By Steve Dinnen
In a recent survey, clients of Northwestern Mutual agreed that to see themselves comfortably through retirement they need $1.46 million. That seems like a lofty goal, considering the Federal Reserve estimated that someone aged 55 to 64 had financial assets of $473,000. (That’s a 2022 estimate. Since then, even the decent stock market hasn’t closed the gap.)
A key component of your retirement fund is a workplace 401(k) savings and investment plan. Here, the figures are not all that helpful, as the average account balance for that 55- to 64-year-old was recently estimated to be $408,000.
But it’s a start. And for its part, the government continues to relax rules on how much you can contribute to a 401(k) account. Starting this year, catch-up limits for 401(k) plans increased for people ages 60 to 63. This is an enhanced catch-up, in addition to the regular catch-up limit that applies to people over age 50.
Here are the numbers: Someone age 50 or older can contribute $7,500 above the regular limit of $23,500, for a total of $31,000. For ages 60-64, the extra pay-in is $11,250, bringing the total to $34,750. After age 64, the add-on reverts to $7,500.
For high FICA wage earners, those who earn more than $145,000, any catch-up funds must be made on a Roth basis.
Remember that your employer will match some, though not all, of your 401(k) set-aside. With that money added in, and a bit of diligence, you might reach closer to that $1.46 million mark than you would have thought.
