How to catch up on retirement savings

As you approach retirement, there is often a sense of urgency to boost your savings and ensure a comfortable financial future. Whether you’ve started later in the game or have faced unexpected setbacks, it’s never too late to start putting extra focus on your retirement savings. Let’s look at some practical strategies you can use to help bridge the gap and secure a more robust retirement nest egg.

What is a catch-up contribution?

One of the major ways to “catch up” on your retirement savings is to use catch-up contributions for your 401(k) and IRA accounts. Catch-up contributions allow individuals aged 50 and older to contribute additional funds to their retirement accounts beyond the standard limits.

401(k) catch-up contributions

If permitted by your plan and you are aged 50 or over at the end of the calendar year, you can make annual catch-up contributions to your account. You can make these catch-up contributions on top of your regular contribution limit. The following plans may qualify:

• 401(k) (other than a SIMPLE 401(k))
  
• 403(b)
  
• SARSEP
  
• governmental 457(b)
  

However, there are limits to how much you can contribute. The standard contribution limit for 401(k) plans is determined by the Internal Revenue Service (IRS) and is subject to change. So it’s important to stay up to date with the limits and regulations surrounding catch-up contributions from a trusted source, such as irs.gov. 

You can find information here: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions

IRA catch-up contributions

Individual Retirement Accounts (IRAs) also offer catch-up contribution options for individuals aged 50 and above. IRAs come in various forms, including traditional IRAs and Roth IRAs, each with its own set of rules and benefits. Like 401(k) catch-up contributions, IRA catch-up contributions can enable you to bolster your retirement savings, compensating for any gaps in your earlier financial planning. Catch-up contributions for IRAs are particularly valuable for those who may not have access to an employer-sponsored retirement plan.

Catch-up contributions serve as a valuable tool for those nearing retirement, offering a chance to accelerate savings and secure a more comfortable financial future. Whether through 401(k) plans or IRAs, if you’re aged 50 or older, you can take advantage of these additional contributions to bridge any gaps in your retirement savings journey. However, it’s important to stay informed about contribution limits, eligibility criteria, and potential changes in tax regulations to make the most of these opportunities. If you need help, don’t hesitate to speak with a financial professional. They can help you navigate the regulations surrounding catch-up contributions and provide you with valuable guidance as well.

How to catch up on retirement savings at any age

Around three in four U.S. adults have financial regrets, according to a Bankrate survey. And 21% say their biggest regret is not having started to save for retirement early enough.¹ 

Related: Save a minimum amount for retirement

While starting to save early is one of the best ways to be retirement-ready, whether you're in your 40s, 50s, or 60s, there are still late retirement planning options that can help you catch up.

In your 40s:
1. Maximize contributions.

• Take advantage of catch-up contributions allowed by retirement accounts
• Contribute the maximum allowed to your 401(k) or IRA to accelerate savings, especially if you receive a company match.

2. Diversify investments.

• Opt for a diversified investment portfolio to balance risk and potential returns.
  
• Consider consulting with a financial professional to align your investments with your retirement goals. You should periodically check in with them to see if any adjustments should be made at different life stages.
  

In your 50s:

1. Leverage catch-up contributions.

• Continue maximizing catch-up contributions to take full advantage of the added benefits in retirement accounts.
  
• Consider contributing extra to Health Savings Accounts (HSAs) for potential medical expenses in retirement.

2. Evaluate lifestyle adjustments.

• Assess your lifestyle and consider making adjustments to free up more funds for savings.
  
• Reevaluate and prioritize your spending habits to focus on essential expenses and cut down on nonessentials.
  

In your 60s:

1. Delay retirement.

• Consider delaying retirement to allow for more years of savings and potential investment growth.
  
• Continued employment can help sustain your income and enable you to keep contributing to retirement accounts.

2. Explore part-time work.

• Transition to part-time work in fields with flexible hours to supplement your retirement income.
  
• Engage in freelance or consulting opportunities to maintain financial stability.

3. Social Security optimization.

• Strategically plan when to start claiming Social Security benefits to maximize your monthly income. 
  
• Consider delaying Social Security benefits, which can result in receiving higher monthly payments—providing more financial security in retirement.
  

General tips for catching up on retirement savings

No matter where you are on your retirement journey, here are some tips that can help you bolster your savings and be better positioned for retirement.

Reduce debt

Prioritize paying off high-interest debt to free up additional funds for retirement savings. Focus on reducing outstanding loans and credit card balances.

Pay off your mortgage

If you own a home, you have a valuable asset apart from your retirement savings. Focus on paying off your mortgage while you’re working and saving for retirement—which gives you the option to sell and downsize, giving you extra money to put toward retirement.

Educate yourself

Continuously educate yourself about retirement planning and investment strategies. You can also attend financial workshops or seminars to gain insights into optimizing your financial situation.

Plan for healthcare costs

Factor in potential healthcare costs during retirement, and explore options such as long-term care insurance or disability insurance. Maintaining a healthy lifestyle can also go a long way toward minimizing healthcare expenses and ensure a better quality of life in retirement.

Get a side hustle

Whether it’s tutoring local kids or making deliveries or even renting out a room in your house, there are many low-stress things you can do to earn a little extra each month. If you’re still in your working years, investing that extra income in your retirement savings can snowball over time due to compounding interest. 

Analyze your monthly budget

Take a look at what you’re spending each month and think of ways you can cut back. If you subscribe to multiple streaming channels, perhaps you can cut back on some. If you eat out a lot, perhaps you can cook more meals at home. While cutting back on expenses can be difficult, chances are you can scale back a little. The important thing is that after you decide on a monthly expense limit that you stick with it. Saving $200 for one or two months is good, but saving $200 every month for many years is what will help you in the long run.

Is it ever too late to save for retirement?

Even if you believe you are far behind on your retirement savings, it’s important to look toward the future. It’s never too late to improve your retirement situation, and a few key steps can have a big impact.

Regardless of your age, making informed decisions can significantly improve your retirement outlook. By maximizing contributions, diversifying investments, and making lifestyle adjustments, you can work toward a more secure financial future, even if you’re catching up in your 40s, 50s, or 60s.

No matter where you are in your retirement journey, it’s important to speak with a financial professional who can create a strategic plan based on your individual circumstances. You may not even be as far behind as you think, and with some strategic moves, the retirement you’ve dreamed of may still be well within reach.

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¹ Lane Gillespie, Bankrate, “Survey: 74% of Americans Have a Financial Regret, Most Frequently Not Saving for Retirement Early Enough,” July 19, 2023.

This material is for informational purposes only. Neither New York Life nor its agents provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.