How to Catch up If You’re Way Behind on Saving for Retirement
Life comes at you fast. One day, you’re 20 years old with a bright future ahead of you. Next thing you know, you’re 50 and realize you’re not saving enough for retirement. Hey, don’t be embarrassed — it happens to a lot of us. In fact, 56% of Americans feel behind on saving for retirement, according to a BankRate survey. It’s never too late to boost your retirement savings. But you shouldn’t put it off any longer. “Fifty is a pivotal age,” says Ryan McPherson, founder of Intelligent Worth, a financial planning firm in Atlanta. “You’re 10 to 15 years away from retirement and still have enough time to make major changes if needed.” So, what should you do if you’re in your 50s and your 401(k) account isn’t up to par? We asked professional financial planners. Here’s what they told us:
1. Sock Away More, Get Free Money
For starters, you absolutely, definitely need to take full advantage of your employer’s matching contribution to your 401(k) plan. “Take advantage of your full company match,” says Jeff Dixson, a financial adviser in Vancouver, Washington, who hosts a radio show called the Retirement Coach. “If they match 3%, contribute 3%. If they match 6%, try to get to 6%. That’s free money. There’s nowhere else you’re going to get free money.” This new tool from The Penny Hoarder can help you save $500 on car insurance.
2. Try a Retirement Calculator
To visualize the power of compound interest, noodle around with a retirement calculator. These calculators will ask you for things like your age, how much money you can save per week, and whether your preferred investment risk level is conservative, moderate or aggressive. Then it predicts how much money you’ll have socked away by the time you turn 62. Try out different savings amounts and risk levels. It’s really eye-opening. Make your money work harder for you with The Penny Hoarder’s top picks for savings accounts.
3. Watch out for Hidden 401(k) Fees
Hidden fees can erode your retirement nest egg over time. You can combat this problem by using as many of the index fund offerings that might be available within your 401(k) plan, as they tend to have hidden fees that are a fraction of what actively managed funds charge. Looking for new ways to save? Try one (or all!) of The Penny Hoarder’s top picks for money-saving apps.
4. Catch up After 50
“Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions,” says David McCormick-Goodhart, a financial adviser with Savant Capital Management in McLean, Virginia. The personal 401(k) contribution max is 23,000 in 2024. People in their 50s and 60s can contribute an extra $7,500 per year — known as catch-up contributions. In the market for a new checking account? Here are The Penny Hoarder’s top picks.
5. Make a Plan
Sit down with someone who specializes in retirement income planning, suggests Dixson. “The whole point of saving for retirement in the first place is to build a nest egg that you can eventually turn into consistent monthly income,” he says. “Wouldn’t it make sense to figure out how much you actually need to save rather than winging it?”
6. Reevaluate Your Spending
Write down everything you spend money on — and how much you spend. “Circle the discretionary items that bring you the most joy,” says McPherson. “Next, circle the ones you could do without. Holding your income constant, something must be cut for you to save more.” Looking for some work flexibility? You can do these 17 make-your-own-schedule jobs from home.
7. Don’t Be Too Conservative or Too Risky
People tend to invest more conservatively with their 401(k) as they age, putting more of their savings in bonds instead of stocks. That sounds like it makes sense. Stocks will generally give you a higher return than bonds, but they’re also more volatile and can suddenly drop in value. But don’t get too conservative, say the experts. Ultimately, it’s all about balancing risks. Here’s The Penny Hoarder’s roundup of six lower-risk investment options to add to your portfolio in retirement.
8. Get a Side Gig
“You’ll want to consider developing a second stream of income,” says Nathan Garcia, a financial planner with Strategic Wealth Partners in Fulton, Maryland. “This income could be as little as $1,000 per month. However, that surplus could be beneficial for replacing income that is now being diverted into your 401(k). There are also significant tax advantages available to business owners, allowing them to write off ordinary expenses such as a cell phone, internet, transportation, etc.” Need some ideas? Here are 15 ways retirees can work from home and make extra cash in 2024.
9. Be Prepared for Hard Choices
“Most people don’t start seriously saving until their kids are out of college. Until then, retirement doesn’t seem real,” says Garcia, the Maryland financial planner. “If your kids are still in college, consider allowing them to pay for their education with student loans so you can divert savings to your retirement. There are loans for college. There are none for retirement.” Wrangle your grocery budget with these 25 tools and tricks to save you $100 (or more)!
This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can't personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.
