Adequate Retirement Savings

Answer: A - Increase her 401(k) contributions to the maximum allowable annual amount for her age to maximize tax-deferred growth.

Explanation:

Option A is the best recommendation because Mary, at age 52, has 15 years remaining until her planned retirement at age 67. Increasing her 401(k) contributions to the maximum allowable limit will maximize her tax-deferred growth, enabling her to accumulate more assets for retirement. In 2024, the 401(k) contribution limit for individuals aged 50 and above is $30,000 (including the $7,500 catch-up contribution). By contributing the maximum, Mary will also lower her taxable income, benefiting from immediate tax savings, which is particularly advantageous at her income level.

• Option B (Focus on Paying Down Mortgage): While paying down debt before retirement is beneficial, it’s essential to first prioritize maximizing retirement savings, especially with the tax benefits of 401(k) contributions. With her 15-year time horizon, Mary can benefit more from tax-deferred growth.
• Option C (Open a Taxable Brokerage Account): Though a taxable brokerage account offers flexibility, it doesn’t provide the same tax advantages as a 401(k). For Mary’s goal of retirement savings, maximizing contributions to her tax-deferred 401(k) is preferable.
• Option D (Stop 401(k) Contributions and Open a Roth IRA): A Roth IRA provides tax-free withdrawals in retirement, but Mary would lose her employer’s match and the higher contribution limits available in a 401(k). A Roth IRA may be beneficial in addition to her 401(k), but stopping her contributions would not be ideal.

In summary, increasing her 401(k) contributions allows Mary to fully utilize tax-deferred growth, employer matching, and catch-up contributions, aligning with her goal of ensuring adequate retirement savings.