Expert Reveals the Right Time To Stop Funding Your Retirement Accounts
Written by
J. Arky
Edited by
Zuri Anderson
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Anyone who is looking forward to retirement one day might be saving up by adding contributions to a 401(k) plan, 503(b) plan or another type of savings account.
How much and how frequently you put funds into one of these accounts will depend on your age, work and financial lifestyle, but there are a few key indicators of when it is time to stop putting money into these accounts.
GOBankingRates spoke with experts who revealed the right time to stop funding your retirement accounts.
Reaching Social Security and Medicare Eligibility
“Having the contributing portion of your retirement savings journey ingrained is helpful while working towards maximizing your savings,” explained Madison Hoffman, the Madison Trust Company resident financial expert. Hoffman noted that after a certain period in time, continuing the accumulation process may no longer hold the same advantageous weight as it did previously.
“This is especially true as you reach the required minimum distribution age and start receiving Social Security benefits and/or Medicare eligibility,” Hoffman went on to say. “If your income is slated to decrease during retirement or if you’ve already reached your ideal retirement balance, you may consider adjusting your contribution amount. Depending on your retirement plan, continuing to submit the same contributions could place you in a higher tax bracket or mandate you to take out larger required minimum distributions.”
Shifting Strategies for Tax Purposes
Like all things related to personal finances, there is a certain consideration to take into account with any money moves related to retirement: Taxes, particularly if you have found yourself in a higher bracket of income over the years.
“If you’re a high net-worth individual, you may consider shifting your strategy to reducing future tax liabilities or perhaps utilizing a tax-advantaged retirement account, such as a Self-Directed IRA (SDIRA),” Hoffman suggested, adding that SDIRAs allow alternative investments that diversify your retirement portfolio, while simultaneously letting you accrue tax-advantaged growth.
Alternative Strategy: Continue Contributing
Alternatively, maybe it’s better to keep funding your retirement account for the foreseeable future, according to Aaron Razon, a personal finance expert at Couponsnake.
“The way I see it, the right time to stop putting money into your retirement account is never,” Razon shared. “The truth is, one can never have too much saved up for retirement, I mean, many Americans enter into their retirement years to find that what they estimated would be enough, is barely enough.”
Razon continued to break it down that the number one reason you shouldn’t stop putting money in your retirement account ever, is that your retirement accounts aren’t like other accounts.
“They have compound interest and tax benefits that make them even more profitable, and they not only help your retirement funds grow significantly, but also cushion your financial future in a way that regular accounts just can not match,” concluded Razon.
More From GOBankingRates
