10 Ways to Save for Retirement if You're Starting Late

Retirement's not looking so far away anymore, and your nest egg isn't enough to cover more than a few months of expenses? Don't panic. Even if you've only got a couple of decades left in the workforce, you can still save enough for a decent retirement.

It'll probably be a little harder than it would've been if you'd started saving early, but if you follow these 10 tips, you'll start making quick headway toward your goal.

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Saving for retirement requires money and a lot of it, especially if you're getting a late start because you won't be able to count on as much investment earnings as someone who started saving when they were younger.

Look through your current budget for any unnecessary expenses and get rid of them. Funnel all that cash into your retirement savings. You can also look for ways to slash your necessary expenses, like downsizing your living space, shopping around for cheaper insurance, and using coupons when you buy groceries. Every dollar helps.

ALSO READ: The Biggest Reason You Can't Afford to Wait to Save for Retirement

A 401(k) is the best place to start saving for retirement if your company matches some of your contributions. These matches are basically bonuses you only get if you put money away for retirement, and they could be worth several thousand dollars, depending on how much you earn and contribute to your 401(k) on your own.

Check with your plan administrator or your company's HR department if you're not sure how your company's matching formula works or how much you must contribute on your own to get the full match.

If you max out your 401(k) or you don't have access to one, an IRA is your next-best option. Traditional IRAs give you a tax break this year, while Roth IRAs allow tax-free withdrawals in retirement. Both can help you save compared to using a taxable brokerage account for retirement.

The downside to IRAs is their low contribution limit -- just $6,000 in 2021 for adults under 50 compared with $19,500 for a 401(k). But IRAs give you greater freedom to invest your money how you want, which could help you grow your nest egg faster.

Once you're 50, you can start putting aside extra money in your retirement accounts, assuming you can afford to do so. Adults 50 and older are allowed to contribute up to $26,000 to a 401(k) in 2021 and $7,000 to an IRA. These limits change periodically, so keep an eye on them every year.

You don't have to do anything special in order to contribute these larger sums to your account. As long as you're at least 50, you shouldn't run into any problems with the IRS.

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Keeping fees low can help you hold onto more of your earnings. Index funds are a great option for this because their expense ratios, or annual fees, are often well below 1%.

There are other things to keep in mind when choosing investments, like your risk tolerance and retirement timeline. But if you can find investments that suit your situation and charge you no more than 1% of your assets annually, you can grow your wealth faster.

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Debt, especially high-interest debt, diverts money away from retirement savings every month. Once you pay it off, you'll have extra cash you can put toward saving for your future.

Focus on high-interest debt first. You may want to pay this down even before you start saving for retirement. For debts with lower interest rates, like mortgages, you can pay them off while building your nest egg. This will also help reduce the cost of your retirement because you won't have to worry about that monthly payment once your debt is gone.

If you get an inheritance, a tax refund, or a lucky break on a lotto scratcher (admittedly, not the best use of your hard-earned cash), put that extra money toward your retirement. You'll need an IRA for this because you can only put money you earned from your job in a 401(k).

Don't forget about any taxes you might owe on these other sources of income. If you put it all in your retirement account, you won't be able to access it without penalty before 59 1/2. Leave a little out for taxes if you expect to owe and then put the rest aside.

ALSO READ: 4 Retirement Planning Hacks for Late Starters

A side job will bring in extra income and can help you reach your savings goal faster. You don't have to pick something you hate. There are so many opportunities out there to make money these days -- everything from driving for a rideshare company to making and selling your own art to walking other people's dogs.

Think about what makes sense for you and how much time you could reasonably devote to a side hustle. Don't forget to set aside taxes out of this income also or you could wind up in hot water with the IRS.

If you're married, you're not in this alone. You and your spouse can depend on each other for help with saving. Maybe one spouse works a normal job and the other works on a side business. Or maybe the two of you open a spousal IRA for the non-working spouse so you can legally set aside even more money every year for retirement.

Sit down with your spouse and make a plan. Figure out how each of you wants to spend retirement and roughly how much that will cost. Then, decide how much each person will save every month toward that end.

More time in the workforce isn't ideal, but it's actually one of the most effective ways to shore up your savings. It shortens the length, and therefore the cost, of your retirement and it also gives you more time to save. Plus, your existing savings have more time to grow before you need to take them out, which can result in more investment earnings.

The downside is not everyone who wants to work longer is able to. Family obligations or health issues could force you out of work ahead of schedule, so you shouldn't rely on this strategy alone to help you save enough.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Saving for retirement is never going to get easier by waiting. So start right now with whatever cash you can afford to spare. Mix and match the tips above to try to increase your savings and keep looking for additional ways to free up more money. Check in with yourself at least once per year to see how you're doing and to determine if you need to make any alterations to your retirement plan.

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