Informative Masterclass
How to Protect your Family’s Assets and Leave a Lasting Legacy
Save Your Spot Now!

White Plains & New City, New York Estate Planning & Elder Law Firm

Tax Planning - I’m Between 55 and 64, How Do I Boost My Retirement Savings?

January 29, 2020
David Parker, Esq.
Don't forget a charitable donation in your estate plan.
David Parker, White Plains and New City NY Estate Planning Attorney
David Parker, Esq.
David Parker is an attorney who specializes in Estate Planning and Elder Law and has been practicing law for 30 years. Be it Wills, Trusts, Powers of Attorney, Health Care Proxies, or Medicaid Planning, David provides comprehensive and caring counsel for seniors and their families. A large portion of David’s practice is asset protection strategies so that families do not lose their hard earned savings to nursing home care costs. He also handles probate administration for the settlement of estates.
If you're between 55 and 64, you still have time to boost your retirement savings. Whether you plan to retire early, late, or never ever, having an adequate amount of money saved can make all the difference, both financially and psychologically. Your focus should be on building out—or catching up, if necessary.

Tax Planning - It’s never too soon to begin saving. However, the last decade prior to retirement can be crucial. By then you’ll probably have a pretty good idea of when (or if) you want to retire and, even more important, still have some time to make changes, if need be.

If you discover that you need to put more money away, Investopedia’s article “Top Retirement Savings Tips for 55-to-64-Year-Olds” gives you several time-honored retirement savings tips to consider.

  1. Fund Your 401(k) to the Max. If your employer has a 401(k) or a similar plan, and you aren’t already funding yours to the maximum, up your contributions. These plans are an easy and automatic way to invest, plus you’ll defer paying taxes on that income until you withdraw it in retirement. You may be in a higher marginal tax bracket now than you will be during retirement, because you’re in your peak earning years. As a result, you’ll see a smaller tax bill in retirement. This applies to traditional 401(k)s and other plans. If your job offers a Roth 401(k) and you participate, you’ll pay taxes on the income now but be able to make tax-free withdrawals later.
  2. Review Your 401(k) Allocations. Experts tells us that you should invest more conservatively as you get older, with more money in bonds and less in stocks. That’s because if your stocks drop in a prolonged bear market, you won’t have the time needed to recover. As a result, you may have to sell your stocks at a loss. Stocks still have growth potential and are a hedge against inflation, unlike bonds. Therefore, remain diversified in both stocks and bonds, but do this in an age-appropriate manner.
  3. Look into an IRA. If you don’t have a 401(k) plan to join at work—or if you’re already funding yours to the max—another retirement investing option is an IRA. There are two types: traditional and Roth. With a traditional IRA, the money you contribute is generally tax-deductible upfront. With a Roth, you receive a tax break later with tax-free withdrawals. Each has its own set of rules for contributions, so educate yourself on the differences.
  4. Know Your Sources of Income for Retirement. Your level of aggressiveness in saving also depends on the other sources of income you can reasonably expect to have in retirement. When you hit your mid-50s or early 60s, you can get a much better estimate than earlier in your career. After you’ve contributed to Social Security for 10 years or more, you can get a personalized estimate of your future monthly benefits using the Social Security Retirement Estimator. Your benefits are based on your 35 highest years of earnings, so they may increase if you continue working. Your benefits will also vary, based on when you start collecting them. You can start taking benefits as early as age 62, but they’ll be permanently reduced from what you’ll receive if you wait until your “full” retirement age (currently between 66 and 67 for anyone born after 1943). You can also wait and start getting your Social Security up to age 70 and see the largest amount possible.
  5. Don’t Mess with Your Retirement Savings. After age 59½, you can begin making penalty-free withdrawals from your traditional retirement plans and IRAs. With a Roth IRA, you can withdraw your contributions (not their earnings) penalty-free at any time. In addition, the IRS has an exception known as “the Rule of 55.” This waives the early-withdrawal penalty on retirement plan distributions for workers 55 and over (50 and over for some government employees) who lose or leave their jobs. This is a complicated rule, so speak to your estate planning attorney. It is important to understand that just because you can make withdrawals doesn’t mean you should, unless you absolutely need the money. The longer you keep your retirement accounts “in the bank” (up to age 72, when you must begin to take required minimum distributions from some), the better off you’re likely to be.
  6. And Remember the Taxes. When you make withdrawals from a traditional 401(k) plan or traditional IRA, you’ll be taxed at your rate for ordinary income—not the lower capital gains rate.

Reference: Investopedia (June 11, 2019) “Top Retirement Savings Tips for 55-to-64-Year-Olds”

Suggested Key Terms: Retirement Planning, Tax Planning, Financial Planning, IRA, 401(k), Pension, Social Security, Stocks, Bonds, Required Minimum Distribution (RMD)

Share This Post
Stay Informed
Subscribe To Our FREE Estate Planning, Probate and Elder Law Newsletter

Book Your Free Initial Consultation With Parker Law Firm Today
Get Started Now

The 15 minute initial phone call is designed as a simple way for you to get to know us, and for our team to learn more about your unique estate planning needs.

Book an Initial Call
Book A Call With Parker Law Firm
Parker Law Firm
White Plains Location

222 Bloomingdale Rd #301,
White Plains, NY 10605

New City Location

120 North Main Street, Suite 203,
New City, NY 10956

IMS - Estate Planning and Elder Law Practice Growth Advisors
Powered by
crosscross-circle