5 Things To Do To Catch Up on Your Retirement Savings Fast

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The long-term goal for any worker is to have enough money later in life to retire comfortably and not have to worry about running out of livable income. Retirement should be relaxing and not stressful, so having enough funding will take the fret out of financial decisions. If you feel like you might be falling behind and need to catch up on your retirement savings quickly there are several strategies you can employ to increase the amount of money you save each paycheck.

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Quick Take: Retirement Plan Options

According to the Department of Labor and financial experts, you will need roughly 70% to 90% of your current income to maintain your standard of living and cover your expenses in retirement. Not only should you start saving now, but you should also diversify how you are growing your money for retirement. Here are some key takeaways:

• What you have in your retirement savings accounts should cover at least an estimated 70% or more to ensure your expenses and cost of living are covered.

• Though the full retirement age of 65 is still considered the standard, many people are choosing to work longer to stretch out their Social Security benefits or other income streams.

• Planning for your retirement now can help you assess what your income needs will be and evaluate how much you’ll need to save per month or year to reach your financial goals.

• Qualified plans or retirement benefits include savings accounts, IRAs, employer-matched 401(k) plans, Social Security monthly benefits and more.

• Outside of retirement plans, you can also grow your wealth and diversify your investments by putting money into stocks, bonds, index funds or real estate.

Learn More: 10 Best (and Worst) Places To Retire If You Have No Savings

5 Ways To Grow Your Retirement Savings Quickly

1. Get a financial advisor

2. Fund a variety of individual retirement accounts, or IRAs

3. Maximize your 401(k) or 403(b) employer contributions

4. Build a more creative budget for spending

5. Put your money into more tax-advantaged retirement plans

1. Get a Financial Advisor

One of the best ways to get your retirement savings on track is to seek out the advice of a financial advisor. They can help you with many areas including retirement planning, taxes, insurance needs, investing, budgeting, borrowing and saving in general.

If you are not ready to hire a financial planner for a specific reason you can start by reading books or columns from famous financial experts. For example, personal financial expert Dave Ramsey, the founder and CEO of Ramsey Solutions, has said to avoid taking Social Security early as waiting will give you a greater return.

“It usually makes sense to take it early if you’re going to … invest every bit of it.”

2. Fund a Variety of IRAs

To increase your savings rate one effective way to catch up on retirement savings is to up the percentage of your income that you contribute to your retirement accounts. Even a small bump can make a big difference over time. Experts recommend aiming to save at least 15% of your income for retirement.

You also don’t want to put all of your eggs in one basket. Spread out where you keep your savings and shop around for the best rates and returns. Here are some examples of retirement savings accounts to which you can contribute:

• Traditional IRA

• Payroll Deduction IRA

• Roth IRA

• Salary Reduction Simplified Employee Pension, or SARSEP

• Defined Contribution Plan

• Federal Thrift Savings Plan

• Nonqualified Deferred Compensation Plans, or NQDC

• 401(k) Plan

• Simple 401(k) Plan

• 403(b) Tax-Sheltered Annuity Plan

• Cash Value Life Insurance Plan

• Guaranteed Income Annuities, or GIA

• Defined Benefit Plan

3. Maximize Your Employer Contributions

There may be no such thing as free money, but there is such a thing as leaving money on the table. Make sure you are matching what your employer is willing to contribute to your retirement fund. You can max out your 401(k) in 2024 by contributing up to $23,000 annually.

However, the employer match does not count toward this limit and the IRS limits total 401(k) contributions to $69,000 or 100% of the employee’s compensation, depending on which is lower. That amount rises to $76,500 with catch-up contributions

Utilize Catch-Up Contributions

Another way to take advantage of contribution options is to utilize catch-up contributions allowed by the IRS. These additional contributions are designed to help you accelerate your retirement savings after a certain age.

