Once you reach the age of 50, you are getting very close to retirement. If you are behind with your retirement savings, this may be an intimidating period for you financially. Finding the right type of retirement account can be essential so that you make sure you have enough money to retire on. There are several accounts that you could use at the age of 50 to help your retirement savings.
The 401(k) is one of the best options for you to consider if you are over the age of 50. With the 401(k), you can make a catch-up contribution of $5,500 in addition to the annual contribution of $16,500, as of 2010. This allows you to put aside more money than most of the other retirement accounts once you reach the age of 50. If you are a sole proprietor, you can put aside even more money through a 401(k). With a solo 401(k), you could set aside as much as $54,500 per year depending on how much you make. This allows you to build up a retirement portfolio much quicker than you could with other options.
The Roth IRA is another option that you may want to consider if you are over the age of 50. With this type of account, the catch-up contribution is only an extra $1,000 on top of the $5,000 that you can contribute on an annual basis, as of 2010. With this account, you can set aside more effective money than you could with a regular IRA because you pay the taxes in advance. For example, you would have to designate more than $6,000 of earnings to set aside the full $6,000. When you reach retirement age, you can then take out money without having to pay any taxes on it. With this type of plan, you can also access many different investment options. Most Roth IRAs allow you to invest in things that you may not be able to access through a 401(k).
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If you are eligible for one, a 403b account can make a lot of sense for an individual over the age of 50. With this type of account, you can essentially set aside the same amount of money that you could with a traditional 401(k). To be eligible to access a 403b, you have to work for a public education organization or a nonprofit company.