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How to catch up on retirement savings if you’ve left the workforce

You can recover lost ground in your retirement savings. The key? Catch up however you can. These six strategies can help.

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6 min read |

People leave the workforce for all sorts of reasons and lengths of time—some by choice, some not. But any break in work, be it temporary or prolonged, may also lead to a break or dip into retirement savings. Take the year 2020: 15% of people faced with a job loss or reduction borrowed from or cashed out retirement accounts, according to the Federal Reserve.1

Luckily, there are lots of ways to catch up on retirement savings if you’ve left (and perhaps reentered) the workforce. Whatever path you choose depends on the tradeoffs you’re willing to make in the short and long term. These ideas may help.

1. Preserve the retirement savings you already have.

Try to leave the savings you already have untouched. You won’t be adding to those accounts, but they’ll still have an opportunity to grow. That may mean adjusting your budget, if you can, or relying on emergency savings to cover day-to-day expenses. Use this checklist for financial next steps after a job loss.

Even over short periods of time, your existing retirement accounts may grow without any additional contributions.

Graphic showing a hypothetical example that if your retirement account balance is $20,000 and you take a workforce break for 3 years with a 6% rate of return, your retirement balance after 3 years will be $23,821.

2. Work a little longer.

Have you set a firm retirement date? If you’re hoping to hit the average age, you’ll likely work until you’re 64.2 But flexing your ideal retirement plan and age—and being willing to work a little longer, even part time—can be key to making up for any lost retirement savings.

In reality, most people no longer expect to go to work one day and then completely stop the next.3 

“Moving your retirement age to account for those years you weren’t earning can help you get there,” says Heather Winston, assistant director of financial advice and planning at Principal®. “But no matter how long you work, the path is the same: Save as much as you can for as long as you can.”

Another perk of delaying retirement a few years? You’ll get a boost in Social Security benefits. While you can start receiving benefits at age 62, your benefits will be 25% less than if you waited until the full retirement age of 66 (and the benefit keeps building the longer you wait).4

Graphic stating that 1 in 3 people plan to continue working into retirement.
Graphic stating that 14% of American expect to delay retirement due to COVID-19.

3. Work backward from your goal.

Say you’re absolutely committed to retiring at 66—no ifs, ands, or buts. Your challenge as you reenter the workforce, says Winston, is to map out what savings rate you need in the working years you have left.

“It’s really a prioritization exercise,” she says. “What are you willing to give up now so you can get there? If you know you have a set number of years to work, you can go backward to figure out how much to save to close the gap between your goal and reality.”

Graphic of a thumbtack.  Tip: Use our Retirement Wellness Planner to see where you’re at and how you can adjust to retire on time. Then log in to your account to change your deferral as needed (if you have an account with services through Principal).

4. Reprioritize your retirement must-haves.

Let’s say you dreamed about retiring somewhere that’s warm year-round—like Phoenix. But the current housing market in Arizona has you questioning whether that’s realistic with the savings you’ll be able to accumulate by your planned retirement date.

Then the question is: What’s the balance you’re willing to strike between your savings and your dream? Are you willing to work longer, save more aggressively, or find a less expensive market to live in?

“Sometimes our vision and reality aren’t aligned. But no matter who you are, how much you have saved, or what your dream is, there are ways to make it come to life. Every decision point has tradeoffs,” Winston says.

For example, if the housing market in your dream locale is too expensive, can a smaller property work? Would a different town or state provide the same quality of life?

Median retirement savings by age7

Less than age 35 $13,000
Age 35–44 $60,000
Age 45–54 $100,000
Age 55–64 $134,000
Age 65–74 $164,000
Age 75 or older $83,000

5. Save when you’re not working (if you can).

The upside of retirement? We’re living longer. About 50% of men and women age 65 will live another 20 years.8

But, of course, that means you’ll have even more years in retirement to save for. See if your budget while you’re not working will allow wiggle room, even a little, to add to an individual retirement account (IRA).

Maybe you can add to an IRA one month, but not the next. That’s OK. “It doesn’t have to be an all-or-nothing approach,” Winston says.

3 common DIY strategies for retirement savings

4% rule Divide your retirement income goal by 4% to get total retirement savings needed.
80% rule Aim to save 80% of your pre-retirement income per year of retirement.
15% rule Save this percentage of your pre-tax income in retirement accounts.

6. Make (literal) catch-up contributions.

Nearly every type of retirement savings account has yearly contribution limits—which can cause worries if you’re approaching retirement age and want to make up lost ground. Luckily, catch-up contributions can help. They’re designed for people age 50 and older and allow you to stash away an additional $6,500 in just one 401(k) account or $1,000 in an IRA, per year.

What’s next?

How are you progressing toward your retirement goals? Log in to to see how you’re doing. Don’t have an employer-sponsored retirement account or want to save even more in addition to a 401(k)? We can help you set up your own retirement savings with an IRA or Roth IRA account. Ready to continue building your financial foundation? Our learning library has information on everything from building a budget to buying a home.