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7 Steps to Take Now to Catch Up on Retirement Savings


Another option is applying for coverage through the Affordable Care Act, which offers a range of plans, including for those still unemployed.

Make catch-up contributions. If you’re 50 or older, the Internal Revenue Service gives you a little savings plum: You can save as much as an extra $6,500 annually in your defined contribution plans (which include 401(k)s, 403(b)s and 457s). If you have a SIMPLE (Savings Incentive Match Plan for Employees) individual retirement account or SIMPLE 401(k), the catch-up contribution is $3,000 annually; it’s $1,000 for a Roth I.R.A.

Automate your savings. If you’re working and offered a 401(k) with automatic payroll withdrawals, you can simply increase your contribution. Want to save even more? Many plans allow you to boost your 401(k) savings when you get a raise. Let’s say you’re 50 or older and save the maximum annual amount — $26,000. That’s $19,500 plus a $6,500 catch-up contribution. Also take your employer’s matching contribution, if it’s offered. This is the low-hanging fruit of retirement savings that most financial planners recommend — again, if you have access to it.

Adjust your portfolio. Just socking more money into a bank money-market account won’t help you catch up much at all. After all, the S&P 500 index is up a stunning amount: more than 40 percent this year. Yields on money markets are awful — the top rate nationally was 0.60 percent, according to Bankrate.com. The best way to achieve your goals is to invest in no-load mutual or exchange-traded funds, preferably with an annual expense ratio below 0.30 percent.

Most mutual fund companies offer dividend growth and income mutual and exchange-traded funds. Also avoid the trap in thinking that money in the bank is safe money. If it’s not beating inflation, which is currently running at an annual rate of just under 3 percent, you’re losing purchasing power. “Don’t keep too much money in a bank account,” Ms. Price warned. “You’re getting paid very little to keep it there.”

Retire later. If you’re able, one simple strategy is to retire after the “normal” age for Social Security benefits, which is 66 for most Americans. That will give you more time to save. Social Security will even pay you more each month if you wait until 70 to collect benefits. A “delayed retirement credit” will raise your retirement payments 8 percent annually every year you wait from age 66 until taking benefits at age 70 for those born in 1943 and later.

Set up your own plan. Small-business owners or those who are self-employed can set up their own plans, from Simplified Employee Pension I.R.A.s to 401(k)s. Ms. Price suggests those over 50 consider a Roth 401(k), if your employer offers it. While contributions are taxed, withdrawals are not. “You’re taxed on money going in, not on gains,” she said. “If you can’t afford to pay taxes on withdrawals later, this is a good idea.”


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