How to Catch Up on Retirement Savings

If you’re feeling behind on your retirement savings, you’re not alone. Many people are approaching retirement and realizing they may not have enough saved to stop working.

A CNBC survey found that 40% of workers say they’re behind on retirement planning and consider “not saving earlier” their biggest mistake.

At Advance Capital Management, we specialize in helping individuals create personalized retirement strategies, no matter where they are in their savings journey. Our team of experienced advisers is dedicated to guiding clients through the complexities of retirement planning, so they can pursue financial security and peace of mind.

So, we can tell you some good news: it’s not too late to catch up. Let’s explore some practical ways to boost your retirement savings, even if you’re behind.

1. Max Out Your Retirement Contributions

One of the best strategies for catching up is to maximize your retirement contributions, especially if you’re over 50. The IRS allows individuals over 50 to make “catch-up” contributions to their 401(k) and IRA accounts.

For 2024, the standard 401(k) contribution limit is $23,000. But if you’re 50 or older, you can contribute an additional $7,500, bringing your total possible contribution to $30,500 for the year. Similarly, you can contribute extra to traditional and Roth IRAs. This can provide a substantial boost to your retirement nest egg, especially with the tax benefits involved.

Important Note: Beginning in 2026, if you earn more than $145,000 annually, those catch-up contributions must be made to a Roth account, meaning they will be post-tax, but withdrawals will be tax-free in retirement.

2. Review and Adjust Your Spending

Before you can maximize savings, it’s crucial to know where your money is going. Start by taking a detailed look at your spending. This will help you identify areas where you might be able to cut back, so you can divert more funds into your retirement accounts.

Categorize your expenses into necessities and discretionary spending. Where can you reduce costs without impacting your quality of life too much? Maybe it’s canceling a subscription you rarely use or dining out less frequently. Small changes can free up more money to save for the future.

3. Locate Forgotten Retirement Accounts

Over the years, you may have worked for several employers and accumulated multiple retirement accounts. Some of these 401(k)s or pension plans may have been forgotten or left unmanaged. Now is the time to track down those accounts and either roll them over into a new 401(k) or an IRA. Consolidating these accounts not only simplifies your finances but also allows you to optimize your retirement savings.

Here are some tips on how to find an old 401(k) and other retirement assets.

4. Tackle High-Interest Debt

Before you can truly ramp up your savings, it’s important to address any high-interest debt, particularly credit card debt. With interest rates often reaching 24% or more, credit card balances can quickly spiral out of control. By focusing on paying off this debt first, you’ll reduce the financial burden and free up more resources for retirement savings.

5. Consider Delaying Retirement or Working Part-Time

If your savings are still falling short, delaying retirement for a few more years can significantly impact your financial outlook. Postponing retirement allows you to continue saving, and it can also increase your social security benefits. The longer you wait to claim Social Security (up to age 70), the higher your monthly benefit will be.

Some retirees also opt for part-time work, which not only supplements their retirement income but also keeps them active and engaged.

6. Downsize Your Home to Access Equity

For some retirees, their home is their largest asset. You may not want to move, but it’s something to consider if you really need additional retirement funds. Downsizing to a smaller home or moving to a less expensive area can free up a significant amount of equity, which can be used to supplement retirement savings. This strategy not only reduces your monthly expenses but also provides a financial cushion in retirement.

7. Determine How Much You Need and Can Safely Withdraw

Last but definitely not least: A crucial part of catching up on retirement savings is understanding how much you’ll actually need to live comfortably in retirement. This means factoring in not only daily living expenses but also healthcare costs, inflation and potential lifestyle changes. Working with a financial adviser can help you calculate a realistic target based on your situation.

In addition to determining how much to save, an adviser can guide you on how much you can safely withdraw from your savings to ensure your funds last throughout your retirement. By analyzing your retirement accounts, potential income streams like Social Security, and any other assets, an adviser will help you create a sustainable withdrawal strategy that aligns with your long-term goals.

The Bottom Line: It’s Never Too Late to Start Saving

Catching up on retirement savings can feel overwhelming, but with a proactive approach, it’s entirely possible. Remember, it’s never too late to start planning for the retirement you want.

If you’re feeling uncertain about how to get started or would like help developing a personalized retirement plan, schedule a free consultation with us today. Together, we can ensure you’re on the right path toward achieving your retirement goals.