What You Can Do if You're Not Saving Enough for Retirement

What You Can Do if You're Not Saving Enough for Retirement. When it comes to retirement, time is mostly on your side. Thus, if you are still many years away from retirement you still have time to build up your nest egg. However, if you are closer to retirement you will need to increase your savings as soon as you can since you don’t have as much time for your investments to appreciate.

If you're not saving enough for retirement, now is the best time to make changes.

Assess Your Current Situation

In order to know whether you’re saving enough for retirement, you should examine your current financial situation. If you have a financial planner, schedule an appointment to discuss your retirement plan; you may not be as far behind as you think. On the other hand, you may have some catching up to do, making it even more important to make changes to your retirement plan as soon as possible.

Maximize Your Contributions

For 2012, you can contribute up to $5,000 per year to either your traditional or Roth IRA. If you reach 50 years of age or more during the year, the annual contribution limit increases to $6,000. If you have a 401(k), you can contribute significantly more. If you’re under 50, you can contribute up to $16,500 per year and once you reach 50, this amount increases to $22,000 per year. The first step to saving enough for retirement is maxing out your contributions. Also, be sure to check every year as the IRS frequently increases 401(k) contribution limits to account for cost of living increases.

Delay Retirement

With life expectancy in the United States going up every year, it’s becoming more and more common for prospective retirees to push back retirement by a couple of years. This means you can stay in the work force longer and shorten the amount of time you’ll need to live off of your retirement income. Additionally, you will be able to collect higher Social Security benefits by delaying your retirement, which can help compensate for a lack of retirement savings.

Increase Your Income

If you find that you still need to save more to secure a comfortable retirement, you can increase your income, which you can then put towards your retirement savings. Part-time work is a great way to stay busy and supplement your income now, so you can relax during retirement later. Alternatively, you may choose to work part-time during retirement to supplement your retirement income, reducing your dependence on your retirement savings.

Balance Your Risk and Reward

While it may be tempting to invest your retirement savings in more aggressive assets such as small-cap equities, it’s not a good idea to take on too much risk. This is especially true if you’re already behind in saving for retirement -- you certainly can't afford to let big market losses erode your nest egg even further. If you are considering changing your portfolio allocations, you should consult with a qualified financial advisor to determine how to best meet your needs.


  • IRS.gov: IRS Announces Pension Plan Limitations for 2012
  • Congressional Research Service: The Changing Demographic Profile of the United States