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VOL. 129 | NO. 158 | Thursday, August 14, 2014

Dana and Ray Brandon

Over 50 – Should You ‘Catch Up’?

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Ray’s Take: If you’re age 50 or older, you can make extra “catch-up” contributions to certain types of tax-favored retirement accounts.

Is this something you should take advantage of? On the surface, it seems like a positive for your retirement account. But take a long honest look at why you are going to make those catch-up contributions and check your plan to make sure you qualify. There is a lot of information out there regarding these types of contributions, and you need to separate the good from the not so good.

If it means you are saving more and truly “catching up,” then is could be a good decision for you. Maybe you weren’t able to make contributions or only small contributions to your 401(k) or IRA in past years. This could assist you under those circumstances.

But where will that money come from? If you are reducing your current lifestyle to fund the additional savings, then great. If you’re increasing your credit card or HELOC or eating into your emergency fund to sustain lifestyle to compensate for the additional deductions, then probably not. It’s always best to start with a plan. If you’re already on track to reach your objectives without additional funding, why would you do it? Just be sure your choices are objective driven. I have seen people make draconian current lifestyle choices for that “some day” only to stress themselves into an early grave. Without a crystal ball, it’s always a balance.

Dana’s take: When we were kids, we were allowed to call a “do over” under certain circumstances in certain games. This is known as a mulligan in the game of golf.

For the Baby Boomers out there, the catch-up rule was created to help you reach retirement goals as you approach the transition from career to retirement. Educate yourself. Look at all the positives and negatives associated with this rule. Discuss your finances with your significant other to see how you might be able to use this rule to your advantage, or not as the case may be.

If your circumstances meet certain criteria in your financial plan, the “catch up” for those over 50 might be just the thing to help you meet goals that you set up for your golden years. Take charge of your plan and your future.

Make sure you have your money under control. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went.”

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.

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