What To Do When You’re Behind on Retirement Savings

The thought of retirement always seems far off until it’s not. Suddenly, you’re faced with the reality that you’re behind on retirement savings and may not have enough saved up to retire comfortably. I use a robo advisor that constantly reminds me that I’m ‘off track’ to reach my retirement savings goal every time I log in.

It can be overwhelming to see that you’re behind on your retirement savings, but don’t get down on yourself. If you’ve been prioritizing your immediate living expenses and short-term savings goals, there’s nothing wrong with that. When it comes to trying to meet your family’s needs now, retirement savings can seem like an afterthought.

However, it’s not too late to make some changes. In this post, I’ll talk about some practical and realistic steps you can take to catch up and get back on track with retirement savings.

Level Set: Change Your Goal

When you realize you’re behind on your retirement savings, it’s important to level set and reassess your goals. You might need to adjust your retirement age or your expected retirement lifestyle. This is totally fine.

Changing your goal might seem daunting, but it’s better than having unrealistic expectations that will only lead to disappointment later on. Once you’ve set a new goal, break it down into achievable milestones. For example, I would have loved to invest $1,500 per month consistently each year but with inflation and other family changes that have increased my expenses it’s just not possible. This still doesn’t mean I can’t save anything at all.

Determine what you can afford to save and adjust your goal accordingly. It’s better to aim for something achievable rather than nothing at all. Sometimes ‘catching up’ involves moving the target closer and being kinder to yourself.

Automate Your Savings

One of the easiest ways to ensure you’re saving enough for retirement is to automate your savings. Depending on where you work, you may be able to set up automatic contributions to your employer-sponsored retirement plan. If not, consider setting up a recurring transfer from your checking account into a retirement account each month.

Automating your savings takes the guesswork out of budgeting and ensures that you’re consistently saving for retirement. I like to automate whenever I can because it helps me save and invest without thinking about it. I’m a big fan of reverse budgeting where you pay yourself first and make do with whatever is left. Of course, to do this you have to have a good handle on your expenses and commit to earning more than you spend.

Start an Emergency Fund

One of the biggest obstacles to saving for retirement is unexpected expenses. If you don’t have an emergency fund, you might be tempted to dip into your retirement savings when an unexpected expense comes up. To avoid this and getting severely behind on retirement savings, start building an emergency fund so you have a buffer when things go wrong.

Aim to save three to six months’ worth of expenses in your emergency fund. Once you have your emergency fund established, you can focus on maxing out your retirement contributions. Don’t skip this step. If you have to take a year off from investing in retirement to build a solid emergency fund, I’d say it’s worth it. Unexpected expenses can wreak havoc on your finances and the last thing you’ll be thinking about is retirement savings when a crisis hits. By having an emergency fund, though, you can keep your retirement savings intact and ensure that you don’t fall further behind.

Consider Getting a Retirement Account Job

If you’re really behind on retirement savings, consider getting a job that offers a retirement plan with matching contributions. Even if the job isn’t in your desired field or pays less than what you’re currently making, it’s worth considering if it means you’ll be able to catch up on your retirement savings. If you can’t switch jobs, see if your current employer offers overtime or additional projects that could increase your income and allow you to save more for retirement.

Another option is to start a side hustle or part-time job and use that income solely to contribute to your retirement. If you’re able to meet your basic needs with your main job, this could help. It’s best to find something to do that you actually enjoy or can work into your regular schedule long-term. For example, you may want to consider taking on some virtual assistant clients or managing social media for local businesses. If you charge $500 per month to create social media posts and manage a client’s account for the month, you could make $1,000 monthly with just two clients. That’s $12,000 per year.

Make the Most of Windfalls

If you receive a windfall, like a tax refund or a bonus at work, resist the urge to spend it all. Instead, earmark a certain percentage for retirement savings. While it’s tempting to use the money for something more immediate, remember that every little bit helps when it comes to retirement savings. If you have debt, use some of the windfall to pay it down, but make sure you’re still setting aside a portion for retirement.

Diversify When You Can

If you’re behind on retirement savings, it’s important to diversify your investments. While you might be tempted to put all your retirement savings into stocks, remember that diversification can help protect your savings from market volatility. Consider investing in a mix of stocks, bonds, and real estate to spread out your risk.

Consider opening a brokerage account and investing in index funds if you already contribute to a 401(k) or Roth IRA. Realize that you don’t need to add a ton of money if it’s not in the budget right now. But something is better than nothing and the sooner you start, the more time you’ll allow your money to grow.

Summary: Remember, Retirement Isn’t Fully In Your Control

Remember that retirement planning isn’t fully in your control. While it’s important to save as much as you can, unexpected events, like job loss or health issues, can derail your retirement plans. Try not to stress too much about what you can’t control. Instead, focus on what you can control, like budgeting, beefing your emergency fund up, doing some extra work, and diversifying investments when you can.