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Marc A. Hebert's Money Sense: Ways to afford your retirement account catch-up contributions

April 27. 2018 10:18PM

Turning 50 is a big milestone in most people's lives. Retirement is on the horizon, and saving for it is a concern. People age 50 and older have one significant advantage in this area. They can make what are known as "catch-up" contributions to an IRA and some workplace retirement plans. Catch-up contributions will maximize the amount of tax-advantaged retirement savings available.

While there are eligibility rules to meet, check the chart below for the standard and catch-up contribution limits for 2018.

Suppose you would like to make a contribution, but just don't seem to have the money - what should you do? Here are a few suggestions that might help:

Earn more: Perhaps freelance or part-time work is a possibility.

Cut the extras: Keep track of every dollar you spend for a couple of weeks. Check to see if there are nonessential items that can be eliminated. Consider cutting that premium cable. Maybe increase the deductible on your auto insurance.

Set a budget: Build a budget - then revisit it. Are the results positive? Allocate specific amounts toward savings.

Do it yourself: Are there projects that you could safely do yourself such as home-maintenance items? Maybe you would enjoy the challenge of learning new skills and accomplishing new tasks.

Turn down the thermostat: Energy savings can really add up.

Park the car: Use public transportation if available.

Go debit: Pay cash instead of using credit cards. Using cash alone might help you reduce your spending. Credit cards can trick you into thinking you have the money when in reality you don't. Not only do you spend more money but also more in interest when you are paying the card balance off.

Buy used: There are plenty of used items - for example clothes and cars - in relatively good condition that are available for sale.

Wait to buy: When you are shopping and your heart leaps at the sight of ABC product, just wait a while. Don't buy on impulse. If you see the product some time later, do you still have same the level of interest? Question all your purchases - do you want that everyday coffee more than a comfy retirement? If it is not a necessity or making you any happier, then perhaps you shouldn't purchase it.

Use vs. cost: It might be worth it to spend more on things you use a lot - a new mattress, for example. Buying a dress to wear once probably doesn't figure well on the use-per-cost ratio. Perhaps forgoing the purchase is a better option.

Save the raise: When you earn a raise, consider saving a portion or all of it in your retirement account.

Duplicates: Consider the items that you already own. De-clutter your home and take some time to inventory what you have.

Remember that even if you can't contribute the maximum catch-up, do what you can. Small amounts over time add up to large amounts at retirement. Once you start, you might be surprised at the momentum you generate going forward. It can be fun watching your savings grow. Consistent savings is the key to meeting your goals and your dreams going forward.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at Your question and his response might appear in a future column.

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