Playing Catch-Up With Retirement Savings Contributions | American Funds

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Retirement Planning

Playing Catch-Up With Retirement Savings Contributions

If you’re getting a late start or have fallen behind with your retirement savings contributions, there are a number of options to consider.

Maximize Your Contribution Levels

One way to save for retirement is through a structured, ongoing investment program, such as a salary deferral or automatic investment plan.

By contributing the most money permitted under your retirement plan or individual retirement account (IRA), you increase your long-term investment potential.

If your employer offers a matching contribution, take full advantage of it. Once you’re fully vested, whatever matching contributions your employer provides are yours. You can qualify for matching funds only if you make the required contribution.

Adjust Your Investment Mix

Generally speaking, based on your investment time frame and tolerance for volatility, you can put together an investment mix that focuses on growth while providing some measure of stability.

Another factor to keep in mind is how much you’ve already saved. If you don’t think you’ve saved enough, you could consider keeping more of your assets in growth investments. However, remember that pursuing more growth generally means taking on greater risks.

Invest Outside Your Retirement Plan With IRAs

If you’ve maxed out your retirement plan contribution, consider opening an IRA. IRAs offer some of the same tax-deferred benefits as retirement plans. There are two types of IRAs: traditional and Roth IRAs. It’s a good idea to research which one best fits your financial situation and long-term needs.

If you’re married, you and your spouse may open separate IRAs. Both of you can contribute the full amount permitted by law. With a traditional IRA, you may be able to deduct a portion or all of your contributions from your income tax, depending on your income.

There are other tax-advantaged investment vehicles you can use to build up your retirement savings, such as annuities and municipal bonds or municipal bond funds.

Given the many options available, you may want to meet with a financial professional to put together an investment program that is designed to help you meet your investment goals.

Take Advantage of Tax Incentives

Now you can contribute more to your retirement plans than ever before.

Salary Deferral Retirement Plans

  • In 2017, your plan may allow you to contribute up to $18,000 to your 401(k), 403(b) or 457 account.
  • If you’re 50 or older, you can add an extra $6,000 to your company retirement plan beyond the general contribution limit for 2017.

401(k), 403(b), 457 and SAR-SEP Plan Limits

Year

Contribution Limit (Under Age 50)

Catch-Up Contribution Limit (Age 50 and Over)

2017
$18,000
$24,000


Check with your employer about specific contribution limits for your plan. Contribution limits are adjusted for inflation in $500 increments. If your 401(k) or 403(b) plan accepts Roth contributions, limits apply whether contributions are pretax, Roth after-tax, or a combination of both.

SIMPLE IRA Plan Limits

Year

Contribution Limit (Under Age 50)

Catch-Up Contribution Limit (Age 50 and Over)

2017
$12,500
$15,500


Check with your employer about specific contribution limits for your plan. Contribution limits are adjusted for inflation in $500 increments.

Traditional and Roth IRA Limits

Year

Contribution Limit (Under Age 50)

Catch-Up Contribution Limit (Age 50 and Over)

2017
$5,500
$6,500


Contribution limits are adjusted for inflation in $500 increments.

Continue to Invest Once You Retire

Even the money you take as your minimum distribution can earn money if you don’t use all of it for living expenses.

You can invest a portion or all of your yearly distribution in a regular taxable investment if you want to keep your money working for you.

A program of regular investing doesn’t guarantee a profit or protect against a loss. You should consider your willingness to keep investing even when share prices are declining. Contact your financial professional or tax advisor for help with building a strategy.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.