Some people have great discipline when it comes to saving money. They began “paying themselves first” at a young age and enjoy watching the “magic” of compound interest increase their savings over time. By the time they retire, they most likely have a sizable nest egg to draw from in retirement.
Other people have little to no discipline in this area. And, even if they know they need to start saving at some point, it’s difficult for them to get into that habit. Other important obligations come first, whether it’s paying back student loans, saving for a home, starting a family or taking care of aging parents.
Without self-reckoning, these saving-averse individuals often wake up in their fifties and realize retirement is just around the corner, and they haven’t saved much, or any, money.
Luckily, there are ways to catch up on your retirement savings if you haven’t saved enough. You could delay your retirement and work a few more years. If you don’t want to do that, here are some other strategies that can help you catch up on your retirement savings.
1. Increase your saving rate
Increase your savings rate, even if it’s by just 1 percent. Any increase to your contribution rate each year will help. You can still benefit from compounding interest during the years before you retire. Increase your savings as much as possible!
2. Reduce your spending
If you aren’t currently using a budget to guide your spending, now is a great time to start! Many people don’t realize where their money actually goes until they create a detailed list of their expenditures in categories like dining out, recreation, subscriptions, clothing and other expenses.
Go through your bank and credit card accounts for the past year. Write down category headings, and figure out how much money you have spent in each category. Next, figure out your income for the past year. Work with your spouse to determine where you can cut spending. Commit to contributing that money to savings.
3. Delay claiming Social Security benefits
Although you can qualify to receive Social Security benefits beginning at age 62, you will receive a considerably bigger payment each month if you wait until your full retirement age, or FRA. For people born after January 1960, the FRA is 67 years.
If you begin benefits before your full retirement age, Social Security reduces your monthly payment by a fraction of a percent for each month you filed early. If you were born in 1963 and start benefits in 2025 at age 62, you will get as little as 70 percent of the amount you would have received if you had waited until 67, your FRA. That reduction is permanent!
Waiting until your FRA to claim will increase your monthly payment. And if you wait until age 70 to claim your benefits, your monthly payment increases even more.
Another good reason to wait until your FRA to claim benefits is that after that point, you can work and earn as much as you like, with no withholding. If you claim Social Security before your FRA, work income above a certain level could trigger temporary withholding from your benefit payments and those of your spouse and children, if they are collecting benefits on your work record.
4. Take advantage of “catch-up” provisions
To help people catch up on saving for retirement later in life, Congress has made changes to the tax code over the years in the form of “catch-up contributions.” They allow investors age 50 and older to contribute extra money to retirement accounts, beyond the usual limits. So now, IRAs, employer-sponsored plans, SIMPLE IRAs, SIMPLE 401(k) plans and health savings accounts (HSAs) offer catch-up contributions.
The first “catch-up contribution” was enacted as part of The Economic Growth and Tax Reconciliation Relief Act of 2001 (EGTRRA) and signed by President George W. Bush. It made significant changes to retirement plan rules and overall tax rates.
On December 29, 2022, President Biden signed the SECURE 2.0 Act into law, as part of the Consolidated Appropriations Act of 2023. It increased the catch-up contribution limit for employees 50 and older who participated in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan.
As of 2026, the standard catch-up contribution for 401(k) and 403(b) plans is $8,000, for a total possible contribution of $32,500.
5. Make after-tax contributions
What if you’ve already maxed out on your catch-up contributions, or you aren’t old enough to make them yet?
In that case, you might want to consider making after-tax contributions to your 401(k), if your employer allows them. As with a Roth 401(k) (or Roth IRA), your contributions are after-tax, but your earnings are tax-deferred. You’ll pay taxes on them at ordinary income tax rates when you take withdrawals.
Maybe you’ve heard about the “backdoor Roth IRA.” It allows you to convert after-tax contributions to a Roth IRA or, if your plan offers one, a Roth 401(k). Once your money is in a Roth, your earnings will grow tax-free, and your withdrawals will be tax-free — as long as you are at least 59½ and have owned the Roth for at least five years. You will not be required to take required minimum distributions (RMDs) from the account.
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An ancient Chinese proverb says, “The best time to plant a tree was 20 years ago. The second best time is now.” The same is true of saving for retirement — the earlier you start saving, the more your savings will grow, thanks to compound interest. However, if you feel like you’re behind on your retirement savings, the second-best time to start saving is now.
If you don’t yet have a customized financial plan, reach out to us, and we will set you on a path to fast-track your retirement savings and help you make up for lost time.
