Catching Up.

So say you're in your 50s now, you've started to do some math about your retirement assets and perhaps that math is a little light on savings.  What can you do?  Use the "catch-up" provisions the government gives you for IRAs and 401(k)s.  The chart above from The Northern Trust does a pretty good job of explaining how much extra you can sock away each year.  You can also delay retiring and accumulate more assets.    The Wall Street Journal ran an article about this today.  This chart is used by Suzanne Shier and the other advisors in the Northern Trust's Wealth Advising group.  Here's what I think is the main point in the article with my highlights.

“Showing people the benefit of making the effort to save a little more tends to be very powerful,” {Ms. Shier} says.For instance, the hypothetical 50-year old 401(k) saver who makes catch-up contributions could have a $1.07 million nest egg at age 65 vs. $925,000 if he or she contributes at the maximum level for younger workers. Continuing catch-up contributions to age 70 could boost that sum to $1.58 million.

Ms. Shier says Northern Trust advisers raise the topic of catch-up contributions with every client approaching age 50. Sometimes, she says, it can make the goal sound less daunting if the adviser breaks down the $6,000 annual 401(k) catch-up contribution into the amount the client would have to set aside from each paycheck—for instance, about $230 every two weeks."

Two-earner couples have twice as much to gain by using the catch-up strategy, adds Ms. Shier."

This is such an obvious investment thing for most people to do that I'm amazed you don't see more written about this topic.  I will say though these calculations get thrown off in a big way if you don't get that 6% growth the chart above assumes is the baseline.  We're all going to have to save more if we are in a 2-3% growth world.  

2-3% growth is something you're going to hear me talk about more as we go forward.  Not that I'm saying that's what we're going to see, but I think it's prudent at this point in the cycle to have a scenario for how you should be investing in case that scenario turns out to be what comes down the highway.  

Back early next week.

Link:  Wall Street Journal {Article was accessed via preview section but may be behind a paywall}.  "Aha! How 'Catch-up' Contributions Boost Retirement Savings"