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Are You Behind? How To “Catch-Up” On Retirement Savings

Are you behind on retirement savings? That’s all good! Life gets hectic, but it’s not too late to have that comfortable retirement you want!

Don’t Stress! It’s Not Too Late!

Are you feeling a pang of anxiety when you think about retirement savings? You’re not alone. Many people find themselves behind on their retirement goals, especially after facing unexpected expenses or encountering life transitions. But fear not, even if you haven’t saved as much as you’d like, there are still steps you can take to catch up and secure that comfortable retirement.

Take A Deep Breath

The first step is to assess your current situation. Gather your retirement account statements and calculate your estimated retirement income from Social Security and any pensions you may qualify for. Then, factor in your desired retirement lifestyle and estimate your anticipated living expenses. In turn, you’ll have a clearer picture of the gap that you need to bridge.

IRA & 401(k) Limits

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Firstly, I highly recommend that you contribute the maximum allowable amount to your retirement accounts each year. If you think about it, the more that you put in now, the happier you’ll be in the future.

For 2024, the maximum contribution limit for IRAs is $6,000 ($7,000 if you’re 50 or older). For 401(k)s, the limit is $22,500 ($27,000 if you’re 50 or older). By contributing the maximum, you’re taking full advantage of any tax benefits associated with these accounts and allowing your savings to grow through the power of compound interest.

Speaking of compound interest, the sooner you start saving, the more time your money has to grow exponentially. Even if you haven’t saved much so far, every dollar you contribute now will have a significant impact on your future retirement nest egg.

But what if you’re 50 or older and feeling the pressure to catch up even faster? The good news is that the IRS offers catch-up contribution options for both IRAs and 401(k)s. Individuals aged 50 and above can contribute an additional $1,000 per year to their IRAs and $6,500 per year to their 401(k)s in 2024. These catch-up contributions allow you to save more aggressively and close the gap on your retirement savings goals.

Do You Have A Side Hustle?

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Another way to accelerate your catch-up plan is to expand your additional income streams. Could you take on freelance work to generate extra income specifically dedicated to retirement savings? I completely understand that everyone is living a busy life, but every bit counts when you’re playing catch-up!

Time Is Everything!

Finally, remember that retirement planning is a marathon, not a sprint. Don’t get discouraged if you can’t max out your contributions immediately. Start by setting a realistic and achievable savings goal, and gradually increase your contributions as your budget allows.

With dedication and smart strategies, you can still achieve a secure and comfortable retirement, even if you’re starting a little behind.

The Best Tactics For Your Situation

i. Invest!

One effective approach is to prioritize high-yield savings vehicles within your retirement accounts. While traditional IRAs and 401(k)s offer stability, they might not always provide the most aggressive growth potential. Consider exploring investment options within your retirement plan that offer a healthy balance between risk and return, such as index funds or target-date retirement funds.

Target-date funds, in particular, are a great option for hands-off investors. These funds automatically adjust their asset allocation, becoming more conservative as you near retirement age, which helps mitigate risk as you approach your golden years.

Consulting with a financial advisor can be beneficial if you’re unsure about choosing the right investment options within your retirement plan. They can assess your risk tolerance and recommend suitable investment strategies to maximize your growth potential while considering your specific timeline and goals.

ii. Delay Your Retirement

Another tactic to consider is delaying your retirement, if possible. Every additional year you spend working allows you to contribute more to your retirement savings and benefit from compound interest.

Additionally, working longer translates to a longer period of Social Security contributions, potentially leading to a higher monthly benefit payout in retirement. Of course, this strategy hinges on your health and overall well-being. If health concerns or a strong desire for retirement life prevent you from working longer, prioritize other catch-up strategies.

iii. Prioritize Savings

Furthermore, don’t underestimate the saving potential of downsizing your lifestyle. Evaluate your current living situation and spending habits.

Could you move to a smaller home or a more affordable neighborhood? Are there subscriptions or memberships you can eliminate that free up some extra cash for retirement savings?

Even small adjustments to your lifestyle can majorly impact your ability to catch up on your retirement goals. Nevertheless, there are numerous ways to keep your standard of living at its highest while cutting down expenses.

Extra Resources

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Remember, knowledge is power when it comes to financial planning. From my experience, the National Endowment for Financial Education is a great comprehensive website with valuable information and tools. The AARP also provides a plethora of resources specifically geared towards financial planning for retirees and those nearing retirement.

At the end of the day, we should plan to retire as early as we can, so we can enjoy life when we’re senile!

Questions, Comments, Concerns?

What do you think?

If you’re behind, don’t worry about it!

You’ll be okay, but make sure to take a deep breath and be patient.

Thank you! Let me know if you are unsure of anything!