Single Biggest Threat to Retirement While Working

​A standard retirement once consisted of a pension, Social Security, and personal investing. Since the 1990s, we have seen pensions go away for a majority of all privately owned companies. In 1983, a bill was set up to adjust the FRA (Full Retirement Age) for Social Security from 65 to 67, taking 43 years. The FRA has gradually increased to 67, and 2026 is the first year that everyone reaching age 62 has a full retirement age of 67. However, individuals can still begin claiming Social Security retirement benefits as early as age 62, although claiming before FRA results in a reduced benefit. Now there have been strong bipartisan efforts to push back FRA to 70!

In efforts to ease individuals into this transition, legislative changes enacted through the SECURE 2.0 Act allow a super catch-up for those who are 60 and still contributing.

Here’s what you are going to do. If you are younger than 50, implement an automatic 2% increase annually. If you are over the age of 50, ensure you are maximizing your retirement contribution amount of $32,500. Then use the super catch-up, since it is available for four years, when you are ages 60–63, to increase your contributions to $35,750. After age 64, the limits go back down to $32,500 a year. In the event that you have an after-tax account, you can make contributions at that same rate. After retirement, those after-tax dollars could be Roth contributions; talk to your CPA to ensure you meet the requirements.

When you don’t use those catch-up contributions or maximize an after-tax account, you could be setting your retirement back years. That, combined with waiting until later to claim Social Security or claiming a reduced benefit earlier, could put you in a position where you don’t have enough money for retirement. A common misconception is that to offset your income deficit, you need to have no debt. However, if you read my article last month on the three main components of inflation—mortgage, electricity, and groceries—these are expenses that are out of your control. The baseline of your investments will not be able to keep up with inflation.

I work with individuals to understand the benefits of their 401(k) and have put together a 12-week series talking about the power of their investments over the ability to pay down debt. Mindful investing is composed of a balance of budgeting and compound interest. With the right partnership early on, you will be able to use these tools for a more sustainable future. Sign up for our series below.

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