Please ensure Javascript is enabled for purposes of website accessibility

3 Steps to Getting Back on Track for Retirement

By Maurie Backman – Jun 14, 2021 at 1:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you've fallen behind on long-term savings, here's how to self-correct.

Planning and saving for retirement is a marathon, not a sprint. But just as you might have a weak mile or two in the course of running a long race, so too might you get thrown off course at some point during your career and start falling behind on retirement plan contributions.

In fact, a lot of people had no choice but to pause IRA or 401(k) plan contributions last year when the pandemic struck. But even without a pandemic, it's more than possible to hit a similar snag when personal circumstances get in the way, whether health issues or job loss.

If you need to get back on track for retirement, here are three tips to help you overcome the setbacks you might have faced recently.

Smiling person at laptop

Image source: Getty Images.

1. Bank your tax refund

Most people who file a tax return wind up with a refund. If you recently received a chunk of cash from the IRS after filing your 2020 return, or expect to get one shortly, then that's money that can go directly into your retirement plan.

Now, you might think that a one-time contribution to your savings won't make a big difference, but imagine you're getting a $2,000 refund and aren't retiring for 30 years. If you put that money into your IRA or 401(k), leave it alone, and watch it grow at an average annual return of 8% (which is doable with a stock-focused investing strategy), then you'll end up growing that single contribution into over $20,000.

2. Get on a tighter budget

Now that things have improved with regard to the coronavirus outbreak and the world seems to be opening back up, a lot of people are eager to get out and do more. But you'll need to spend carefully in the coming months, especially if you've fallen a bit behind on retirement savings.

A good way to ramp up your contributions and avoid overspending is to set up a new household budget -- one that reflects your current bills and accounts for the way inflation is making many common purchases, like groceries and gasoline, cost more. In fact, you may need to cut back in certain spending categories to ensure that you're not only able to enjoy going out and being social, but also generously fund your IRA or 401(k).

3. Consider a side job

Last year, a lot of jobs were shed when the pandemic first broke out. Nowadays, there are labor shortages in a number of key industries, like restaurants and retail, so if you're willing to pick up some evening or weekend shifts on top of your main job, you could earn a nice pile of cash and use it to boost your savings.

Of course, you may not be able to commit to an extra job's pre-set schedule if your primary job keeps you very busy. If that's the case, find a second job you can do at your convenience, like driving for a rideshare company or designing websites from home.

You'll need a healthy amount of savings during retirement to supplement your Social Security income. If you've fallen behind, don't sweat it. Instead, regroup and use these tips to give your savings the boost they need.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.