How To Pivot Your Retirement Plan If You’re Behind on Savings

Saving for retirement isn’t at the forefront of our minds when we’re just starting our careers. We often are just figuring out what we want to do for work, rather than how we’re going to pay for life after it. That’s probably the reason why 1 in 4 people have nothing at all saved up for retirement. When you don’t make saving for retirement a priority, it can seem overwhelming at crunch time. Experts recommend investing enough money that your retirement income is 80% of your working income. On average, here’s how it breaks down: If you’re earning $50,000 by age 30, you should have $50,000 saved. By age 40, you should have three times your annual salary. By age 50, six times your salary; by age 60, eight times; and by age 67, 10 times your salary. If you reach 67 years old and are earning $75,000 per year, you should have $750,000 saved. If these numbers aren’t lining up, you’re not alone. You can feel regretful and think there’s no possible way to catch up to this figure, but rest assured there are strategies that can help you build your retirement cash, even if you’re getting close to the time you plan to stop working.

Increase Your Retirement Contributions ASAP

An obvious first step is to reevaluate what you’re currently contributing to your retirement account. The maximum retirement contribution for 2022 is $20,500, which is $1,000 more than it was in 2021. Those over 50 can contribute $6,500 over that for 401K accounts and $1,000 over that for IRAs. You can choose to max out your contribution if that seems feasible and your retirement date is within the next few years. However, if you’re still a little far off from retiring, financial experts recommend putting 15% of your paycheck away for retirement. If you do this from the time you’re 25 to the time you’re 65, you’ll have put away enough to make 80% of your income during retirement. However, if you’re waiting until you’re 45 to start investing in your retirement, you’ll need to put away 41% of your salary to hit that 80% goal by the time you’re 65. If your company offers matching 401K contributions–take advantage of these! Contribute over the amount you need for the employer to match so you don’t have to take quite as much out of your paycheck to reach your retirement goals.

If Available, Enroll in an Employee Stock Purchase Plan

Some public companies will offer an Employee Stock Purchase Plan (ESPP) as part of their benefits package. How it works is you’re able to purchase your company’s stock at a discounted rate. If the stock goes up dramatically by the time you retire, you will have made quite a profit and can use your earnings to offset the lack of funds in your retirement account.

Look Into a Second Job

If it just doesn’t seem like your first job’s earnings or retirement plan offerings are going to be enough to reach the goals you have, it’s time to bring in a second income stream. You can get a part-time job like providing customer service from home, rent out a room on Airbnb, or contribute to the gig economy. Whatever your second income is, make sure you invest 75% of it into your retirement savings.

Extend How Long You Work

If your original plan was to retire at 65, think about delaying that. Even waiting until you’re 68 can have a huge impact on what you have to spend for the rest of your life. Budget out the plan that works best for you, and if it seems like working a few extra years would make all the difference, then don’t be ashamed of doing so.

Don’t Claim Social Security Benefits Right Away

You pay into social security with each of your paychecks, and you’re eligible to start receiving this cash at 62. If you’re still working and behind on your retirement, consider delaying these payments. This will mean you’ll have access to more social security money available when you retire. The difference can be dramatic: you can earn up to 77% more by waiting until you’re 70 to claim social security versus claiming it as soon as you’re able to at 62.