Behind on Retirement Savings? 5 Ways to Catch Up Fast

Young businessman with a briefcase and glasses running

Don’t fall behind on retirement savings. | iStock.com/master1305

Americans are an optimistic bunch. When it comes to money, most people feel secure and on track to achieve their financial goals, according to Experian’s 2016 personal finance survey. Dig a little deeper, though, and some problems begin to emerge. Three quarters of people say they’re stressed about money at least some of the time and 41% are earning less today than they expected they would be five years ago. Nearly 75% said they felt behind on their retirement savings, including one-third who believed they were too far off track to ever catch up.

What exactly do those who are behind in their savings expect to do once they hit retirement age? Keep working until they drop, apparently. Just over one-quarter of people will stay at their job for as long as they possibly can, a 2014 Federal Reserve survey found. Planning to keep working during retirement isn’t always a bad thing, especially for those who find the idea of a life without a job a bore. But it’s not exactly a solid retirement plan. Layoffs and health problems can force you into retirement earlier than you would like, which is one reason why you also want a healthy nest egg – it gives you something to fall back on if your career goes belly up.

Unfortunately, the average 401(k) balance of just under $100,000 isn’t going to cut it in retirement, even if you do manage to keep working into your 70s. Still, an anemic retirement account doesn’t have to mean a lifetime of work, provided you act now. While nothing beats saving early and often, there are ways to juice your savings so you can increase your chances of enjoying a financially secure retirement. If your 401(k) needs some TLC, consider these five fast ways to catch up on your retirement savings.

1. Invest found money

jar of spare change for retirement savings

Make your money work for you. | iStock.com

When retirement accounts are thin, you need to make any extra dollar you can find work for you. “Take tax refunds, workplace raises, and inheritances and invest instead of spend them,” Willie Schuette, an Ohio-based financial coach with The JL Smith Group, said in an interview with The Cheat Sheet.

Not expecting a raise or tax refund this year? You may still have some extra cash lying around and not even know it. States currently have $41 billion in uncashed payroll checks, unclaimed security deposits, and closed bank accounts, and some of it may be yours. The IRS is sitting on another $1 billion in unclaimed tax refunds. And don’t overlook other assets you might be able to convert to retirement funds. Jewelry, collectibles, antiques, a boat, or a vacation home are items Schuette suggested selling if you’re looking for fast ways to increase your savings.

2. Slash fees

Person Hand Inserting Coin In Pink Piggybank

Even small fees add up. | iStock.com/AndreyPopov

Investment fees of 2% sound innocuous and perhaps even reasonable. Your money isn’t going to manage itself, after all. But paying an extra 1% or 1.5% in fees cuts eats away at your retirement account. “Even small differences in investments costs can translate into large differences over time,” Schuette said.

How much do you stand to lose? If you had $500,000 account with investment costs of 1.06%, you’d pay $502,000 in fees over 30 years, according to a study by Personal Capital. Increase the investment fees to 1.98%, and you’d pay $936,000 in fees over three decades. (The study assumed a 7% rate of return.) Switching to lower-cost investments is a virtually painless way to make your retirement savings work harder, and the sooner you make this move, the more you stand to save.

3. Downsize

home with for sale sign

You probably don’t need all that space. | iStock.com

Retirement is closing in and it’s looking like your nest egg just isn’t going to cut it. Now is the time to consider downsizing, especially if your kids are grown. Turn your home into a retirement asset by selling the property and investing your gains.

“Consider harvesting some of your home equity by scaling down to a smaller less expensive house,” Schuette said. “This creates a double-win for your savings because you increase investment income while reducing certain expenses such as mortgage payments, utilities, property taxes, and insurance.” You can save even more by relocating to a smaller home in an area where taxes and other expenses are lower, Schuette said (though that may not be an option if you’re still working and need to stay close to your current job).

4. Get a second job

plants on piles of euro coins

A little extra income could make all the difference. | iStock.com/RomoloTavani

Sometimes, you have to work harder now so you can work less later. Thirty-five percent of people Experian surveyed said they weren’t earning enough money to save. If you’re one of them, a second job could be the solution. A part-time retail gig might be an option, as is freelancing or consulting. But don’t overlook more creative ways to boost your income. Driving for Uber, listing a spare bedroom on Airbnb, or finding dog-sitting jobs through DogVacay can pad your income by a few hundred dollars per month, enough to make a meaningful difference in your retirement account balances.

Even earning an additional $50 or $100 per month and putting the money toward retirement could make a big difference in your total savings. A 30-year-old who saves an extra $600 per year, or $50 per month, could have an extra $100,000 in retirement, assuming a 6% return, according to the Motley Fool. The results won’t be quite as dramatic if you’re closer to retirement, but setting aside an extra $200 per month from age 50 to 65 could increase your total savings by tens of thousands of dollars.

5. Get comfortable with investing

stacks of coins representing investments

Take some calculated risks. | iStock.com

Only 30% of people Experian surveyed said they invested in stocks and bonds. Avoiding those higher risk but potentially more lucrative investments is probably one reason so many are behind on their retirement savings.

If you’re keeping most of your retirement funds in “safe” investments like savings accounts, certificates of deposit, or money market accounts, it’s difficult for your money grow at a fast enough clip for you to accumulate a significant nest egg. Worse, you’re probably not even earning enough to keep up with inflation.

To make your money work for you, you need to get more comfortable with investing. Boosting your returns from 1% or 2% a year to 5% or 6% can mean hundreds of thousands of dollars more for retirement 30 years from now. Not sure where to start? Your 401(k) provider should have a target date fund with an appropriate mix of investments for people in your age group. Or check out The Cheat Sheet’s beginner’s tips for investing.

Check out The Cheat Sheet on Facebook!

More from Money & Career Cheat Sheet:

More Articles About:   ,