Behind on Retirement Savings? You're Not Alone

Let's get real for a moment. You just checked your 401(k) balance, maybe ran it through a retirement calculator, and the number staring back at you feels... inadequate. Maybe you're 52 with $80,000 saved when the "experts" say you should have twice your salary put away. Maybe you're 47 and just starting to think seriously about retirement. Maybe life happened: a divorce, medical bills, helping kids through college, or just the reality of living paycheck to paycheck for too many years.

Here's what you need to hear first: you're not alone, and you're not a financial failure. According to the Federal Reserve's 2022 Survey of Consumer Finances, the median retirement account balance for families aged 55-64 is just $185,000. That's nowhere near the million-plus that gets thrown around in financial headlines. And guess what? A third of Americans in this age group have nothing saved at all.

This isn't about shame. It's about what you do next. And the good news? You have more options than you think.

Before you can catch up, you need to know what "caught up" actually means for you, not for some generic retirement calculator. Here's your starting checklist:

• Calculate your actual expenses: What do you spend now? What could you realistically live on in retirement? Many people find they need less than they think, especially once the mortgage is paid off and work expenses disappear.
• Factor in Social Security: Visit the Social Security Administration's website and create a "my Social Security" account. You'll see your estimated monthly benefit. For someone retiring at full retirement age (66-67, depending on birth year), the average benefit in 2024 is about $1,907 per month. That's $22,884 annually. It's not nothing.
• Consider your timeline flexibility: Who says you have to retire at 65? Every extra year you work does triple duty: you save more, your savings grow longer, and you delay tapping into your nest egg.
• Think about other income sources: Do you have home equity? A pension (even a small one)? A side hustle that could continue into retirement?

When you add it all up, the gap might be smaller than you feared. And even if it's not, at least now you know the real number you're working with.

Here's where the tax code actually helps the late bloomers. Once you hit 50, the IRS lets you contribute extra to your retirement accounts. These "catch-up contributions" are specifically designed for people in your situation.

For 401(k) plans in 2024:

• Standard limit: $23,000
• Age 50+ catch-up: Additional $7,500
• Total you can contribute: $30,500

For IRAs (Traditional or Roth) in 2024:

• Standard limit: $7,000
• Age 50+ catch-up: Additional $1,000
• Total you can contribute: $8,000

Can you actually afford to max these out? Maybe not. But here's the thing: every dollar you can squeeze in makes a difference. If you're currently contributing 6% to get your employer match, try bumping it to 8%. Then 10%. Many people find that once they adjust their budget, they don't even miss the extra money because it never hits their checking account.

Let's do some quick math: If you're 50 years old and increase your 401(k) contribution by just $300 per month ($3,600 per year), and that money grows at 7% annually, you'll have an extra $68,000 by age 65. Bump it to $500 per month? That's over $113,000.

Nobody wants to hear "stop buying lattes," so I won't insult you with that advice. But if you're serious about catching up, you'll need to find money somewhere. Here are the adjustments that tend to have the biggest impact without making you miserable:

Housing costs: This is your biggest expense, so it has the most potential. Could you refinance? Take in a roommate? Even consider downsizing a few years earlier than planned? A move from a $2,500 mortgage to a $1,800 mortgage frees up $700 monthly. That's $8,400 per year to redirect to retirement.

Transportation: Can you drive your paid-off car another three years instead of upgrading? The average new car payment is $726 per month. Keep your current car and invest that payment instead.

Adult children: This is tough, but necessary. If you're still significantly supporting adult children, it's time for an honest conversation. You can't sacrifice your retirement security to fund their lifestyle. They have decades to build wealth. You don't.

Subscriptions and memberships: Yes, it's the classic advice, but audit everything. Streaming services, gym memberships you don't use, that software subscription you forgot about. These "small" expenses add up to $200-300 monthly for many people.

Healthcare costs: If you're not already, consider a high-deductible health plan with a Health Savings Account (HSA). In 2024, you can contribute $4,150 as an individual or $8,300 for family coverage, with an extra $1,000 catch-up if you're 55+. HSAs are triple tax-advantaged and can be used for healthcare in retirement, including Medicare premiums.

Here's a truth that the financial industry doesn't always emphasize: retirement doesn't have to happen at 65. In fact, working longer is one of the most powerful levers you can pull.

