Steps to Take If You’re Behind on Retirement Savings

How To Save For Retirement When You Are In Your 50s | Bankrate

Retirement often feels like a distant goal until it suddenly becomes urgent. You might find yourself behind on retirement savings, facing the reality that you may not have enough saved to retire comfortably. I frequently get reminders from my robo advisor that I’m ‘off track’ to meet my retirement savings goals.

Seeing that you’re behind on your retirement savings can be overwhelming, but don’t get discouraged. If you’ve been focusing on immediate living expenses and short-term savings goals, that’s understandable. Meeting your family’s current needs can make retirement savings seem like an afterthought.

However, it’s never too late to make changes. Here are some practical and realistic steps to help you catch up and get back on track with your retirement savings.

Level Set: Change Your Goal

When you realize you’re behind on retirement savings, it’s important to reassess and adjust your goals. You might need to modify your retirement age or expected lifestyle. This can seem daunting, but it’s better than having unrealistic expectations that lead to disappointment. Set a new, achievable goal and break it down into milestones. For example, if investing $1,500 per month is unrealistic, determine what you can afford and adjust your goal accordingly. Sometimes ‘catching up’ means moving the target closer and being kinder to yourself.

Automate Your Savings

One of the easiest ways to ensure you’re saving enough for retirement is to automate your savings. If your employer offers an automatic contribution option to a retirement plan, take advantage of it. If not, set up a recurring transfer from your checking account to a retirement account each month. Automating savings removes the guesswork and ensures consistency. I prefer reverse budgeting, where you pay yourself first and live on what’s left. This requires a good understanding of your expenses and a commitment to earning more than you spend.

Start an Emergency Fund

Unexpected expenses can derail retirement savings. Without an emergency fund, you might be tempted to dip into retirement savings when unexpected costs arise. To prevent this, build an emergency fund to cover three to six months’ worth of expenses. Once your emergency fund is established, you can focus on maxing out retirement contributions. If you need to pause retirement investing for a year to build a solid emergency fund, it’s worth it. This way, you can handle crises without compromising your retirement savings.

Consider a Job with Retirement Benefits

If you’re significantly behind on retirement savings, consider getting a job that offers a retirement plan with matching contributions. Even if the job pays less or isn’t in your desired field, it might help you catch up on retirement savings. If changing jobs isn’t an option, see if your current employer offers overtime or additional projects to boost your income and retirement contributions. Alternatively, start a side hustle or part-time job dedicated to retirement savings. For example, managing social media for local businesses or taking on virtual assistant clients can provide additional income for retirement savings.

Make the Most of Windfalls

If you receive a windfall, such as a tax refund or work bonus, resist the urge to spend it all. Allocate a portion to retirement savings. While it’s tempting to use the money immediately, remember that every little bit helps with retirement savings. If you have debt, use part of the windfall to pay it down, but ensure you’re also setting aside some for retirement.

Diversify When You Can

Diversifying your investments is crucial if you’re behind on retirement savings. While it might be tempting to invest solely in stocks, diversification can protect your savings from market volatility. Consider a mix of stocks, bonds, and real estate. If you already contribute to a 401(k) or Roth IRA, think about opening a brokerage account and investing in index funds. Even small contributions can grow over time, so start as soon as possible.

Summary: Remember, Retirement Isn’t Fully in Your Control

Remember that retirement planning isn’t entirely within your control. Unexpected events like job loss or health issues can impact your retirement plans. Focus on what you can control, such as budgeting, building your emergency fund, doing extra work, and diversifying investments. Don’t stress too much about the uncontrollable aspects; instead, make proactive decisions to secure your financial future.

Leave a Reply

Your email address will not be published.