What to do when your employer-sponsored retirement plan has run out

Since the day you were hired, you’ve been investing in the company retirement plan. You’re at the point financially where you’ve maxed your employer-sponsored retirement plan, but you’re not saving enough to retire when you desire. What can you do? Look at additional ways to save for retirement, of course!

What to keep in mind when planning for retirement:

Before we develop a financial plan, there are several factors to consider, including how much you’ve already saved; the number of years until the desired retirement, if you will work part-time before fully retiring; and more:

• Your current age
• Your spouse’s current age
• The age you and your spouse want to retire
• Consideration for Social Security
• Employer-sponsored retirement plan, including qualifications for matching contribution and the performance of the mutual funds in the plan.
• Current retirement and other savings
• Real estate investments (primary, secondary and rental properties)
• Tax bracket
• Insurance, including long-term care
• Current lifestyle (including income, expenses, and debt) and expected retirement lifestyle
• Other plans such as caring for a disabled adult child, the primary caregiver of your own parents or grandchildren, travel, move to a different city or state.

Each of us has a different financial story, so it’s important to think about the full picture, especially when considering retirement planning. It’s likely more than just your employer-sponsored plan, but we have to take each on a case-by-case basis.

What’s the maximum you should save?

Let’s take a look first at what you’re already saving. Often, I meet with clients to review their retirement plan and recommend adjustments. For example, if the plan is an employer match of 50 percent up to 5 percent of salary contributed, then your max contribution is 5 percent of your salary. We want to maximize the matching contribution because it’s basically free money, and then we might look at other options.

If you’ve changed employers, which so many of us have done, have you consolidated investments into an IRA? We want to be sure we’re reviewing all of the retirement accounts, not just your current employer. There are times when I recommend rolling investments from a former employer’s plan into your own IRA, but it has to make financial sense.

You’ve maxed your employer-sponsored plan, now what?

Now that we’ve reviewed and made changes to current retirement accounts, let’s look at other options to help you retire at your desired age.

Roth IRA

If your adjusted gross income for 2017 is less than $132,000 if you’re single or less than $194,000 if you’re married, you’re eligible to contribute to a Roth IRA. Contributions are capped, and eligibility changes frequently, so make sure you’re checking with your financial advisor to make sure you qualify. The benefit of a Roth IRA is that contributions grow tax-free until withdrawal, typically at the age of 59 ½ years old.

For those who are self-employed, you may also be eligible for a SEP-IRA, which will allow you to save more than the maximum of a Roth IRA and up to a percentage of your income.

Traditional IRA

In addition to your employer’s retirement plan, you can also have a traditional IRA. This is where you might, for example, roll over funds from previous employer-sponsored plans. You can also contribute up to $5,500 per year. Check with your financial advisor on the current limits as they are subject to change.

Whether Roth, SEP, or traditional, an IRA may be a good choice for those with a long-term investment horizon. You’re investing while you’re in your twenties or thirties and cashing out when your tax rate is significantly lower when you’re 59 ½ years or older. These tax-advantage accounts aren’t the only option.

Taxable investments

Stocks and mutual funds held outside a retirement plan are taxable investments that make sense for some investors. For others, they may not make sense when it comes to capital gains taxes, so you should consult with your financial advisor. You may use these funds, for example, when making a large purchase prior to being eligible for funds from retirement investment accounts.

Keep in mind that allowable contributions on some types of accounts will be capped at a lower amount when you reach a certain age. Check the IRS IRA Contribution and Deduction Limits or ask your financial professional. It’s important to know what you can do today to invest in your financial future.

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DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.