Financial firms and other organizations routinely conduct surveys in the hopes of gaining insight into adults’ habits regarding retirement savings. Such surveys rarely paint a rosy picture and typically indicate many working adults are concerned that they aren’t saving nearly enough to retire comfortably, if at all.
A recent survey from AARP is among the latest examples to indicate the fear some have regarding a potential savings shortfall during retirement. That survey, released in April 2024, found that 20 percent of adults age 50 and over have no retirement savings, while roughly three in five fear they will not have enough money to keep them afloat once they call it a career.
Saving for retirement is vital to long-term financial health and can ensure retired adults have enough money to meet both their needs and wants. Insufficient retirement savings can compromise retirees’ ability to pay medical expenses and make it hard for them to realize dreams often associated with retirement, such as travel and additional leisure activities. The good news about saving for retirement is there are many ways for those who have fallen behind to catch up.
Find ways to cut back on spending. One of the more direct yet still challenging ways to begin catching up on retirement savings is to cut back on spending in other areas so funds can be redirected to retirement accounts and additional investments. Start by documenting daily, weekly and monthly expenses in a spending journal. After enough data on spending has been documented, examine your spending habits to identify areas where cutbacks can be made so funds can be redirected to retirement contributions. Dining out, entertainment, streaming subscriptions, and travel expenditures may stand out as superfluous luxuries that can be trimmed in the hopes of saving more for retirement.
Take advantage of alternative income streams. Another direct way to begin saving more for retirement is to begin earning more. That’s easier said than done, but it’s not necessarily impossible to find a side hustle to generate sufficient funds for retirement. Earnings from a second job like a freelancing gig can be set aside exclusively for retirement contributions.
Contribute the maximum to retirement investment vehicles. Retirement investment vehicles like an individual retirement account (IRA) have annual contribution limits, and those trying to catch up on retirement savings are urged to contribute the maximum allowable amount under the law. Certified financial planners can help adults navigate these waters, as some people may be eligible to contribute an extra $1,000 per year. Adults also can increase their contributions to employer-sponsored retirement plans like a 401(k). One of the notable benefits to increasing 401(k) contributions is the funds are withdrawn prior to taxes, meaning a 2 to 3 percent contribution increase won’t have a dramatic effect on workers’ take-home pay.
Downsize and redirect funds into retirement investment vehicles. Downsizing a home can be a great way for empty nesters to save money, but there are additional ways to downsize. Adults paying for more streaming subscriptions than they can name can trim the fat by canceling little-used services and redirecting monthly fees into retirement investment vehicles. Adults can downsize their social lives, resolving to dine in more often and even host less frequently or shift toward styles of hosting like potluck affairs that encourage hosts and guests to share the costs of throwing a get-together.
