Feeling behind on retirement savings? Here’s how to catch up

If you feel like you’re behind on your retirement savings, you are not alone. Nearly 30% of homeowners aren't prepared to retire on time, but it’s never too late to start catching up. With a clear plan, realistic goals, and smart use of your assets—including your home equity—you can take meaningful steps toward building a secure and comfortable retirement.

How to catch up on retirement savings

Whether you’re in your 30s, 40s, or 50s and beyond, it’s never too late to boost your retirement savings.

Know where you stand

Start by taking stock of your finances. List your assets—retirement accounts, investments, cash savings, home equity, and other valuable items—and your liabilities, including mortgages, loans, and credit card debt. Understanding your net worth will help you see how much ground you need to make up.

Create a savings plan

Next, set a realistic plan to increase your contributions. Consider how much you’ll need in retirement to maintain your lifestyle—many experts aim for around 80% of pre-retirement income, but your personal expenses and goals may vary.

Trim your spending

Boosting savings often means adjusting your current budget. Track your spending, cut back on non-essential purchases like subscriptions, takeout, or personal services, and redirect those funds into your retirement accounts. Small changes now can make a big difference later.

Eliminate your high-interest debt

If you have high-debt, it is imperative to clear it before you reach retirement age.

High-interest debt, like credit card debt, acts as a road block for your retirement savings goals. Even if you are behind on retirement savings, paying down your high-interest debt should almost always come before making those catch up contributions. Interest can grow and compound far faster than the savings in your retirement account.  

Concentrate on eliminating your debt, and live as frugally as you can until it is gone. Your worry-free retirement depends on your ability to conquer your debt. Make whatever lifestyle changes that you have to, and remember that this is only temporary, in service of a goal.

Once your debt is gone, you can redirect the money you were spending on monthly payments to your retirement accounts.

Optimize your retirement accounts and max out your contributions 

With your spending and debt fully under control, you will be able to shift your attention more fully to your retirement accounts and retirement planning goals. 

Maximize employer-sponsored plans

If you have an employer-sponsored retirement plan, check to make sure you’re contributing enough to get an employer match (if your company offers one). 

Familiarize yourself with your investments. If you need help understanding your benefits, speak with your human resources department. If you want to make sure you’re optimizing your 401k plan, work with a tax advisor or financial advisor. 

Check to see how much your investments are costing you in terms of their fees and expense ratios. Also, make sure you’re invested in funds that match your risk tolerance.

Invest in additional retirement accounts

In addition to employer-sponsored retirement plans, you can open a Traditional or Roth IRA (individual retirement account) to increase your retirement savings. Keep in mind that each type of retirement account has different rules, limits, and tax advantages. Once you’ve maxed out all available retirement accounts, open a regular brokerage account and invest more.

Explore catch-up contributions

Certain types of retirement accounts, including IRAs, allow what’s called, catch-up contributions. This is when people age 50 or older can invest additional funds into their retirement accounts. 

For example, in 2023, the IRA contribution limit is $6,500, but individuals over 50 can invest an extra $1,000 annually. If you can afford it, make catch-up contributions every year.

Consider tax-advantaged accounts

If you have a Traditional IRA, but not a Roth, IRA, consider doing a Roth conversion. Many people prefer investing in a Roth IRA because you can withdraw your money in retirement tax free.

You can’t contribute directly to a Roth IRA if you exceed certain income limits the IRS sets. However, you can do a conversion. This is also sometimes called a back-door IRA. This method will cost you upfront but can save you thousands in taxes down the line.

Don’t be afraid to bring in an investment professional

A fee-only fiduciary or another kind of financial advisor can be a key part of meeting your retirement goals. Retirement planning and the great, wide world of investing can be overwhelming, so don’t be afraid to reach out for help. 

Your financial advisor will look at your expenses, your income, and your retirement savings goals in order to keep you on the right track. 

Increase your income 

While cutting back on your spending is always a good idea, growing your income can make an even larger impact on your retirement savings goals. Think about how you can use the skills you’ve built over a lifetime to add new income streams to your household. Start a small business, sell a craft, or tutor students in your neighborhood – or do anything else you can dream up. 

You can also invest in real estate. There are options for burgeoning real estate investors at every budget – whether that’s purchasing a rental property, building a backyard ADU to rent out, or investing in an eREIT. 

Remember, growing your income will always have a larger impact than just keeping down costs. 

Leverage your home equity to boost your nest egg

Over time, as you pay down your mortgage and your property potentially increases in value, the equity you’ve built can serve as a powerful financial resource. Even if you haven’t tapped into it yet, simply knowing the value of your home and how much equity you have can help you plan a stronger retirement strategy.

Home equity can act as a safety net, a source for future investments, or a way to fund major expenses without derailing your long-term savings goals. Understanding and tracking this value allows you to make smarter financial decisions and feel more confident about building your nest egg.

• Home equity line of credit: A HELOC lets you borrow against your home’s equity only when you need it, like a credit card, with a set credit limit and draw period. You typically pay interest only on what you use, giving flexibility and control.
• Home equity loan: A home equity loan provides a lump sum based on your home’s equity, with fixed monthly payments and terms, making it easier to plan larger expenses or consolidate debt.
• Home equity investment (HEI): An HEI provides a lump sum in exchange for a share of your home's future appreciation. There are no monthly payments over a flexible 30-year term. Instead, you'll repay the investment plus share of the home'c change in value when you refinance, sell, or use another source of funds.