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Make a plan to replenish your retirement account
If rapidly rising prices have hampered your ability to save for retirement, it’s important to try to get back on track with savings as quickly as possible, experts say.
“Make a plan now about how and when you will do it,” said certified financial planner David Mendels, director of planning at Creative Financial Concepts in New York. “Maybe you know you’re getting a bonus and you know when it’s due, and so you say the money is going to your retirement account.”
The danger, he said, is that without a plan, “it’s too easy to keep slipping.”
Find ways to reduce your spending
While smaller retirement contributions (or not) may currently help with your cash flow for current expenses, “it’s important to think of this as a temporary temporary solution,” Mendels said. “You will have to figure out how to reduce your spending to [increase] Your retirement savings.
If you examine how your money is spent, you may discover that there are expenses that you can cut back.
“Don’t look at it as black and white,” Mendels said. “Maybe you stop going out to dinner twice a week and only go once a month, or maybe you take a less expensive vacation.
“Where you can reduce costs a little bit, they build up little by little,” he said.
Indulging in retirement savings could mean a penalty
Also know that if you dive into retirement savings early, there may be tax implications.
Depending on the type of retirement account and circumstances, withdrawals made before the age of 59½ can come with a 10% tax penalty. For 401(k)s and traditional IRAs, if you do not meet a qualifying exception, you will pay this penalty in addition to any taxes owed on the withdrawal amount.
if it was Ruth’s account – Those whose contributions are made after tax – You can get any money you contributed without tax or penalty. However, the withdrawal of profits can come with the penalty, depending on the specifics.
Retired savers next year You can contribute up to $22,500 in 401(k) seconds, with people age 50 or older allowed an additional $7,500 in so-called catch-up contributions. For IRAs, the contribution limit in 2023 is $6,500 and the compensation amount is $1,000.
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