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If I Were Behind on Retirement Savings, This Would Be My Game Plan

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Three experts share how they'd catch up.

A hefty retirement nest egg is essential to a secure future. Unfortunately, far too many people simply don't end up with enough invested to support themselves after paychecks stop coming.

The good news is, if you're behind on retirement savings, you don't have to resign yourself to a life full of financial worry in your later years. There are steps you can take to turn things around. To help you get started, three Motley Fool retirement experts share how they'd fix a shortfall and get back on track if they'd saved too little.

You can put these tips into practice and hopefully catch up so you'll have plenty of money put aside by the time you become a senior. 

Older couple talking with financial advisor.

Image source: Getty Images.

Double-check my investing strategy

Katie Brockman: Finding enough cash to save for retirement is crucial, but it's just as important to make sure your money is working hard enough for you. If I were behind on my retirement savings, I would double-check that I'm investing aggressively enough.

The returns you earn on your investments will depend on where, exactly, you're investing. Many people invest conservatively, thinking that's the safest option. In fact, 53% of Americans keep at least a portion of their retirement savings in a savings account, according to a survey conducted by the Certified Financial Planner Board and Morning Consult.

The problem with investing conservatively is that you'll see lower returns than if you invest more aggressively. The S&P 500, for example, earns an average 10% annual return. Bonds and other conservative investments, however, typically see returns of around 4% to 5% per year. Savings accounts are the least effective for long-term savings, as they generally have interest rates of just 1% per year or less.

That may not sound like a significant difference, but it adds up over time. Say, for instance, you're saving $200 per month in your retirement fund. If you're earning a 1% annual return, you'd have around $83,000 saved after 30 years. With a 5% annual return, you'd have around $159,000 saved in that time period. But if you were earning a 10% annual return, you'd have roughly $395,000 socked away.

Investing aggressively doesn't have to be risky, either. If you're aiming to maximize your returns while minimizing risk, one fantastic option is to invest in an S&P 500 index fund. An index fund is a collection of stocks or bonds grouped together into a single investment. By investing in an S&P 500 index fund, you'll be investing in all 500 companies that make up the index -- which are some of the largest and most successful companies in the country.

Keep in mind that your investing strategy will change as you get older, too. Investing more aggressively is smart when you still have at least a decade or two before retirement, because your money will have plenty of time to recover from any market downturns. As you get closer to retirement, though, it's a good idea to start investing more conservatively to protect your savings against market volatility.

Investing in the stock market is one of the most effective ways to save a lot of money in a relatively short period of time. So if you're not already investing, it may be time to start.

Save an extra $50 a month

Maurie Backman: Getting caught up on retirement savings can seem daunting, and if you're nearing the end of your career, you may need to take a more aggressive approach to boosting your nest egg. But if you're still in your 30s or 40s with several decades of work ahead of you, you can take a more moderate approach.

One thing I'd try doing in that situation would be to boost my savings rate modestly -- say, by $50 a month. Will that have the same impact as adding an extra $200 or $300 a month to a savings plan? Not at all. But here's why I like the idea of a $50 monthly catch-up.

First, it's attainable. Cutting back on one restaurant meal a month, for example, could free up that $50. That's not such a huge sacrifice.

Second, it's sustainable. You could, in theory, slash your spending in a major way to free up more money for your IRA or 401(k) on a monthly basis, but after a while, living under such extremely frugal circumstances might get to you. And that could, in turn, cause you to give up on your savings goals. Saving an extra $50 a month, on the other hand, is something you may be able to keep doing for a long time. And financially, it could still make a big difference.

Say you're 32 years old and want to retire at age 67, which would be your full retirement age for Social Security purposes. Saving $50 extra a month would boost your nest egg by about $83,000, assuming you invest that money at an average annual 7% return, which is a few percentage points below the stock market's average.

Of course, boosting your retirement plan with $50 a month is just a start. As your earnings grow, you can, and should, aim to increase your savings rate even more. But if you're behind right now, immediately commit to an extra $50 a month. That's what I would do.

Automate investments and periodically up the amount

Christy Bieber: Investing more for retirement is the best way to catch up if you've fallen behind. And this can actually be simpler than you imagined. In fact, here's what I'd do. 

The first step to seriously increasing the amount you invest for retirement is to automate the process, if you haven't already -- and I'd make that a priority. When you have money put directly into a 401(k) before you get paid or you set up an automated transfer of funds into an IRA on payday, you won't have to make a choice about whether to invest. The money will be saved for you automatically, so you won't get the chance to spend it on anything else. 

I'd start by investing as much as I could comfortably set aside after taking a careful look at my budget -- whether this is 5% of income, 10%, or more. Next I'd make a commitment to inch up the amount every few months. 

For example, if you're investing 5% today, increase that to 6% in three months and 7% in six months. By making incremental changes, you won't have to make any major lifestyle shifts all at once, and chances are good you'll easily be able to adjust your spending a little bit downwards since the extra monthly amount isn't huge. 

Then, each time I got a raise, I'd automatically increase my contribution by that amount -- before ever getting a single higher paycheck. If you take this approach, you never get used to the extra cash, so you won't miss it. 

I'd go this route to increase my investments because if you inch up your savings slowly and make big jumps up when you get a raise, you'll be able to increase your savings rate in a sustainable way. And, more quickly than you'd imagine, you'll end up saving enough money to build the retirement nest egg you need for a secure future. 

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