For 2024, individuals aged 50 and older can contribute an extra $6,500 to their 401(k) plans and an extra $1,000 to their IRAs on top of the regular contribution limits. In simple terms, you can contribute an additional $7,500, which increases the annual allowance to $30,500.

4. Build a More Creative Budget for Spending

Ultimately, your main goal should be to save more than you spend. Look for areas where you can cut expenses and redirect those savings toward your retirement accounts. This might involve downsizing your home, reducing discretionary spending or eliminating unnecessary subscriptions and services.

Every dollar saved can contribute to your retirement nest egg. You could try breaking up your budget into percentages such as the 50/30/20 rule which has you allocate 50% of your paycheck for needs, 30$ for wants and 20% for savings. Another example would be from financial expert Suze Orman, who says, “10% of your salary is the minimum amount you should put in your 401(k), and 15% is a smarter target. If you’re not putting in 15% yet, raise your contribution by 1% per year until you get there. Vow to use half of a raise for retirement.”

5. Put Your Money Into More Tax-Advantaged Retirement Plans

When it comes to income taxes both during and pre-retirement you want to aim to be as tax-free or tax-friendly as possible. More traditional accounts such as IRAs or 401(k) plans are great examples of tax-deferred retirement accounts. This means your earnings on investments are not taxed annually but instead have that tax deferred until you retire and can make withdrawals from the account.

Retirement Finance Tips To Help Grow Your Savings

To get a good jumpstart on your retirement savings here are a few tips and tricks to grow your money more quickly.

• Assess your current situation: Take a close look at your finances. Understand how much you have saved for retirement, how much you’ll need and what your current saving and spending habits are to provide a clear starting point for your efforts to catch up.

• Explore additional income streams: Increasing your income through side hustles, freelance work or part-time employment can provide extra funds to boost your retirement savings. Consider leveraging your skills and interests to generate additional income outside of your primary job. Even a modest increase in income can have a significant impact on your retirement savings over time.

• Consider delaying retirement: While retiring early might sound appealing, extending your working years can significantly increase your retirement savings. By delaying retirement, you can continue to contribute to your retirement accounts while also delaying the need to tap into them, allowing your savings to grow further.

• Invest wisely: Review your investment strategy to ensure it aligns with your retirement goals and risk tolerance. Consider diversifying your investments across different asset classes to reduce risk and maximize returns over the long term. Consulting with a financial advisor can help you make informed decisions about your investments.

Final Take To GO

The bottom line is that catching up on retirement savings may seem daunting, but it’s entirely achievable with careful pre-tax planning and disciplined saving habits. You can accelerate your progress toward a financially secure retirement by starting better savings habits now. Remember, the key is to not wait another day and take action now to remain consistent in your efforts to build a brighter financial future.

FAQ

Here are some answers to frequently asked questions about how to catch up on your retirement savings and do so quickly.

• What is the best form of retirement plan?

  • There are many options for retirement plans so make sure you research which best suits your financial needs. Here are some great options to invest in for your retirement savings:

    • Traditional IRA

    • Payroll Deduction IRA

    • Roth IRA

    • Salary Reduction Simplified Employee Pension, or SARSEP

    • Defined Contribution Plan

    • Federal Thrift Savings Plan

    • Nonqualified Deferred Compensation Plans, or NQDC

    • 401(k) Plan

    • Simple 401(k) Plan

    • 403(b) Tax-Sheltered Annuity Plan

    • Cash Value Life Insurance Plan

    • Guaranteed Income Annuities, or GIA

    • Defined Benefit Plan

• How can I make my 401(k) grow faster?

  • Here are some great ways to grow your 401(k) faster before retirement:

    • Maximize the amount you put into it and the savings rate.

    • Get the most out of your employer match.

    • Don't withdraw from or cash out the account early to avoid fees or tax penalties.

    • Maximize Your Tax Break

    • Make sure to roll over your account when you change jobs when possible.

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This article originally appeared on GOBankingRates.com: 5 Things To Do To Catch Up on Your Retirement Savings Fast