Pure’s Senior Financial Advisor, Sumit Mehta, CFP®, AIF®, highlights the most common IRA mistakes people make in their 50s and 60s and how to avoid making them.
Transcript
If retirement is on the horizon, your IRA is one of the most powerful tools you have. But even the most diligent savers can make a few costly mistakes along the way, often without even realizing it. Today, I’m walking you through the most common IRA mistakes people make in their fifties and sixties, and more importantly, how to avoid them.
Mistake number one, not taking advantage of catch-up contributions. Now, here’s one of the biggest missed opportunities I see. Most people just assume their contribution limit is fixed and it’s not. After 50, you get extra runway, which is called a catchup contribution in 2026. That means you can put in $8,600 a year into a traditional or Roth IRA instead of the standard 7,500.
That extra $1,100 a year. Compounded over 10 or 15 years can make a meaningful difference in your retirement balance. Mistake number two. Forgetting about required minimum distributions. The IRS requires you to start withdrawing a minimum amount from your traditional IRA each year. Miss the deadline, you could face a penalty of up to 25% of the amount you should have withdrawn.
A lot of people don’t even know this clock is ticking until they’re already in their seventies. Mistake number three, ignoring the Roth conversion opportunity. Many pre-retirees assume that a traditional IRA is always the right choice, but here’s something worth considering if you expect your tax rate in retirement to be higher than it is today.
Converting some of your traditional IRA funds to a Roth IRA might save you significantly in the long run. Mistake number four, naming the wrong beneficiary or none at all. When did you last check the beneficiary listed on your IRA? Now it’s important to note that your will or trust does not automatically name your IRA beneficiary.
That’s determined by the specific beneficiary designation form on file with a financial institution that holds your account. And this supersedes any instructions in a will or trust. Now your IRA is one of the hardest working assets in your retirement plan. Download the ultimate IRA guide. Or if you’re ready to find out which financial solutions work best for your personal retirement needs schedule your free assessment with Pure today.
Subscribe to our YouTube channel.
IMPORTANT DISCLOSURES:
- Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
- Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
- All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
- Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
AIF® – The AIF® designation, administered by the Center for Fiduciary Studies fi360, certifies that the recipient has specialized knowledge of fiduciary standards of care and their application to the investment management process. To receive the AIF Designation, the individual must meet prerequisite criteria based on a combination of education, relevant industry experience, and/or ongoing professional development, complete a training program, successfully pass a comprehensive, closed-book final examination under the supervision of a proctor and agree to abide by the Code of Ethics and Conduct Standards. Six hours of continuing education is required annually to maintain the designation.
CFP® – The CERTIFIED FINANCIAL PLANNER® certification is by the CFP Board of Standards, Inc. To attain the right to use the CFP® mark, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. 30 hours of continuing education is required every 2 years to maintain the certification.
