Congratulations! Your youngest child is ready to move out of the house, leaving you with the proverbial “empty nest.”
That should free up some time and cash, as your parenting responsibilities and household both move into “downsize” mode.
Now is your chance to take that class you always wanted to, or volunteer for your favorite cause, or maybe just stop procrastinating and start hitting the gym. Go for it! Your time is finally your own.
But what’s the best thing to do with that extra cash?
Here’s a great idea to shift your retirement planning into overdrive and help you cut next year’s tax bill (perfect timing given the tax hikes on the way!).
In 2013, if you are age 50 or over by the last day of the year, you can put an extra $1,000 into your Traditional or Roth IRA (for a total of $6,500).
You can also put an extra $5,500 into your 401(k), 403(b), 457, or TSP (for a total of $23,000).
If you’re covered by a SIMPLE-IRA at work, you can put an extra $2,500 into the plan (for a total of $14,500).
Here’s proof your extra savings can make a big impact:
If you make the extra contributions to your IRA and 401(k) from age 55, the age of the average empty nester, to retirement at age 65, you can boost your retirement nest egg by more than $100,000, based on a fairly modest 6% per year growth rate!
Tip: Did you know that the amount you can contribute to your IRA, 401(k), or SIMPLE-IRA is increasing in 2013? For updated retirement plan contribution amounts, see our recent blog post.