As a 58-year-old woman who needs to save for retirement, what is the best way to save?
I am 58 years old and I have a wonderful job that is paying six figures. My employer contributes 25 percent of my salary and bonus each year into an account (not a fund of any kind) for me. I already have a traditional IRA that I used to roll my 401(k) over to. I also have a Roth IRA that has a very small amount that I am not doing anything with. I will be retiring within 10 years and the 25 percent retirement account will not be enough to retire on so I feel like I need to do something else. Should I take some of my paycheck and contribute to my Roth IRA?
Co-Published on Investopedia
Yes, you will want to contribute the maximum you can to the Roth IRA, which is $6,500 in 2018 (you get access to the $1,000 catch-up contribution for being over age 50). You may also need to save additional money into a taxable account to supplement your tax-advantaged retirement funds.
You should investigate the account your employer is contributing money into to determine if the money can be invested. You might be surprised that the plan documents allow you to invest this money, even if it doesn't seem so when you first look at the plan. For example, you might be eligible for an in-service rollover to your traditional IRA, which would allow you to invest the funds in an appropriate mix of equities, bonds, and other investments. If the plan documents are difficult to understand, a fee-only and fiduciary adviser can give you good advice on the plan and what you can do with it.
You may also want to hire a financial adviser to do a calculation of your retirement readiness; including projections for your Social Security benefits and the income you can expect from the current employer's account, the traditional IRA, and the Roth IRA. We do a retirement readiness report, and I'm sure other planners can help you with this as well.
Finally, you most likely would benefit from establishing a plan to allow you to retire at 68, when you want to, without taking Social Security until age 70. If a plan can be established to do this, your Social Security benefit will be significantly increased, which will relieve some of the pressure on your retirement savings.