Author: Alicia Rose Hudnett / Source: Wise Bread
If retirement planning hasn’t been at the top of your to-do list, your 50s are the time to make it your first priority. Wait 10 more years, and your only choice of retirement options may just be to keep working. Here’s how you can prevent that from happening.
1. Take advantage of catch-up contributions
Whether you’ve been a responsible saver or not, this may be your last chance to really build up your nest egg. Beginning the year you turn 50, you can contribute $6,500 to an IRA (that’s an additional $1,000 for 2018) and $24,500 to most workplace retirement plans (that’s $6,000 more than the standard allowable amount for 2018). (See also: 6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future)
2. Get an HSA
If you have a high-deductible health plan (HDHP), you can open a health savings account, or HSA. Contributions to an HSA are made on a pretax basis and remain tax-free if used for qualified health care expenses. For the 2018 tax year, if you have an individual plan, you can contribute up to $3,450, and if you have family coverage, you can contribute up to $6,900. If you are age 55 or older, you can contribute an additional $1,000.
A health savings account is similar to other tax-advantaged retirement accounts: Once you establish an account, you don’t need to use up the funds each year, and you may be able to invest the money within the HSA, allowing the account to grow. And even if you’ve established the account through your job, you can take the account with you if you leave.
Before age 65, if you take a distribution from your HSA for non-qualified medical expenses, you may owe income taxes and a 20 percent penalty. But after age 65, non-qualified distributions are penalty-free (but not income-tax free), making it structured like a traditional IRA. Qualified health care expenses are always tax-free at any age. (See also: How…
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