What to Do If You’re Behind on 401(k) Savings
Given the increase in the cost of retirement, it’s no wonder many are worried they are behind on 401(k) savings.
According to the Northwestern Mutual 2024 Planning & Progress Study, “American adults say on average they now need $1.46 million to retire. That’s 15% higher than a year earlier and a 50% increase since 2020.”¹
If you are one of the many Americans who feel as if you are behind on 401(k) savings, there are ways you can catch up.
Follow these tips to boost your 401(k) savings and prepare to retire more comfortably.
#1 Increase Contributions
The most obvious way to boost 401(k) savings is to increase how much you contribute.
If your 401(k) account is still set up just as it was when you were first employed, it’s time to make changes.
Begin by increasing the percentage of your paycheck you contribute each month.
Financial advisors will tell you that it is a no-brainer to contribute at least enough to receive the company match.
That’s because it’s free money.
Let’s say your employer matches 100% up to 6% of your pay.
If you make $40,000 a year and contribute $2,400 (or 6%) for the year, your employer will match this 100%.
This means you would get $2,400 of free money.
But contributing just enough to get the company match isn’t enough.
While contributing something is better than nothing, $2,400 isn’t going to get you far if you are behind on 401(k) savings.
Ideally, you should aim to contribute the maximum amount allowed.
The employee 401(k) contribution limits for 2024 have increased to $23,000.
For those 50 and older, you should also take advantage of catch-up contributions, which allow you to contribute more than $23,000.
Catch-up contributions are designed specifically for those who are behind on 401(k) savings.
For those ages 50 and older, the 401(k) catch-up contribution is $7,500, for a total of $30,500.
[Related Read: Big Catch-Up Contribution Changes Coming in 2024]
#2 Earn More Money
If you are behind on your 401(k) savings, you need to do whatever you can to earn more money for retirement.
Even if this means you need to take on a side hustle or a second job.
Take advantage of the gig economy and earn money for doing simple tasks for other people when you aren’t working at your full-time job.
Find another way to earn money, and then, take all the extra money you earn and put it into your 401(k) account.
[Related Read: Close the Gap on Financial Goals with a Side Hustle]
#3 Get Healthy Now
Healthcare is one of the most expensive parts of retirement – and healthcare costs are rising.
According to the Fidelity Retiree Health Care Cost Estimate, “A single person age 65 in 2023 may need approximately $157,500 saved (after tax) to cover health care expenses in retirement. An average retired couple age 65 in 2023 may need approximately $315,000 saved.”²
Fidelity also claims that “the average age 65-year-old couple today will spend around $12,000 on healthcare in their first year of retirement.”³
Given the rising costs of healthcare, it is imperative to get healthy now.
The cold hard truth is that the less healthy you are, the more expensive your healthcare will be in retirement.
PBS News reports, “Obesity is an expensive disease, especially for aging seniors. One study found that while obese 70-year-olds live as long as healthy weight 70-year-olds, they will spend $39,000 more on health care.”⁴
If you are making unhealthy choices today, you will literally pay for them tomorrow.
Change your habits and embrace a healthier lifestyle.
Exercise regularly to reduce the chances of heart disease and stroke.
Take advantage of your employer-sponsored healthcare insurance plan, which should include regular physicals and preventative care options.
#4 Cut Expenses
What you spend money on today will affect your retirement savings tomorrow.
Think of it this way: If you spend less, you can save more.
If you know you are behind on 401(k) savings, it’s time to take a good hard look at your expenses.
Are there places where you are spending more than you need?
Consider cutting these expenses:
- Subscription services – Do you need multiple ones?
- Clothing – Do you have more than you need?
- Gifts – Do you overspend when giving to others?
- Vacations – Can you take less expensive vacations?
- Food and drink – Can you reduce how often you eat out to save money?
- Entertainment – Are you willing to utilize free community events and library services?
- Utilities – What are some ways you can lower energy and water costs?
- Home repairs and landscaping services – Can you do it yourself or negotiate for better rates?
Wherever you cut back, make sure you are placing the saved money toward your 401(k).
#5 Seek Professional Help
There is no shame in getting help if you are behind on 401(k) savings.
And you’ve come to the right place!
401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance.
With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.
Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.
Sources
- https://www.forbes.com/sites/bobcarlson/2024/05/24/how-much-money-do-you-really-need-to-retire-comfortably/
- https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
- https://communications.fidelity.com/wi/tools/retirement-health-care/
- https://www.pbs.org/newshour/show/extra-costs-extra-weight-older-adults
