What to do if you haven't saved enough
If you've fallen behind on your retirement savings — or haven't saved anything — it's not too late.
Paula Hendrickson, director of retirement plan consulting at First Western Trust in Denver, CO, often visits with individuals who've put off saving for retirement. "I meet with people all the time who say, 'Gosh, is it too late?'" Hendrickson says. "But it's never too late. They've just got to get started."
If you've fallen behind or are getting a late start on saving for retirement, you're not alone. In fact, the 2012 EBRI Retirement Confidence Survey (PDF) found that 51 percent of Americans age 35 to 44 have $10,000 or less in their retirement savings. Here are Hendrickson's tips for playing catch-up on retirement savings and helping to reach your financial goals.
Participate in your organization's retirement plan
"This is usually the most cost-effective way to save for retirement," Hendrickson says. This year, 2013, you can contribute up to $17,500 to your employer-sponsored retirement plan. If you can't contribute the maximum amount, at least save enough to receive the full match offered by your organization, if any. Hendrickson also suggests auto-escalating your contribution rate by 1 to 2 percent every year if that option is available. "The more you can automate your contributions, the quicker it can be," she says.
Build a more aggressive portfolio
When you get off to a late start saving for retirement, more than likely you're going to have to be more aggressive in your investment allocation, Hendrickson says. Just remember: Only take on the amount of investment risk you're comfortable with because, as Henderson says, you don't want to stay up all night worrying about your investments.
Add a Roth IRA
Depending on your income, you may be eligible to catch up on your savings by contributing to a Roth IRA in addition to your organization's retirement plan. For people under age 50, the current Roth IRA contribution limit for 2013 is $5,500. Contributions are made with after-tax funds on the way in, but if you allow that money to grow, your withdrawals will be tax-free during your retirement years if you've met distribution requirements.
Start Saving More
Take steps to get on track by enrolling in your organization's retirement savings plan or increasing your retirement deferral.
Use this calculator to see how advantageous it may be to increase your contributions.