6 Ways To Catch Up If You’re a Boomer Behind on Retirement Savings

John Csiszar

Wed, Nov 22, 2023, 5:00 AM 5 min read

One of the reasons that saving for retirement is hard is that it usually seems like a very distant goal. If you start saving in your 20s, for example, you’re setting aside money that you won’t be touching for 30 or 40 years, which can seem like a lifetime at that age.

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If you’re a boomer, however, retirement is usually right around the corner, making this your last chance to amp up your savings and boost the value of your nest egg. The good news is there are concrete steps you can take to accomplish this. Here’s how.

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Max Out Your Retirement Accounts

Although it can take some sacrifice to max out your retirement accounts, the few years before you stop working are really your last chance to take advantage of them. If you have access to a workplace 401(k) plan, it’s essential to contribute at least enough to get your full employer match. Usually, employers will match 50% to 100% of at least a portion of an employee’s contributions, and this amounts to free money for retirement.

For example, if you kick in $5,000 to your 401(k), your employer might also contribute $2,500 to $5,000 as well. If you can get this match for the last 10 years of your work career, that’s another $25,000 to $50,000 that will be added to your nest egg, in addition to whatever gains you can earn on it. You’ll also benefit from tax-deferred growth on that money until you withdraw it.

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Take Advantage of Catch-Up Provisions

In addition to the regular contribution limits on retirement plans like IRAs and 401(k)s, the IRS permits “catch-up” contributions for savers who are at least 50 years old. These can prove invaluable for boomers who are behind on their retirement savings.

For IRAs, while the regular contribution limit for 2024 is $7,000, those 50 and older can contribute an additional $1,000, for a total of $8,000 per year. However, the big benefit applies to 401(k) plan participants. While the regular contribution limit for 2024 is $23,000, the catch-up contribution allows another $7,500, for a large total allowable contribution of $30,500.

If you take advantage of the catch-up contributions starting at age 50 and retire at age 65, for example, you can add another $15,000 to your IRA, or as much as $112,500 to your 401(k). This is in addition to any normal contributions you make, or the employer matches you earn in your 401(k), and can go a long way towards shoring up your nest egg.

Use an HSA

A health savings account (HSA) is a great way to enjoy tax savings while reserving money for your health expenses. You get a tax deduction on your contributions, your money grows tax-free within the account, and even distributions are tax-free when used for qualifying health expenses.

But some people also use HSAs as a form of retirement account, particularly those who have already maxed out their more traditional retirement plans like IRAs and 401(k)s. While there’s a 20% penalty for taking distributions for non-medical expenses, that vanishes once you reach age 65. You will have to pay ordinary income tax on your distributions if they aren’t used for qualifying expenses, but if you can wait until age 65, your HSA essentially functions like a traditional IRA.

Adjust Your Budget

While this advice can apply to savers at any age, it’s of particular importance to boomers who are coming up short when it comes to retirement savings.

When you’re in your 50s or 60s, it’s your last chance before you retire to adjust your budget to one in which you spend less than you earn. This will allow you to save more before you lose your primary source of income. It’s also a great time to start envisioning a realistic budget for after you retire, when both your income and expenses are likely to change.

Downsize

If you’re a boomer approaching retirement, you may be living in a home that’s now too large for you. If you’re an empty nester, as many boomers are, you may no longer need a three- or four-bedroom house, for example.

Moving to a one- or two-bedroom house could either significantly trim your rent or provide you with a potential windfall in housing profits. Either way is a great way to immediately boost your retirement savings.

Move to a More Affordable Area

If you’re struggling to trim your expenses so that you can save more for retirement, consider moving to a more affordable area. Whether this means moving a few blocks away, to another state or even to another country, you may be able to save hundreds or even thousands of dollars per month by simply relocating. In this way, you can maintain or even slightly improve your quality of life while socking away extra money at the same time.

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