How to Catch Up on Retirement Savings (2024)

“Start saving for retirement as early as you can.”

If you’ve heard someone say this before and realized it’s much easier said than done, you’re not alone.

According to a GoBankingRates survey, about 1 in 3 Americans have absolutely nothing saved for retirement and about 20% have less than $10,000 saved.

It’s hard to think about saving for retirement when you’re drowning in debt and bills as those circ*mstances could understandably lead you to faLL behind on contributions.

So what do you do when time is no longer on your side and you’re behind on your retirement savings? Here are a few options to help you catch up.

Increase Your Savings Rate

Let’s say you didn’t have the money to invest much in retirement throughout your 20s and you are just getting started in your 30s. You may not have a net worth as high as someone who started saving for retirement when they were 21, but all hope is not lost.

You just need to increase your savings rate instead of implementing a risky strategy like investing in individual stocks and hoping they triple in value.

If you receive an annual raise, put that money toward your retirement account instead. Ask your employer to withhold more from your paycheck or set up automatic contributions each month so you don’t have to worry about it.

You can even sign up for a free Digit account so you can save extra spare money from your checking account automatically and put it toward retirement instead of spending it.

If your employer offers a 401(k) match, try to contribute enough to receive the match because this is one of the easiest ways to boost your retirement fund.

Get a Side Hustle and Contribute The Extra Money

If you don’t have 35-40 years left until you’d ideally like to retire, you’ll need to increase your income so you can catch up on your retirement savings.

There are many flexible jobs you can do to earn extra money. Determine what your skills are and what type of work you’d be interested in doing.

You can get a part-time job, try freelancing, tutor students, get a work-from-home customer service job, babysit or pet sit, photograph weddings, try voiceover acting, drive for Uber or Lyft, etc.

Try to earn at least a couple hundred dollars each month or even $1,000+ so you can invest a large majority of it. That way, you can use the income from your day job to meet your regular living expenses.

Plan to Work a Few Extra Years

If you’re getting a late start on saving for retirement, you might want to consider working a few extra years so you can play catch up. If you are content with your current job and able to put in a few extra years of work, this may not be a huge issue.

On the other hand, you may want to find another job you can do that would be more sustainable long-term or even switch careers if you can’t see yourself working your current job in the future.

You can also lower your living expenses during this time so you can maximize savings. Giving yourself a few extra years could allow interest to compound and your nest egg to grow even more instead of trying to retire without having enough money to live comfortably.

Take Advantage of Catch-Up Contributions

For most retirement plans, you will be able to make catch-up contributions once you reach a certain age which is usually around 50-55.

For workplace retirement plans including 401(k) and 403(b) plans, people over the age of 50 can currently stash away and extra $6,000 for the year.

For individual retirement plans, you can contribute an extra $1,000 per year to your Roth IRA and an extra $3,000 per year to your Simple IRA. While you can’t make catch-up contributions to a SEP IRA, you can contribute up to $54,000 annually.

Retirement plan catch-up contributions generally increase each year to keep up with inflation and the cost of living which means you can plan to contribute even more than these amounts in the future.

While you can’t foresee the future and what your income will be like once you reach 50, you can plan to make catch-up contributions to increase your retirement fund.

If you plan on retiring at 65 and start making catch-up contributions at 50, you’ll still have 15 years to save enough for retirement.

Talk With a Certified Financial Professional to Develop a Game Plan

Finally, you’ll want to consider speaking with a financial professional like an advisor or financial planner who can examine your unique situation and help you develop a plan to adjust your investments so you can catch-up on retirement contributions.

If you’re having trouble doing the math and figuring out the best solution for you, talking to an advisor can help you determine what your next step will be given how much time you have left before you wish to retire.

Seeking out a fee-only financial planner would be ideal since they accept a fee paid by the client for their services and do not earn any extra commissions or incentives based on trying to sell you special stocks and financial products.

The Financial Gym, provides one-on-one training sessions (online or in person) with certified financial trainers who can help provide you with the tools, resources and back-end support you need to work toward and meet several of your financial goals including saving for retirement. If you decide to use them tell them we sent you!

Summary

Bottom line, it’s not too late to start saving for retirement even if you are getting off to a later start. It may be more tricky, but there are still options for you to take advantage of to catch-up on your contributions so you can retire comfortably one day.

The key is to take action now.

Have you started to save money for retirement? What caused you to get started or what is holding you back? What do you think is the best way to play catch-up for your retirement fund?