If you're counting down to retirement, you're most likely looking forward to the days when you'll be able to kiss your alarm clock goodbye. But before you close out your career, there are a few benefits you want to consider claiming before your window of opportunities expires.
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1. Earn free money from your employer's 401(k)
Unless your employer has a lousy 401(k) plan, you'll probably want to dump more money into the account before you leave the working world. This year, you'll be able to take advantage of the biggest 401(k) contribution limits we've ever seen. If you're over 49, for example, you're allowed to stash away up to $30,500 into a 401(k).
Your employer may offer a matching incentive, which can make contributing to a 401(k) even more appealing. Let's say your employer matches 100% of what you contribute to your 401(k), up to 5% of your salary. In this case, if you're making $100,000 per year, then a 100% match on the first 5% of your salary would be $5,000. So you'll need to contribute at least $5,000 to your retirement plan to get the full 401(k) match from your employer.
If you keep up with the maximum contributions to a 401(k) for the next three years and your employer keeps chipping in a 401(k) match, you could easily add an extra $100,000 to your 401(k) within the next three years if you are age 50 or older. But if contributing the max to a 401(k) doesn't work well for your finances, you want to contribute enough to help you snag as much free money from your employer as you can. Don't forget to check your company's vesting schedule to see how long you'll have to wait before you own all the money your employer contributes to your 401(k).
2. Build your own tax-advantaged retirement portfolio
A 401(k) can be very rewarding, but it often comes with limited investment options and fees. If you open an individual retirement account (IRA), you'll get more flexibility to choose the investments you want without the high fees.
So if you don't have an IRA yet, you might want to start researching the best IRA accounts to house your money. When you stop working and the Social Security benefits start rolling in, you won't be able to fund an IRA because you need earned income to contribute to these accounts.
For 2024, you can tuck away up to $7,000 in an IRA if you're under 50 and up to $8,000 if you're older. Since you have extra time to contribute money to IRAs, you can still add funds to your 2023 Roth IRA until April 15. You're allowed to contribute up to $6,500 if you are under 50 and an extra $1,000 if you're older.
At this point in the year, you have a chance to max out your 2023 and 2024 IRA and add $13,500 to your account. If you qualify for a Roth IRA, you'll be able to contribute after-tax dollars now in exchange for tax-free income during retirement.
3. Take advantage of credit card rewards
If your finances are in order and you have a good track record of paying your bills on time, a new credit card could boost your benefits in retirement. For example, if you've already started creating your travel bucket list doing retirement, a travel credit card could make your experience sweeter. You may be able to rack up miles for purchases, earn hotel benefits, and gain access to airport lounges.
Since you have a higher chance of getting approved for credit cards while you're still earning money, you might want to look into them before you leave your job. You can do your research now and compare credit cards based on the benefits that matter most to you. You might even qualify for a larger credit line, since you most likely have more income coming in now.
But if you feel trapped by credit card debt and your spending is out of control, you should skip this tip. A credit card will only add value if you understand how they work and how to make the most of them.
You can set yourself up for an enjoyable retirement if you make the most of your working years. So before you close out your career, think about what type of life you want to live during retirement, and take advantage of all the benefits you can unlock right now to make it possible.
