6 Tips to Help You Catch Up on Your Retirement Savings

We all know about the importance of starting your retirement planning early in life. Start funding your retirement plans in your 20’s, continue feeding them throughout your working life, and by the time you’re 65 you’ll be on easy street. But what if that hasn’t happened? What if you didn’t start in your 20’s — or even your 30’s? Maybe you had other motivations at the time, or life’s complications just got in the way. Will that mean you won’t be able to retire?


Hardly. It won’t be as easy to accumulate the kind of money you’ll need to have a dream retirement, but it’s still doable. You’ll just need to attack the problem on multiple fronts.

Maximize Your Retirement Contributions

No matter what you’ve done about retirement contributions up to this point, it’s important that you get this going immediately. If you haven’t funded your retirement so far, make the largest contributions your plan will allow. Never assume that it’s too late either.

Let’s say you’re 40 years old, you have no retirement savings at all, and you want to retire at 65. The maximum you can contribute to your 401K is, say $10,000 per year. If you make those contributions faithfully for 25 years, and earn an average 8% (you’ll have to be at least at little aggressive here), by the time you’re 65 you’ll have saved just over $731,000. That may not get you a full retirement at a seaside luxury resort community, but it will provide the foundation of a decent retirement.

If you don’t have a 401(k) at work, you can set up an IRA that will allow you to contribute up to $5,000 per year ($6,000 if you’re 50 or older) and a matching contribution for your spouse. Right there you’ll be able to make a $10,000 annual contribution.

Create New Revenue Streams

Look into creating new income sources. This will accomplish at least two purposes; first, it will provide additional income to fund retirement savings, and second, it can provide an extra source of income when you retire.

You can do this by starting a side business that you can grow into something more substantial when you retire.

Create Passive Revenue Streams

Passive revenue streams are seldom passive when you’re setting them up. You may have to do some heavy work now to develop income streams that will be well established by the time you retire. Examples might be starting a revenue generating blog or website, or investment real estate. (Investment real estate is particularly suited for this if you can acquire it now and have the mortgage paid off by the time you retire.)

When such an income source is established it can provide a revenue stream with very little effort on your part. It’s a way of creating passive income that doesn’t require huge outlays of capital the way a typical investment will.

Plan to Retire Where the Living is Cheap

If retirement savings will be a little short start now to investigate lower cost places to live. The differences between one city and another, or even between states, can be substantial.

For example, moving from Washington, DC, to Charleston, South Carolina can mean a drop in the cost of living by about one-third. Use a cost of living comparison calculator to compare what it costs to live where you are with other areas that you may consider living in. The less it costs you to live, the less income you’ll need in retirement.

Plan to be Completely Out of Debt by the Time You Retire

One of the best ways to offset low retirement savings is to be out of debt by retirement. Debt is a major component of most people’s cost of living, and if you can get rid of all of your debt you’ll need less income.

That’s not just car loans and credit cards either. Your mortgage payment is probably your single biggest expense and if you can eliminate it you’ll open up far more options. Combined with moving to a less expensive location, paying off debt can have a major effect on your retirement planning.

Delay Your Retirement

This can be the single most effective retirement strategy. By delaying your retirement you can not only increase your retirement income and assets, but you’ll also be able to stretch them further.

Consider what you can accomplish by delaying your retirement to age 70 instead of age 65:

  1. Your Social Security benefits will increase by up to 32%
  2. Your retirement investments will continue to grow — in using the example above, by delaying and continuing to fund your retirement plan until age 70, you will increase your portfolio from $731,000 to $1,132,800, an increase of more than $400,000!
  3. The five year delay will decrease the number of years you’ll be drawing on retirement assets keeping more money available for later.

If you’re joining the retirement planning game a bit late, don’t sweat it — just get busy. You can still have a comfortable retirement.

Are you where you want to be in your retirement planning? If not, what are you doing to compensate?

Photo via Wikimedia Commons

About the Author

By , on Apr 21, 2013
Kevin Mercadante is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

How to Become Rich e-Course

Budgeting 101


  1. The right time to start saving for retirement is now if you have not started. It then means that the right tools should be found to build consistency and the momentum towards secured retirement.

  2. Kelly says:

    Good advice. Its hard not to start thinking about retirement even at my early age with all of the focus on the subject these days. Delaying retirement as late as possible is a good idea, but the best tip is to have a number of revenue streams and dedicate the income from those side jobs to your retirement savings.

  3. Passive income is a great way to get some extra money into your savings and to keep making money throughout retirement. I am only 21 and don’t even have a full time job yet since I am still in school, but as soon as I start making an actual yearly salary I’m going to start saving for retirement ASAP!

  4. I’m putting most of my financial effort into creating passive income streams. With any luck, these should cover all of my expenses long before I hit retirement age.

Leave a Reply

Your email address will not be published. Required fields are marked *

Disclaimer and Stuff

The articles are written by personal finance enthusiasts (not certified professionals) based on their personal experience. What works for them may or may not work for you, and you should always consult a financial advisor before making important financial decisions.

In accordance with FTC guidelines, we disclose that we have a financial relationship with companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.

Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.

For additional information, please review our legal disclaimers and privacy policy.