Maxed Out On Your Ira And 401(K)? Two Possible Next Steps To Take


If you are contributing the maximum amount to your 401(k) or other employer-sponsored retirement plan each year, that’s good.

And if you’re also maxing out on your Individual Retirement Account (IRA) annually, that’s even better.

But what then? If you’re already fully funding your 401(k) and IRA, can you put away even more for retirement? Should you?

The answer to this last question is almost certainly “yes” — because you could spend a long time in retirement.

How long? Consider these statistics from the Society of Actuaries:

A man who’s reached age 65 in good health has a 50-percent chance of living 20 more years and a 25-percent chance of living to age 92.

A 65-year-old woman has a 50-percent chance of living to age 88 and a 25-percent chance of living to 94.

There’s a 50-percent chance that at least one member of a 65-year-old couple will live to 92 — and there’s a 25-percent chance at least one of them will reach age 97.

Because you have a reasonably good chance of spending two, or even three, decades in retirement, you need to accumulate substantial financial resources before you retire.

So, if you consistently reach the contribution limits on your 401(k) and IRA, you’re making a smart move, as both these vehicles offer the potential for tax-deferred earnings and a variety of investment choices.

But if you can still afford to put away more money, or if your income level prevents you from contributing to a Roth IRA, you may want to look at these possibilities:

• Life Insurance Retirement Plan — A Life Insurance Retirement Plan (LIRP) is essentially a life insurance policy that can potentially help you generate tax-advantaged income during your retirement years.

Until you begin taking withdrawals, the cash value of your policy has the potential to grow tax deferred.

When you retire, you can take tax-free payouts from your principal. And your beneficiaries will receive the balance of the death benefit income tax free, minus any loans or loan interest.

• Annuities — You might find that a fixed annuity can be an appropriate way to supplement your retirement income.

Like a LIRP, a fixed annuity’s earnings have the potential to grow on a tax-deferred basis. Also, fixed annuities generally offer some type of guaranteed rate of return over the life of the annuity contract. And perhaps most importantly, you can structure your annuity to provide you with an income stream you can’t outlive.

While you can certainly get some key benefits from a LIRP and a fixed annuity, you need to understand all aspects of these investment vehicles and make sure they are suitable for your situation and individual needs.

Consequently, before investing, consult with a financial professional.

But don’t wait too long. By preparing for your retirement well ahead of time, you can boost your chances of enjoying the type of golden years lifestyle that you’ve envisioned.

Mike Blaes is a licensed financial advisor with the firm of Edward Jones. For more information, call him at (928) 476-6427.

This article was written by Edward Jones for use by your local Edward Jones financial advisor.


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