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Play the Retirement Catch-Up Game

Sep 13, 2020 3 min read

Key takeaways

  • The longer you wait, the harder it is to make up lost time.
  • Show your age (and save even more) if you're 50+.
  • Move the goalposts at work: more saving, less spending.


It’s the golden rule of retirement saving: Start early. The advantages are well-documented. Thanks to compound interest, the sooner you begin, the more your money can grow over time, and the less pressure to save you'll feel as retirement nears.



But, for various reasons, not everyone manages to start funding their futures when they’re young. The Federal Reserve reports   PDF Opens in new window that fully one in four non-retired Americans have no retirement savings at all, with those under 30 (38%) leading (or trailing) that pack. And many others are saving—but not enough to handle their future financial needs.

The good news: If you haven’t begun to save, or you haven’t been hitting your savings targets, there’s still time to make up lost ground—as long as you begin now. Don’t let worry over missed opportunities stop you from acting now to secure your financial future.

After all, the worst thing you could do is to let yourself fall even further behind.


No time like the present

No matter your age, retirement savings must be a priority—and the sooner, the better. But even if you’ve passed your 20s, there’s still time to build up a healthy retirement fund.

Consider: A 35-year-old who starts saving $8,000 a year—$670 a month for the next 30 years could end up with more than $750,000 at age 67, assuming 6% annual returns on average.

But if the same person waited just five more years to start (at age 40), putting away $8,000 a year may yield only $543,000 by 67, assuming the same rate of return. As you can see, a small delay can make a big difference.

The task of saving grows harder with each passing year, but it can be done. So, don’t waste another minute.


Turbocharge your savings

Save as much as you can in tax-favored retirement accounts, which can grow tax-deferred and give you other tax breaks when you contribute (traditional) or withdraw (Roth). For example, you can save up to $19,500 a year ($26,000 with “catch-up” contributions if you’ll be at least age 50 by Dec. 31) in workplace retirement plans like 401(k)s, 403(b)s or 457s. Outside of work, you may also be able to contribute up to $6,000 a year ($7,000 if you’re over 50) to an individual retirement account (IRA). (The IRS usually raises all those savings limits every two years for inflation.) You might face income and other limits on certain accounts, so consider talking to a financial advisor before making a move.

Even if you can’t max out on saving right away, try hit your target gradually by raising your contributions each year by, say, 1% or 2% on your birthday. Some workplace plans even let you set up automatic annual increases. You won’t feel much pain in your paycheck (especially with traditional pretax contributions), but it can mean big gains in the long run.


Coming up with the cash

You may need to adjust your household budget to redirect money toward retirement. Some possible sources of extra savings:

  • Smarten your phone.

    Shop around for mobile carriers with cheaper packages for the voice and data services you use.
  • Cut the cord.

    Research potentially cheaper alternatives to your cable package, such as streaming services.
  • Boost your deductibles.

    Higher deductibles for your home, renters or auto insurance can lower your premiums. But only do this if you’ll have the cash to cover the higher amount if you file a claim.
  • Unsubscribe.

    Scour your credit card bills or bank statements for subscriptions you don’t use but still pay for.


Rethink retirement

Sometimes, despite your best efforts, your savings may need more time to grow before you can stop working. Consider postponing retirement by a year or two if you can, or make work a part of your retirement plan.

Delaying retirement offers two (and maybe three) financial benefits: You’ll have more time to save (and for your account to grow). You’ll have fewer years in retirement to save for (and less need to draw down on the account and reduce its principal). And for each year you delay starting your Social Security benefits (until age 70), your monthly check from Uncle Sam will be 8% larger—for life.

And even after you call it quits on the 9 to 5, you may not want to close the door entirely to work. A few hours of consulting work or a home-based business can add significantly to your retirement income—even if you’ve started taking Social Security.


What you can do next

When it comes to funding your future, there really is no time like the present. Even a small bump can make a big dent over time. Look for ways to scrounge up extra cash, take advantage of tax-advantaged savings plans ("catch-up" rules if you're over age 50), and even consider working longer if you can. Of course, you should consult your tax and legal advisors for guidance on your circumstances.


This article was originally published on Oct. 12, 2016, and has been updated occasionally to reflect cost-of-living increases to retirement account contribution limits as well as Social Security assumptions for younger workers.

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