3 strategies to save more for retirement (even if you're late)

Kelly Kowalski, Cliff Noreen, and Bronwyn Shinnick

Posted on July 17, 2022

RS Catch-up saving for retirement
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This article will ...

Tell you how you can “catch up” on your savings if your 50 or older.

List ways to make your money work for you.

Explain the advantages of consolidating your retirement accounts.

Have you saved enough for retirement? Are you confident you’re on target to have the lifestyle you want when you think about life after you stop working? If you’re not sure, you’re not alone.

The reality is most American workers are behind on their retirement savings, and many don’t realize it until later in their careers—some with just five to 10 years until they plan to retire. Only about half of Americans believe they are on track to retire when they want to, according to a recent MassMutual survey.1 

If you’re among those who’ve fallen behind on saving for retirement, it’s not too late. Here are a few simple strategies you can use to help you catch up, even if you’re close to retirement. The best part? You can start today.

Strategy #1: If you’re 50 or older, “catch up” on your savings

Your workplace retirement plan offers you some great tax benefits, like the ability to set aside pre-tax money from your paycheck. However, the IRS sets annual limits on how much you can contribute. Beginning in 2022, the contribution limit for most retirement plans is $20,500.

Once you reach age 50, however, you are allowed to contribute even more each year. If you’re going to be 50 (or older) before the end of 2022, you can save an extra $6,500 in your 401(k), 403(b), and most 457 plans. That means you have the opportunity to sock away as much as $26,000 for retirement in 2022 — that’s a significant amount of savings even if you only plan on working a few more years.

Strategy #2: Make your money work for you

Although you don’t want to take too much investment risk as you get closer to your retirement date, now may not be the time to be too conservative either. Even if retirement is only five to 10 years away, you’ll need to make your money last for 20–30 years. So, you still may need to take some investment risk in order to maximize your opportunity for higher returns while your money remains invested. (Related: Know your risk profile)

Many people over 50 tend to shy away from stocks, but that can hurt your ability to make your money work for you. Re-evaluate your current asset allocation—the mix of investments in your retirement portfolio—to make sure it isn’t too conservative or too risky to keep you from reaching your retirement goals.

If you don’t feel comfortable making investment decisions, or you just don’t have the time or inclination to do the research, here’s another option: You could put your savings into a target date fund (if available in your employer’s retirement plan). Target date funds are designed to simplify the investment process by providing a professionally managed investment mix based on your anticipated retirement date. Target date funds also adjust the investments over time to become more conservative as your retirement gets closer. Some target date funds follow a “through retirement” investment philosophy, which means they’ll keep a higher mix of stock funds in the mix past your retirement date.

Strategy #3: Simplify by consolidating your retirement accounts

Keeping tabs on your finances takes time. It can take even more time if you have separate retirement accounts in multiple locations — with your former employers, for example. After all, that means you have to keep track of a pile of different statements, investment options, tax forms and passwords. Instead of tracking all that, you could consolidate your retirement accounts into one plan to simplify your financial life.

Consolidating your accounts into your current employer’s retirement plan, for example, has several advantages. Your employer is required to oversee the management of the plan and make sure the investment options are prudent investments with reasonable fees. If you have all your retirement savings in one account, you only have one investment mix to manage. This will make it easier for you to make sure your investment selections are working together to grow your account balance. (Related: Switching jobs and retirement plan options)

Keeping your accounts “under one roof” may also help you save money by reducing investment and account management fees. Being able to see your entire savings and investment portfolio at a glance can help you plan more effectively for the future. Finally, when it comes times to withdraw your retirement savings, having all your money in one account can simplify your retirement income planning too.

Consolidating your accounts takes time and careful consideration, but you might find that the benefits far outweigh the one-time effort it takes to get it accomplished.

Time is of the essence

When it comes to retirement savings, it’s never too late to save more. Consider putting aside as much as you can for retirement. If you’re over 50, take advantage of the “catch-up” option. Re-evaluate the investment mix in your retirement portfolio to make sure it still meets your financial needs. And consider consolidating your retirement accounts to simplify your financial life.

Start “catching up” today.

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1 MassMutual, Fall Consumer Sentiment Survey, Fall 2021.

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Investors should consider the impact of transfer fees, the loss of vested benefits, and/or surrender charges that may be imposed by their current plan when funds are consolidated.

Generally, target retirement date (lifecycle) investment options are designed to be held beyond the presumed retirement date to offer a continuing investment option for the investor in retirement. The year in the investment option name refers to the approximate year an investor in the option would plan to retire and likely would stop making new contributions to the investment option. However, investors may choose a date other than their presumed retirement date to be more conservative or aggressive depending on their own risk tolerance. Target retirement date (lifecycle) investment options are designed for participants who plan to withdraw the value of their accounts gradually after retirement. Each of these options follows its own asset allocation path (“glide path”) to progressively reduce its equity exposure and become more conservative over time. Options may not reach their most conservative allocation until after their target date. Others may reach their most conservative allocation in their target date year. Investors should consider their own personal risk tolerance, circumstances and financial situation. These options should not be selected solely on a single factor such as age or retirement date. Please consult the prospectus (if applicable) pertaining to the options to determine if their glide path is consistent with your long-term financial plan. Target retirement date investment options’ stated asset allocation may be subject to change. Investments in these options are not guaranteed and you may experience losses, including losses near, at, or after the target date. Additionally, there is no guarantee that the options will provide adequate income at and through retirement.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to see advice from their own tax or legal counsel.