We all know we're supposed to be saving for retirement, but a frightening number of Americans are falling short in that regard. It's estimated that 41% of workers don't have the option to participate in an employer-sponsored 401(k) plan. But even if you don't have access to a 401(k), you can still sock away a fair chunk of money for retirement by opening an IRA.


Unfortunately, most Americans aren't going that route, either. According to the latest TIAA survey, only 33% of Americans have an IRA. And while 23% of workers claim they don't need an IRA because they already have a workplace retirement plan, another 25% say they don't know enough about IRAs to feel comfortable opening one.

The latter point is particularly troubling, especially given the wealth of IRA resources available today. However, there's another reason so many of us aren't contributing to an IRA: We don't have the money to do so, or at least we think we don't. In fact, 46% of respondents in the TIAA survey claim they don't have enough money to save more than they already do. But if your goal is to eventually retire on time and maintain a reasonably comfortable lifestyle, you'll need to step up your game before it's too late.

Save sooner rather than later

One drawback of IRAs is that they don't have the same generous annual contribution limits as 401(k)s. Workers with access to a 401(k) can currently contribute up to $18,000 a year, and those over 50 get the option to contribute up to $24,000 annually. The current IRA limits are considerably lower -- $5,500 a year for those under 50 and $6,500 for Americans 50 and older. But even with that constraint, you can still amass a sizable nest egg in time for retirement if you start saving early enough.

Imagine you're 25 and are able to max out your IRA contribution beginning this year. Let's also assume that you continue saving $5,500 a year for the next 40 years (though you're allowed to increase your contribution at age 50, we'll keep things simple for our calculation). Finally, let's say your investments generate an average annual 7% return, which is actually a couple of points below the stock market's historical average. By the time you reach 65, you'll have close to $1.1 million. However, if you delay your savings efforts, you'll wind up with far less by the time retirement rolls around.

The following table shows how much of a nest egg you'll accumulate if you start maxing out your IRA at various ages:

If You Start Saving $5,500 a Year at Age:

Here's What You'll Have by Age 65 (Assumes a 7% Average Annual Return):


$1.098 million










As you can see, there's a huge difference between saving $5,500 a year at age 25 versus starting just five years later. And while you do get the option to make higher contributions once you turn 50, waiting that long could seriously hamper your savings efforts. In fact, if you were to start saving $6,500 a year at age 50, you'd have just $163,000 by age 65, assuming that same average annual 7% return. And while that's far better than nothing, it's nowhere close to what you'd have by starting 10, 15, or 20 years earlier.

Finding ways to save

Of course, coming up with $5,500 a year can be tricky if you're already living paycheck to paycheck. If you're not sure where to begin, start by creating a budget. This will help you figure out where your money is going and identify ways to save. Next, go through your spending categories and find opportunities to cut corners. Replacing one restaurant meal per week with a home-cooked alternative, for example, could free up well over $1,000 over the course of a year.

That said, if you're serious about making retirement a priority, you might need to resort to bigger changes to see a real difference. This could mean downsizing your living space or moving someplace more affordable. In 2015, almost 12 million households spent more than half of their income on housing. If your housing costs eat up more than 30% of your paycheck, it's time to consider relocating. You might also think about unloading your car if public transportation is an option where you live. AAA reports that it costs an average of $8,700 annually to own and maintain a vehicle, so if you're able to slash that figure in half by sticking to buses and trains, you'll be close to maxing out your IRA for the year.

No matter what steps you take to save, the key is to open that IRA when time is on your side. Otherwise, you'll risk running out of money in retirement just when you need it the most.