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

It’s never too late to learn how to catch up on retirement savings. No matter your age, there are steps you can take to create a better financial future.

Catherine Collins
November 1, 2023

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If you feel like you’re behind on your retirement savings, you are not alone. According to a Bankrate poll, more than half of Americans say they don’t have enough saved for retirement. Luckily, it’s never too late to learn how to catch up on retirement savings. No matter your age, there are steps you can take to create a better financial future.

How to catch up on retirement savings

Here how to start increasing your retirement savings, whether you’re in your 30’s, 40’s, or even 50 years old and beyond.

Know where you stand

Before you catch up on your retirement savings goals, first, know where you stand today. Sit down and use an app or a pen and paper to write down all of your assets. Your assets include your home, your retirement accounts, other investment accounts, your car, cash savings, and more. Make a note of how much equity you currently have in your home.

Next, write down your liabilities. Your liabilities are your debt, including your mortgage loan, car loan, personal loans, credit cards, student loans, and anything else you owe to someone else.

Ideally, plan to maximize your assets and minimize your liabilities by retirement age.

Create a savings plan

Once you’ve done that, the next step is to create a plan to start saving more for retirement. 

Keep your retirement savings goals achievable

We’d all love to retire with millions in the bank, but that’s not always possible. If you’re catching up on retirement savings, you need a goal that reflects your living expenses. 

A common retirement-planning benchmark is aiming for 80% of your pre-retirement annual income when you stop working. However, depending on your expenses and retirement plans, you may be able to get by with less. 

Spend some time figuring out how much you’ll need in your retirement savings to live the kind of life you want. Once you know how much, you can start planning how to catch up on retirement savings. 

Build a more frugal budget

In order to prepare for the future, you may need to cut back in the present. Your retirement savings goal will need to be prioritized over unnecessary expenditures. Start tracking your spending and looking for opportunities to cut back. 

Trim any unnecessary subscriptions, reduce the your monthly takeout orders, and look for opportunities to save on things like personal services, shopping, and lawn care. By tracking your spending, you’ll be able to figure out what really matters and where you can afford to trim in order to meet your savings goals. 

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

In addition to making a plan, tracking your spending, increasing your income, assessing your retirement accounts, and seeking professional advice, you can also leverage your home equity to help afford your expenses during retirement.

Many people nearing retirement have a large portion of their wealth stored in their home. If you are concerned about having enough to live on in retirement, you can downsize or tap into your home’s equity to increase cash flow. Here are some options to consider.

  • HELOC: A home equity line of credit enables you to use equity only when you need it, similar to a credit card. You typically have a credit limit and a draw period.
  • Home equity loan: A home equity loan is when you leverage the equity in your home to get a loan. These loans typically come with terms and set monthly payments over a period of time.
  • HEI: A home equity investment is when a company purchases an equity stake in your home. There is no income requirements and no monthly payments. They earn money when you sell your home or when you buy back your equity.

Final thoughts

If you want to catch up on retirement savings, the first step is to create a plan. Armed with your savings plan, you will keep your spending low, your debt-reduction high, and your investment accounts managed. If you find yourself in need of an extra boost to your debt repayment or retirement savings goals, you can also leverage your existing assets, such as your home equity. If you have questions on your retirement strategies, consult with a financial advisor.

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