Consider what happens if you work until 68 instead of 65:

• Three more years of contributions and employer matches
• Three more years of investment growth (and at this stage, you likely have your largest account balances earning returns)
• Three fewer years of withdrawals from your nest egg
• A significantly higher Social Security benefit (benefits increase about 8% per year you delay between full retirement age and 70)
• Three more years on employer health insurance, delaying Medicare decisions

For someone with $200,000 saved at 65, working three more years while contributing $15,000 annually (with 7% returns) could mean retiring with around $317,000 instead. That's a 58% increase.

But here's the key: working longer doesn't have to mean the same stressful job. This might be your chance to downshift to something less demanding, turn a hobby into part-time income, or consult in your field with a flexible schedule. Retirement doesn't have to be an on/off switch.

Geographic arbitrage: Retiring somewhere with a lower cost of living can make a smaller nest egg go much further. Moving from a high-cost coastal city to a more affordable state could cut your living expenses by 30-40%. Some retirees even spend part of the year in countries with favorable exchange rates.

Home equity: If you own your home, you're sitting on a potential retirement asset. You could downsize and invest the difference, take out a reverse mortgage later in retirement (though understand the costs), or plan to sell and rent in retirement. A paid-off home worth $400,000 represents real wealth, even if it's not in a retirement account.

Delay Social Security: Every year you delay claiming Social Security past your full retirement age (up to age 70), your benefit increases by about 8%. If your full retirement benefit would be $2,000 at age 67, it becomes $2,480 at age 70. That's an extra $5,760 per year, every year, for the rest of your life. If you can live on savings or part-time work while delaying, it's often worth it.

Roth conversions: If you're in a lower tax bracket now than you expect to be in retirement (or if you want to reduce future Required Minimum Distributions), gradually converting traditional IRA money to a Roth can make sense. You'll pay taxes now, but qualified Roth withdrawals are tax-free. This is complex, so definitely consult a tax professional.

When you're feeling behind, desperation can lead to bad decisions. Avoid these common mistakes:

Don't take on excessive risk: Yes, you need growth, but betting everything on crypto or meme stocks because you're "running out of time" is more likely to set you back than help. A balanced, age-appropriate portfolio is still your best bet.

Don't raid your current retirement accounts: Taking an early withdrawal or loan from your 401(k) will cost you taxes, potential penalties, and lost growth. It's almost never worth it.

Don't neglect an employer match: If your employer offers a 401(k) match and you're not contributing enough to get it, you're literally leaving free money on the table. This should be your first priority, even before paying off debt.

Don't ignore the math: Hopeful thinking won't build your nest egg. Run real numbers, use retirement calculators, and be honest about what you need to do.

Don't go it alone if you're overwhelmed: A fee-only financial planner (fiduciary, not commission-based) can help you create a realistic plan. Often, their fee pays for itself in the better decisions you'll make.

You're not going to go from "behind" to "perfectly on track" overnight. That's okay. What matters is that you start moving in the right direction today.

Maybe you can't max out your 401(k), but you can increase your contribution by 2%. Maybe you can't work until 70, but you could push retirement to 67. Maybe you can't slash your spending dramatically, but you can find $200 per month to redirect. Each of these moves matters.

Remember, retirement isn't a pass/fail test. It's not about hitting some magical number that financial websites tell you that you "should" have saved. It's about building enough resources, combined with Social Security and other income, to support a life you'll actually enjoy.

And here's something else to keep in mind: many people find that they spend less than they expected in retirement. Travel tends to decrease after the first few active years. You're not commuting or buying work clothes. You have time to cook instead of eating out. You can be strategic about entertainment and hobbies. Your retirement might cost less than you think.

So yes, take this seriously. Make changes. Increase contributions. Adjust your timeline if needed. But also, give yourself some grace. You're here, reading this, thinking about solutions. That puts you ahead of a lot of people. Now you just need to take the next step.

Disclaimer: The information provided in this article is for educational purposes only and does not constitute financial advice. We are not certified financial planners or advisors. Everyone's financial situation is unique, and what works for one person may not be appropriate for another. Before making any financial decisions, including changes to your retirement savings strategy, please consult with a qualified financial advisor or planner who can review your specific circumstances and provide personalized guidance.