The final sprint
It’s Not Too Late to Contribute More
If you’re just five to 10 years out from retirement, the finish line is within sight. With each lap around the sun, you should take the pulse of your retirement goals, savings strategy and account balances. And if you feel that you are trailing behind on your financial plans, you still have time to bump up your account with increased contributions.
Do you really need to contribute more?
If you’ve only been contributing a small percent and not taking advantage of your company’s matching contributions, if available, you might find yourself with a shortfall in your retirement account. If so, consider doing the following:
- Increase your contribution, even if it’s just by 1% per year
- Max out your contributions if you’re able
- Make catch-up contributions if you’re over age 50
For additional tips, watch Pete the Planner’s It’s Never Too Late to Start video.
If you’ve been contributing regularly to your retirement account over the years, taking advantage of any company match, if available in your plan, and maxing out your contributions, consider working with a financial professional to explore other retirement preparation options.
Your Net Worth
Another way to determine if you need to contribute more, is to calculate your net worth. Maybe between your projected Social Security disbursements, stock investments, real estate and other assets, you are diversified enough and already have multiple streams of retirement income at your disposal.
You can also use this Pete the Planner guide Net Worth, the Ultimate Financial Network to calculate your net worth.
Maximum Contibution Amounts
2022 Salary-Deferral 401(k) Contribution Limits
Individual plan participants can contribute up to $20,500 of their wages in 2022.
2022 Total Annual 401(k) Contribution Limits
Total contribution limits for 2022 are $61,000 total annual 401(k) if you are age 49 or younger
Each year the Internal Revenue Service (IRS) evaluates contribution limits for employee benefit plans, including retirement accounts. As a result, cost of living adjustments may be made to retirement account contribution limits. As you plan for retirement, it may be helpful to understand the current contribution limits. If you can, maximize your retirement plan contributions. Your contributions, employer contributions, if applicable, plus compound growth on these amounts, can help you to make the maximum contribution amounts. That way you’ll maximize the income you’re able to receive when you start taking distributions from your retirement account.
Because not everyone is able to contribute the maximum amount to their retirement plan in their 20s and 30s, and even into their 50s, concessions have been made to the contribution rules. Catch-up contributions allow anyone age 50 and older to kick in an extra amount above and beyond the maximum levels. If you are age 50 or older and maximizing your retirement account contributions, you may want to consider making a catch-up contribution as you enter the homestretch of retirement preparation.
The important takeaway is that you can still increase your contributions, right up to the time that you retire.
1. Average 401k Balance by Age, https://balancingeverything.com/average-401k-balance-by-age, (CNBC/Investopedia), July 5, 2021.
Note: OneAmerica® is the marketing name for the companies of OneAmerica. Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Administrative and recordkeeping services provided by OneAmerica Retirement Services LLC, a OneAmerica company, which is not a broker/dealer or investment advisor.
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. These concepts were derived under current laws and regulations. Changes in the law or regulations may affect the information provided. For answers to specific questions, please consult a qualified attorney, tax advisor, or financial professional.
Investing involves risk, including potential loss of principal.
The views and opinions expressed by Peter Dunn (aka Pete the Planner) are solely his and do not necessarily reflect the views and opinions of the companies of OneAmerica. Pete the Planner’s content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. Pete the Planner is not an affiliate of any OneAmerica company.