For those who have reached their 50s, retirement is no longer a long-term event, but just around the corner. To prepare for a situation in which less income is coming in than going out, it makes sense to look beyond Social Security and maximize any possible tax-advantaged savings routes.
For those without employer-sponsored plans, one attractive pathway is the Roth individual retirement account, which allows those 50 and older to make annual contributions up to $7,000. This contribution limit applies to anyone who earns less than $124,000 ($196,000 for married couples, filing jointly). Beyond this point, reduced contributions are available to those who earn under $139,000 ($206,000).
An advantage of Roth IRAs, as well as Roth 401(k) plans, is that contributions take place after-tax and withdrawals are tax-free. If you believe that taxes are likely to rise in the future to service government debt, this could present a major benefit. At the same time, it makes sense to maintain a moderate-risk portfolio that includes equities as a way of ensuring that assets stay on pace with inflation. For many approaching retirement, this means a 60-40 portfolio, with 60 percent reserved for equities and 40 percent for fixed income holdings.
