This Is How to Catch up If You’re Way Behind on Saving for Retirement

A retired couple sit in their living room while looking into the camera.
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A retired couple sit in their living room while looking into the camera.
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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.”

More from The Penny Hoarder: Our 11 Top Picks for Best Savings Accounts

How to Catch up on Your Retirement Savings

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.”

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.

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.

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.

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.”

Related: 6 Free Budgeting Templates To Help You Save In 2024

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.

Robert Johnson, president of the American College of Financial Services in Bryn Mawr, Pennsylvania, recommends embracing the risk of the stock market well into your 50s.

Since 1926, the average annual return is 10% for stocks, 6% for bonds and 3% for cash, he says.

“Investors in their 50s may not feel that their time horizon is long enough to invest in stocks, and that is a mistake,” Johnson says. “Having a significant allocation to stocks is advisable for most individuals in their 50s.”

Don’t go crazy, though. Don’t get overly aggressive with stocks.

“One of the biggest mistakes I see people in their 50s who are behind on their retirement savings is trying to play catch-up by taking on additional risk to make up for lost time,” says Desmond Henry, founder of Afflora Financial Life Planning in Topeka, Kansas. “Sure, the potential for higher returns is there, but so is the potential for loss.”

Ultimately, it’s all about balancing risks.

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? Read about 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.”

Frightened yet?

It’s OK. It’ll be OK.

You still have time to turn things around if you set your mind to it.

Remember the bottom line:

“If you’re not willing to save more or decrease your desired standard of living in retirement,” says Dixson, “you’ll be forced to work longer.”

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He does not have enough saved for retirement.

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.