10 Tips for Catching Up If You’re Behind on Your Retirement Savings

Your golden years won't feel so golden if you're struggling to pay for your basic expenses. Figuring out how to catch up on retirement savings can seem overwhelming, especially the closer you get to retirement age.

These tips will help you save for a more financially secure retirement.

What Age Should You Start Saving for Retirement?

The ideal time to start saving for retirement is as soon as you get a job. Starting as soon as possible gives your money more time to earn interest and take advantage of compound interest, which means you'll have significantly more money when you retire. An early start also gives you more time to earn your money back if the market takes a nosedive and your retirement fund decreases. Starting in your 20s gives you the greatest potential for saving money and growing your balance, but it's never too late to begin a retirement savings account.

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What Are Catch-Up Contributions?

Retirement accounts have a contribution limit each year, which can make it difficult to save a lot if you start late. Catch-up contributions allow you to contribute more than the normal limit, starting the calendar year you turn 50. If you've been trying to figure out how to catch up for retirement, this could be an ideal way to do it.

As of 2022, you can contribute an extra $6,500 per year to a 401(k), 403(b), SARSEP or governmental 457(b). You can contribute an extra $3,000 to a SIMPLE IRA or SIMPLE 401(k) and an extra $1,000 to a traditional or Roth IRA. Some restrictions may apply to the catch-up payments, so consult with a retirement expert for help.

What Are Some Things Late Starters Can Do If They're Behind?

No matter how old you are, starting a retirement fund now helps you prepare for your future. Being strategic about how you save can put you in a better financial situation when you're ready to retire.

If you need to catch up on your savings, try these tips.

1. Work With a Financial Adviser

Every financial decision you make — from what type of retirement account you choose to how you pay off debt — can affect your retirement income. Working with a financial adviser gives you professional advice on how to best handle your money and prepare for retirement. They can help you budget, prepare for taxes, anticipate your finances in retirement and help you understand your sources of retirement income based on your financial situation.

2. Know How Much You Need

Having a solid estimate of how much money you need in retirement helps you set savings goals. Consider the age you plan to retire as well as the minimum amount you'll need to cover your living expenses each year. Take into account extra spending you want to do, such as moving to a different city.

3. Start Now

If you're already behind, one of the best ways to figure out how to catch up on retirement savings is to start immediately. Even if you can only contribute a small amount right now, the compound interest will help that little amount grow. Set up automatic contributions based on what you can afford now to make it easy. If you get extra money, such as a bonus at work or a tax refund, direct that amount to your retirement account to boost the balance.

4. Contribute as Much as Possible

Maximize your contributions to your retirement account every month. If you can contribute up to the limit for that type of account, go for it. If the maximum you can afford is lower, that's fine, too. When you get a raise, increase the contribution by the increase in your salary and continue living on the amount you were used to having. If you have an employer-sponsored retirement account with a matching component, try to contribute enough to qualify for a full match.

5. Make Catch-Up Contributions If You Qualify

Once you reach age 50, you can bump up your retirement funds by making catch-up contributions. This is helpful if you're already maxing out your retirement accounts every year. Start the catch-up contributions as soon as you can, and continue them until you retire.

6. Minimize Your Investment Risk

You can choose different ways to invest your retirement funds, which gives you some control over your future. It might be tempting to choose a riskier option for greater growth potential, but you can also lose a lot more if things don't go your way. If you're near retirement and already behind, that could significantly lower your retirement account balance. Work with an investment professional or financial adviser to choose an investment option that makes you comfortable and minimizes your risks.

7. Open Additional Retirement Accounts

The easiest way to get started with retirement savings is by using the 401(k) or other retirement options your employer provides. Enrollment is usually easy, and you might get an employer match. However, if you reach your maximum contribution for the year and want to save more, consider opening an IRA as well.

8. Lower Your Debt

How much debt you have as you go into retirement can impact your financial status. High interest rates on credit cards can make your debt soar or decrease very slowly. Paying off your debt as quickly as possible lowers how much you pay in interest and decreases your expenses in retirement. Pay more than the minimum amount due to shrink your debt faster. Once you pay off your debt, you can put more money into savings.

9. Reduce Your Spending

Cutting your expenses now allows you to contribute more money to retirement. Getting used to spending less also prepares you for a potentially lower income when you retire. Revisit your budget to look for areas where you can reduce your spending, or create a budget if you don't have one yet. Track where you spend your money to find simple ways to cut back. If you want to make a bigger dent in your expenses, consider downsizing to a much cheaper home or trading in a newer car with high payments for something cheaper.

10. Be Strategic About Your Retirement Age

Most people want to retire as early as possible, but working a few extra years can maximize your retirement funds. It gives you longer to contribute, and you can earn more interest. If you retire before your full retirement age, you'll receive a smaller Social Security payment for the rest of your life. The full retirement age for people born in 1960 or later is 67, but you can start collecting as early as 62. Maximum benefits are available after age 70. The earliest age at which retirement accounts can be accessed without penalty is 59.5.