Nearly a quarter (21%) of Americans have nothing at all saved for retirement, according to Northwestern Mutual's 2018 Planning & Progress Study, and about a third of workers have less than $5,000 in their retirement funds.

It's easy to put off retirement planning for another day when you'll have more time, money, and energy to devote to saving. However, that day may never come -- and before you know it, you'll be approaching retirement age with only a few thousand dollars (or less) in your piggy bank.

Dollar bills with stopwatch on top of them

Image source: Getty Images.

The bad news is that the longer you wait to start saving, the harder it is to catch up. Compound interest allows your savings to grow exponentially over time, but your money needs to be invested for many years before you really start to see significant gains. The good news, though, is that it's never too late to start saving. Even if you're in your 40s or 50s and don't have a penny in your retirement fund, you can still save hundreds of thousands of dollars if you're strategic about saving.

Smart ways to save more

One of the easiest ways to boost your savings is to take advantage of one of the most powerful retirement tools at your disposal: your 401(k). Especially if your employer offers matching contributions, you're leaving money on the table if you're not making the most of your 401(k).

Say, for instance, you're 45 years old and have nothing saved for retirement. You're earning a salary of $50,000 per year, and your employer will match 100% of 401(k) contributions up to 3% of your salary, or $1,500 per year. Let's also say you've just started contributing $100 per month ($1,200 per year) to your 401(k). Your employer matches that, bringing your total annual contributions to $2,400. Assuming you earn a 7% annual rate of return on your investments, you'll end up with just over $100,000 by the time you turn 65.

However, while $100,000 may seem like a lot of money, it won't last you very long during retirement. The typical person age 65 and up spends about $45,756 per year in retirement, according to the Bureau of Labor Statistics, and if you spend, say, 20 years in retirement, that means your golden years will cost around $915,120. Of course, Social Security benefits can help some, but considering the average check amounts to around $1,300 per month (or $15,600 per year), they likely won't be enough.

That being said, if your only two options are "save what you can" or "don't save at all," then go with option No. 1. But if you're serious about saving enough to enjoy a comfortable retirement, you'll need to do more than the bare minimum to reach your goals.

Seeing savings in action

To get an idea of just how much you can save -- even if you've gotten a late start to the saving game -- we'll look at a hypothetical example.

Let's say you're 45 years old and earning $50,000 per year, and you don't have anything saved for retirement. You can only afford to save $100 per month -- that's $1,200 per year, or about 2.5% of your salary -- which your employer matches. Every five years, though, you bump your contribution rate up, saving an additional 2% of your salary. So at age 50 you're contributing 4.5% of your salary ($2,250 per year), at 55 you start saving 6.5% ($3,250), and at 60 you're contributing 8.5% per year ($4,250).

Your employer will match your contributions up to 3% of your salary, so from age 45 to 50 you're receiving an additional $1,200 per year, while you'll be getting the full $1,500 match from 50 to 65. Assuming you're earning an annual 7% rate of return on your investments, here's what your total savings would look like over time:

Age Total Annual Contributions Total Savings
45 (Today) $2,400 $0
50 $3,750 $14,800
55 $4,750 $43,800
60 $5,750 $90,600
65 $5,750 $162,500

Source: Author's calculations

If you had only contributed $100 per month (plus another $100 per month from your employer) for 20 years, you'd end up with roughly $100,000 by the time you turned 65. But by gradually increasing your contributions each year, you can save tens of thousands of dollars more.

Keep in mind, though, that even though $162,500 is a good start, it's not nearly enough to live on if you're planning to spend more than a few years in retirement. Realistically, you'll need to save a lot more each year if you want a good chance at a comfortable retirement.

For instance, say you have a goal of saving $750,000 by age 65. Using the same example, let's say you're still earning $50,000 per year and your employer will match contributions up to 3% of your salary, or $1,500 per year. Assuming you're earning a 7% annual return on your investments, you'll need to save around $17,100 (not including the employer match) every year for 20 years to achieve total savings of $750,000 by the time you turn 65 -- that's around 34% of your salary.

Is that feasible for most people who are already struggling to save? Probably not. But it's important to look at saving from two angles. First, you need to realistically determine how much you need to save (otherwise, you may get too comfortable with not saving enough, which can lead to a financial disaster once you reach retirement age and don't have enough to get by). Second, you need to figure out how much you can actually save, and if that's nowhere near your ideal amount, you can't let that discourage you from saving altogether. You may need to make serious cuts in your budget, give up some things you love, or pick up a side hustle to make more cash, but your future self will thank you for every extra dollar that helps to see you through retirement.

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