Are You Behind on Saving for Retirement? Here's How to Catch Up!

Feeling like you’re falling behind on saving for retirement can be overwhelming, but you’re not alone. Many people find themselves in the same boat. The good news? It’s never too late to start catching up. According to SmartAsset, the average 401(k) balance for people aged 44 to 54 is about $312,000. If that number feels far off for you, don’t worry—there are practical steps you can take today to improve your financial future.

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Step 1: Know Your Target

One of the biggest questions people have is, “How much should I save for retirement?” The answer is different for everyone and depends on your expected expenses. Start by figuring out what you spend monthly right now.

A simple way to begin is by looking at your take-home pay. Ask yourself:

• How much am I saving each month?
• How much am I spending?

From there, you can estimate the lump sum you’ll need in retirement. A great tool to help you calculate this is Fidelity’s 45% Rule, which guides you in understanding how much of your income you’ll need to replace. With this reality check, you’ll have a clear starting point.

Step 2: Make Saving a Priority

Life can get in the way of saving for retirement. Between raising kids, paying off a mortgage, and handling day-to-day expenses, it’s easy to push saving to the back burner. But as your financial obligations ease—like kids graduating or paying off big debts—you can shift your focus back to saving.

Here’s how to make saving a priority:

• Maximize contributions: Focus on boosting your 401(k) and IRA contributions.
• Pick the right tools: Whether it’s a Roth IRA, pre-tax account, or a taxable account, choose what works best for your situation.
• Leverage peak earnings: If you’re in your peak earning years, use any extra income to fuel your retirement fund.

Small changes today can mean big benefits later, so start making saving a top priority.

Step 3: Pay Down Debt

Eliminating debt is one of the best ways to improve your financial health before retirement. High monthly payments on mortgages, credit cards, or student loans can limit your flexibility once you stop working.

Academic research shows that retiring without a mortgage significantly improves your financial success. Why? Because fewer monthly obligations mean less pressure on your retirement savings. Focus on:

• Paying off high-interest debts first.
• Reducing or eliminating your mortgage before retirement.
• Avoiding unnecessary new debts.

By tackling your debt now, you free up more money for saving and reduce financial stress in retirement.

Step 4: Get a Reality Check

Retirement isn’t just about hitting a certain number in your savings account—it’s about planning for the realities of life after work. Here are a few key considerations:

• Health insurance gap: Retiring at 62? You’ll need to cover three years of health insurance costs before Medicare kicks in.
• Social Security timing: Your benefits depend on when you start collecting them. Waiting a few extra years can significantly increase your monthly check.
• Overspending risks: Spending more than your plan allows can quickly derail your retirement. While it’s okay to treat yourself, staying within your budget is critical.

A reality check might mean tweaking your retirement timeline or adjusting your spending habits, but these changes can make a huge difference.

Step 5: Invest Wisely

Investing for growth is crucial, especially in your earlier working years. But as you approach retirement, your strategy should evolve.

Here’s how to manage your investments:

• Start with growth: In your 30s and 40s, focus on higher-growth investments, like stocks. Avoid being overly conservative in your 401(k)—you need your money to grow.
• Adjust as you near retirement: If you’re close to retiring, consider scaling back risk by taking some profits and shifting to more stable investments.
• Plan for taxes: Understand the difference between pre-tax and Roth accounts. A mix of both gives you more flexibility when managing your tax bill in retirement.

Tools like target-date funds can help by automatically adjusting your investment mix over time. Wise investing ensures your money grows when you need it most.

Step 6: Seek Professional Help

You don’t have to navigate retirement planning alone. Financial planners can provide the clarity and long-term perspective you need.  Here is how our team can add value.

• Visualize your future: They can show how small changes today impact your retirement down the road.
• Simplify the process: Professionals can help with calculations and strategies you might not have considered.
• Focus on the long term: When you’re caught up in day-to-day concerns, a financial planner can keep you focused on your goals.

The right advice can make all the difference in turning your retirement dreams into reality.

Final Thoughts

Catching up on retirement savings is possible with the right mindset and a solid plan. Remember:

1. Start by understanding your expenses.
2. Make saving a priority.
3. Pay down debt to free up cash flow.
4. Plan for the realities of retirement.
5. Invest for growth while being mindful of risks.
6. Don’t hesitate to ask for help.

Saving for retirement might seem overwhelming, but every small step you take today can lead to a more comfortable and secure future. Start now, stay focused, and remember—you’ve got this!