Forty-two percent of Americans have nothing saved for retirement, according to the Center for Financial Services Innovation. That's a large percentage of citizens who are in effect relying on Social Security to provide them with a safe retirement.

There's just one problem. Social Security was never designed to be the primary vehicle supporting older Americans. Currently, Social Security benefits replace about 40% of Americans' pre-retirement income. Meanwhile, retired people will need roughly 80% of their final salary each year to live on. In other words, people with a zero balance in retirement savings face a significant shortfall of about 40% -- between what they'll receive from the government and the income they'll need to provide themselves with by saving during their working years.

Male figure walking up wooden steps.


Planning and saving for a comfortable retirement is crucial, or you'll struggle in the later years of your life. Here are four steps to build your balance for the future if you have an empty retirement nest egg right now.

1. Start saving immediately

Do not delay: The first step is to open a retirement account at a brokerage firm or bank and then start saving a good portion of every paycheck immediately.

It doesn't matter how old you are. The sooner you start saving, the more you'll benefit from exponential growth over time. Don't fret if you're not in your 20s; compound returns can propel a retirement nest egg well above its initial value over even a few years.

Imagine this scenario: You are 40 with a $60,000 salary and no retirement savings. By trimming your expenses to save 3% of your annual income for retirement, you'll put away $1,800 a year, which comes out to only $150 per month -- an achievable amount for most people. By the time you reach age 67, you will have saved $48,600, assuming the amount you save holds steady. That's your principal amount, or the balance you put in of your own money.

Ah, but by investing this money, you get to add a 7% average appreciation on that money over 27 years, which is the historical average for stock market returns. Tying your money's fate to the market's means that you'll be looking at about $123,618 in your retirement account -- between two and three times what you actually managed to save. In other words: Compound returns are your friend.

If you are one of the roughly 78% of Americans who have access to a 401(k) plan through your employer, it's a good idea to check out your workplace plan, as most provide a range of investment options.

If your employer offers matching contributions, it's really to your advantage to use this plan. Any kind of match means your employer adds an extra amount of the company's money to your account, usually based on a certain percentage of the amount you contribute of your own money. In other words, if you're saving 3% of your pre-tax income -- assuming that $60,000 income -- and you are entitled to a 50% match, your employer will be kicking in an extra $900 per year in addition to what you're saving.

If you don't have access to a 401(k) plan, consider opening an Individual Retirement Account (IRA). IRAs come in two flavors, traditional and Roth. Both are self-directed and allow you to invest in individual stocks, mutual funds, and fixed-income investments like bonds and certificates of deposit (CDs).

The primary difference between traditional IRA and Roth IRA is their respective tax treatment. With a traditional IRA, you can deduct the amount of your contribution from your taxes in the year you make it. Qualified withdrawals, which can take place when you're 59 1/2 and must begin when you're 70 1/2, will be subject to tax, at your ordinary income rate the year you take withdraw it. A Roth IRA contribution is not tax deductible so you are taxed on the money before you save it, but the money grows tax free until you withdraw them, and then qualified withdrawals are not subject to tax.

2. Make catch-up contributions if you're 50 or older

Both 401(k)s and IRAs allow catch-up contributions for people 50 and older. These are amounts above the contribution limits for people younger than 50. If you are 50 or above, catch-up contributions allow you to jumpstart your retirement savings.

For 401(k) accounts, the contribution limit for folks 50 and older in 2019 is $25,000, versus $19,000 for everybody else. For both types of IRAs, the contribution limit for folks 50 and up is $7,000 in 2019; it's $6,000 for people younger than 50.

3. Plan to work as long as possible

If you've saved nothing for retirement, the next step depends on how old you are. If you're in your 20s or 30s, you have decades to create a robust nest egg if you start now. If you're middle-aged or older, though, your plan likely involves working longer.

If you're in your 40s or 50s, make a long-term goal of moving to a higher-paying job or pursuing a promotion. The more income you receive, the more you can save to ensure a comfortable retirement. It may be tougher to get raises or promotions once you're in your 60s, so if you envision being older in the workforce, be sure to keep up with current trends in your field to remain a valuable employee and avoid being laid off.

Income from your job is one reason to work as long as possible. But a more hidden reason, though, is that the amount of your Social Security benefits grow the longer you delay starting to take them -- and working longer is the primary way to defer them since you have paychecks to live on in your later years.

Americans become eligible for Social Security benefits at age 62, but the amount you receive is reduced a certain amount for every year you're under your full retirement age (FRA), which is 66 for people born between 1943 and 1954. It rises incrementally a few months for people born after that, until it hits 67 for folks born in 1960 and after. Because of the reduction in benefits if you're under FRA, it's to your financial advantage not to draw benefits earlier.

There's another way to maximize Social Security benefits: By delaying starting to claim. You receive a roughly 8% increase in benefits every year you delay between your FRA and age 70, when the bonus maxes out. So if your FRA is 67, and you don't take Social Security benefits until 70, your benefit check when you start taking it at age 70 will be approximately 24% higher than if you took it at your FRA.

4. Take a hard look at your expenses to see where you can save

So far, we've looked at ways to maximize retirement savings and income, but there's another part of the equation: paring down your expenses.

Cutting expenses can be helpful if you are young or middle-aged and you feel like you don't have enough money to put toward retirement savings. Study your budget closely to see where you can rein in spending, and then increase the amount of your regular retirement contributions so the savings actually go there.

But if you're facing retirement fairly soon and you have zero saved, cutting expenses in major categories will be essential.

Fortunately, there are multiple ways to spend less in retirement. Consider relocating to a lower cost-of-living (COL) area. Some states are more affordable for retirees thanks to lower taxes or cheaper real estate. The 3 best states for retirees in 2019 are South Dakota, Florida, and New Hampshire; for a complete list, see here.

Downsizing your living space is another tried-and-true formula for soon-to-be retirees or retirees. A condominium or smaller house can help you save significantly on living expenses. Downsizing combined with moving to a cheaper region can pack a significant punch to your budget. There are both pros and cons to this approach, though, so be sure to weigh both. Calculate your expected savings from current expense levels, and be honest about whether you'd be happy moving. Your financial security shouldn't come at the expense of your happiness.