-education/retirement/planning-set-up-your-savings

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