Can you contribute more to your retirement financial planning than most Americans? For high-income earners and those who have other assets they could put away for retirement, standard contribution limits can be costly and frustrating. How can you work around these exterior limitations and put much more away for your own retirement? Here are five ideas for any saver.
1. Maximize Catch-Up Contributions. If you are over 50, you have the option to contribute more both to IRAs and 401(k) plans. The catch-up contribution limit for IRAs is fairly small but increased limits on 401(k) plans and SIMPLE plans are much higher.
2. Contribute From a Side Gig. Do you have a skill or service that you might turn into a side gig? If so, you can take advantage of generous retirement planning designed for small business owners. For example, a SEP IRA designed for entrepreneurs caps contributions at 25% of your earnings or $58,000. You can often max out these with other, more traditional retirement plan contributions.
3. Open an HSA. Health savings accounts (HSA) are tax-deferred savings and investing tools to cover future medical expenses. Your health insurance plan must qualify as a high-deductible plan, but you can then contribute up to $3,600 per year for an individual. And the good news for your retirement is that you can save this money for as long as you want to.
4. Invest In an Asset. IRS-approved tax plans aren't the only way to maximize your retirement financial planning right now. Why not invest in an appreciating asset that you can hold until retirement? The most common capital asset for retirement is a piece of real estate. Along with the monthly income potential from renting it out, you can defer capital gains taxes with like-kind exchanges if you must sell early.
5. Create Your Own Pension. Defined benefit plans — which guarantee a certain amount per month for retirees — are a great balance against riskier retirement investments. If you run your own business, you can create one of several types of pension plans. Along with a traditional pension plan, many small businesses opt for a cash balance pension plan which operates much the same way. And contribution amounts are surprisingly high.
Could one of these retirement planning hacks boost your contributions and maximize your retirement possibilities? To learn more about any of these methods or learn other tools you can use, start by meeting with a financial planner. A financial planner can provide additional information.