Behind on Retirement Savings? Here’s Where I’d Start
Many Americans worry they're behind on retirement savings. And in many cases, they're right. Studies continue to show that a large percentage of workers are not on track to maintain their current lifestyle throughout retirement.
If you think you may be behind, don't panic. Being behind doesn't mean you're out of options. However, it does mean it's time to get realistic about where you stand and what adjustments may be needed. Below are steps and considerations to help get you on track:
Start with an Honest Assessment
The first step is often the hardest: stop avoiding the issue.
Take inventory of your retirement accounts, estimate your future Social Security benefit, and look at your current spending. You can't build a plan until you know where you're starting. For many people, the uncertainty is actually worse than the reality.
Consider Right-Sizing Your Lifestyle
One of the most effective strategies is making lifestyle adjustments before retirement rather than waiting until retirement forces the issue.
If your current spending leaves little room for saving, it may be time to evaluate what expenses are truly worth it. Reducing spending today can free up money to invest while also helping you adapt to a more sustainable retirement lifestyle. Small adjustments now are often easier than major cuts later.
Increase Savings Where Possible
If retirement is approaching, incremental changes may not be enough. Look for opportunities to increase retirement contributions, take advantage of catch-up contributions, and direct raises or bonuses toward savings.
While you can't make up for years of missed saving overnight, increasing your savings rate can still make a meaningful difference. Set savings goals and try to automate them as much as possible with regular contributions. And though incremental changes can help, to make up for lost time, try to jump start with a larger savings target if possible.
Work Longer—or Transition Gradually
Retirement doesn't have to happen all at once, and I’m regularly seeing this with my clients.
Working a few extra years can improve retirement readiness by allowing more time to save and fewer years relying on your portfolio. A transition with part-time work during the early years of retirement can reduce pressure on your investments and provide additional flexibility, not to mention ease into a slower pace of life.
Be Strategic About Social Security
For many retirees, Social Security is one of their most valuable sources of guaranteed income. While every situation is different, delaying benefits can significantly increase your monthly payment. If you're concerned about retirement savings, your Social Security claiming strategy may have the biggest impact on your financial security.
Review Your Investment Strategy
When retirement gets closer, some investors become too conservative while others take excessive risks trying to catch up. Neither approach is ideal, and letting your emotions drive your investment strategy isn’t generally a good idea.
Your portfolio should align with your goals, timeline, and comfort level. A thoughtful investment strategy can help balance growth and protection.
Don't Ignore Debt
High-interest debt can make it difficult to build retirement savings and may become an even bigger burden once paychecks stop. Eliminating expensive debt before retirement can improve cash flow and lower the amount of income you'll need later.
Focus on Progress, Not Perfection
It's easy to compare yourself to someone who started saving decades earlier. And even though I’ve heard countless times, “I wish I started this earlier”, you can’t go back so focus on making better decisions moving forward.
If you're behind, the goal isn't to catch up overnight. It's to improve your situation by saving more, spending intentionally, making smart claiming decisions, and building a realistic plan.
The sooner you face the numbers and take action, the more options you'll have.
