Bigger 401(k) Contributions Are Easier for Empty Nesters

Looked at your 401(k) statement lately? Your investment accounts are probably doing well overall, but the total still seems too small to maintain your lifestyle in retirement. You know you should have saved more in your 20s and 30s, but it wasn’t easy with a layoff, two kids, buying a home, and taking vacations. Now you’re fiftysomething, and the college bill for your youngest child looms. The family car needs to be replaced soon, too.

You wish you’d followed the classic advice in the 401(k) literature to regularly set aside at least 10 percent and maybe as much as 20 percent of income in retirement savings. The longer you wait, the higher the odds you’ll end up scrimping later in life. The save-early-and-steady mantra is sound advice. Yet the recommended percentages are often unrealistic. It’s little wonder the median combined 401(k)/individual retirement account balance for working households nearing retirement was only $135,000 in 2016, according to the Federal Reserve. That sum would provide about $600 a month in retirement as an annuity.