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Late to Retirement Savings? Here's Your Game Plan

By Maurie Backman - Apr 14, 2021 at 5:54AM

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Worried you've missed the boat on funding your IRA or 401(k)? Do these things to catch up.

Saving for retirement is something you should, ideally, begin doing from a young age. That way, you'll give your savings ample time to grow. But what if you're already late to that party? If so, here's what you need to do.

1. Breathe and regroup

So you've reached your 50s with no retirement savings. First and foremost, don't panic. Though your situation isn't optimal, it's also salvageable. Rather than get worked up, stay calm as you navigate your options. You aren't the first person to start saving for retirement later in life, and you won't be the last.

Middle-aged man looking at laptop with serious expression

Image source: Getty Images.

2. Cut expenses to boost your savings rate

If you've missed out on years of retirement savings, your best bet is to start socking money away in an IRA or 401(k) plan immediately. And to do that, you may need to cut back on spending. Set up a budget and see where your money typically goes on a monthly basis. Then, identify expenses you're willing to cut back on. You may decide to give up the car you can technically do without, or to spend a lot less on leisure and entertainment.

3. Invest as aggressively as you can

Investing aggressively generally means going heavy on stocks, and that can be a dangerous thing to do when you're right on the cusp of retirement. But if you still have at least 10 years to go until you plan to end your career, then stocks are a good bet for your retirement plan. Say you're 55 and are able to start socking away $500 a month in an IRA or 401(k). If you invest largely in stocks, you might easily see a 7% average annual return in your account -- that's several percentage points below the market's average. If your target retirement age is 67 -- that'd be your full retirement age for Social Security purposes -- then you'll end up with $107,000 in savings by the time you get there.

4. Make plans to work a bit longer

Americans are living longer these days. If you extend your time in the workforce, you'll have an opportunity to grow your savings without depriving yourself of too many years of retirement. Let's revisit the example above. We saw that saving $500 a month over 12 years at an average annual 7% return yielded a $107,000 savings balance. If you were to work three years longer, you'd grow that balance to about $151,000. Work five years longer, and you're looking at $185,000. Plus, working longer could make it possible for you to delay your Social Security filing, thereby scoring a much higher monthly benefit for life.

When it comes to retirement savings, being in catch-up mode can be stressful. But rather than work yourself up over the fact that you're late to the game, do your best to move forward with a strategy. In addition to the moves above, you may need to look at working in some capacity during retirement if your ending savings balance doesn't wind up meeting your needs. But that's also not a terrible fate to resign yourself to, and the fact that that option exists should give you peace of mind as you attempt to regroup and make up for lost time.

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