Supersize your nest egg before it’s too late!
If you’ve reached the age of 50, you’ve probably had a moment of dawning realization regarding your financial future. Perhaps you’ve taken a look at your retirement nest egg and found it a bit wanting.
In the US, women outlive men. According to 2022 data from the US Centers for Disease Control and Prevention, women’s life expectancy is almost 80 years, versus nearly 74 years for men.
For many years, a common objective for Americans was to build a nest egg of at least $1 million in order to live their golden years comfortably. Reaching that sum would, in theory, enable the individual to live off of the retirement investment income generated annually.
However, based on annual inflation, the ideal size of a nest egg continues to grow as the purchasing power of the dollar diminishes.
If you’re in your 50s and want to supersize your nest egg to build a kitty for your golden years, here are some ways to do that so you can retire with a greater sense of security.
1. Max out on your employer match
There’s a great advantage when it comes to contributing the maximum allowed to your 401(k) plan. But even if you’re unable to save that much, at least ensure that you’re stuffing enough into your 401(k) plan to get the employer match.
Chances are you’ve heard this a million times by now, but this really is free money. It’s one of the most effective ways to supersize your nest egg.
Companies take different approaches to how they match, but sometimes the company’s contribution can be pretty generous. For instance, let’s say your company matches your salary dollar for dollar up to 4%. If you make $50,000, that means that you can potentially get an extra $2,000 for retirement each year by not lifting a finger but saving a bit more.
2. Take advantage of the retirement catch-up provision
The US government is always ready to add a little extra boost to your retirement savings efforts. If you’re 50 or older, another way you can supersize your nest egg is by taking advantage of “catch-up” provisions in the tax code that enable you to contribute more to your retirement accounts.
For instance, if you have a 401(k) plan, you can contribute an additional $7,500 a year once you turn 50. If you have an IRA, whether it’s a traditional one or a Roth one, you can add an extra $1,000 to your contribution every year, starting the year you turn 50. The best thing you can do is have a notebook to write down the figures so you can keep track of them (this notebook is ideal for this).
The amount Uncle Sam allows you to contribute to these retirement savings accounts usually grows as the years roll on. These bigger contribution limits can make a huge difference and can help you supersize your nest egg.
3. Open a self-employed 401(k)
Nowadays, millions of workers earn a living as contractors or freelancers. This is what’s called a “gig economy.” Millions of other people own small businesses, many of which are one-person shops.
Luckily, working on your own doesn’t preclude you from opening a 401(k) account. Solo workers and entrepreneurs can open a self-employed 401(k) account, often known as a “solo 401(k).”
These accounts give you the chance to add huge amounts of money to your retirement savings every year. If you’re self-employed, this is by far one of the most effective ways to supersize your nest egg.
For instance, you can make the same amount of $23,000 in employee salary deferral contributions as any other employee with a 401(k) plan. Furthermore, you can make a profit-sharing contribution of as much as $69,000 in 2024.
If you’re self-employed, the solo 401(k) might be the single best method to supersize your nest egg.
4. Sign up for a health savings account
A health savings account, also known as an HSA, might just be the best hidden secret in the whole tax code. It’s an effective tax advantage that can help you supersize your nest egg and ensure you’ll live a comfortable retirement.
Firstly, you can deduct your contributions from your taxes for the tax year during which those contributions were made. Another great thing about the HSA is that any gains on your contribution are tax-free. Thirdly, withdrawals are also tax-free when used to cover qualifying health care expenses.
To put it another way, you will never owe taxes on money that passes through an HSA, as long as you follow the IRS rules for using the funds to pay for qualified health expenses.
For 2024, HSA contribution limits are as follows: $4,150 for those with self-only health insurance coverage and $8,300 for those with family coverage.
On top of that, you can again make a catch-up contribution. However, for this one, you must be 55 or older to enjoy the advantages of this provision, which is limited to $1,000 for 2024.
Keep reading to discover other ways to supersize your nest egg!
5. Get a side gig
By the time you’re 50, you’ve accumulated a lot of smarts and wisdom, both professionally and personally. While the Big 5-0 might be a little too early to retire, it’s not too early to start planning your golden years.
There are many ways you can bring in extra income to supersize your nest egg. For example, you can use your skills and make some money out of them. Whether you’re proficient in Microsoft Office, good at fixing TVs and computers, or know how to play guitar or piano, there are always people looking for someone to teach them something or fix something. Or you can become a tutor if you’re particularly knowledgeable in a certain subject.
6. Become a landlord
Investing in real estate has long been a go-to plan for those with limited financial resources who want to retire in relative comfort. One of the best methods to grow your income and supersize your nest egg is to purchase a rental house or duplex and let your tenants’ rent checks cover the mortgage over a number of years.
Yes, being a landlord comes with some risks. You have to screen tenants carefully to ensure that you won’t wind up with a troublemaker. And even if you tick off all your due diligence, things can still go wrong.
But owning rental properties brings passive income, and it’s one effective way to make money without actually having to work for it.
And here’s a bonus tip for those who really want to boost their profits: When you sell a rental, you’re subject to the capital gains tax on the profit—unless you’ve lived there for two of the five years prior to selling the property.
So, if you can do that, move into the property for a few years before selling. This trick could save you tons of thousands of dollars in taxes, money that you can use to supersize your nest egg.
7. Work a little longer
If you’re 50 or older and you’re not comfortable with what your retirement savings look like, it might be time to bite the bullet and work a bit longer than planned.
Staying at your job longer allows you to save more money before you finally leave the workforce for good. Moreover, working longer might increase the size of your monthly check once you apply for Social Security.
Remaining on the job for a few more years can also supersize your nest egg, especially if you’ve reached the point in your career where you’re well compensated for what you do.
If you liked our article on ways to supersize your nest egg, you may also want to read Retirement Milestones: 11 Important Age Deadlines.
