The 2019 contribution limit for 401(k) plans and similar workplace retirement plans is $19,000 and for individual retirement accounts — whether traditional or Roth — it’s $6,000. People age 50 and older allowed to make so-called catch-up contributions of $6,000 for 401(k) plans and $1,000 for IRAs.
Also, part of having confidence in the savings aspect of your retirement plan is knowing how a stock market drop would impact your portfolio and how you’d react. That means examining your risk tolerance, which generally refers to both how well you can stomach volatility in the stock market and how long until you need the money.
Younger savers — those who won’t need the money for decades — generally can be more aggressively invested in stocks and not worry about volatile times or extended down markets.
“Historically the stock market is the best place to be,” Iammarino said. “You just have to be able to stay invested through the downturns.”
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For older savers with retirement on the horizon, you might need to adjust your asset allocation — your mix of stocks, bonds and cash — to reflect that looming milestone.
While no one can predict with certainty when the economy or stock market will sour or to what degree, the safe assumption is that when it happens, you’re more likely to react emotionally to a drop in your portfolio’s value if you haven’t anticipated it ahead of time.
“We call it the ‘freak-out risk,'” Iammarino said. “If you don’t have a plan in place, you risk going to cash at the wrong time — the bottom of the market — and then reinvesting at the top of the market.”
The bottom line is that if you prioritize retirement savings and create a plan that matches your goals and vision for you golden years, you’re more likely to have peace of mind.
“When people have a plan that accounts for whether things go well or bad, they have a better chance of succeeding,” Iammarino said.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
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