Finances

How to catch up on retirement savings

The virtues of saving for retirement are extolled from the moment young men and women begin their professional careers. Such advice is sound, and though retirement is a long way off from the start of one's career, those professionals who heed these words of wisdom and start saving early are bound to benefit down the road.

But even the best advice can fall on deaf ears from time to time, and many people simply don't save enough for retirement. A 2013 survey from Fidelity Investments revealed just how much financial trouble the average American is likely to be in upon retirement. The survey asked more than 2,000 participants a range of questions on topics, including their health, retirement and saving habits, and found that the average baby boomer, which includes those born between 1946 and 1964, was on track to reach just 81 percent of their retirement income needs. Those needs include food, shelter and medical care. The study also found that 40 percent of participants across all generations were saving less than 6 percent of their salaries for retirement. That's especially troubling when considering financial planners often advise men and women to save 10 to 15 percent of their salaries for retirement.

Some simple arithmetic and an examination of assets, including retirement accounts and savings, can shed light on how rosy or bleak a person's retirement looks. Young professionals have time to make up for their indiscretions, but men and women over 50 who haven't saved enough for retirement must get to work immediately to ensure their retirement years are comfortable. The following are a handful of ways men and women can catch up on retirement savings.

* Start spending less. The easiest way to catch up on retirement savings is to start spending less. Men and women over 50 know that the sand in their earnings hourglass is running out, and those behind on retirement savings need to make the most of their earnings in the years ahead. That means cutting out any unnecessary expenses so that money can be used to save for retirement. Examine all of your monthly and annual expenses to find ways to trim some fat. You many want to downsize your vehicle to a less expensive and more fuel-efficient make and model. Golfers can cancel their country club memberships in favor of golfing on more affordable public courses that don't charge hefty annual membership fees. Slashing spending won't be easy, but doing so is the first step toward catching up on your retirement savings.

* Contribute more to your employer-sponsored retirement plan. If you have not been contributing the maximum amount to your employer-sponsored retirement plan, start doing so. This is especially beneficial if your employer matches your contributions. Contributing more to such plans should not drastically affect your take-home pay now if the plan is a pre-tax plan like a 401(k).

* Make IRA catch-up contributions. The Internal Revenue service allows men and women over the age of 50 to make annual catch-up contributions up to $5,500. These contributions must be made to a retirement plan via elective deferrals, and there are additional requirements as well. Men and women over 50 interested in making catch-up contributions to their retirement accounts can learn more at www.irs.gov.

* Put more in traditional savings accounts. Though it's best to put as much money into tax-advantaged accounts, if you are already maxing out your contributions to such accounts it's still good to sock away money into a traditional taxable savings account. It's unwise to expect your retirement accounts to fully fund your lifestyle in retirement, so you will need, or at least want, a substantial amount of money in savings. The benefit here is the money you put into traditional savings accounts has already been taxed so you won't incur any bills from the tax man once you begin to use that money down the road.

* Postpone retirement. Though it's not ideal for men and women with a target retirement date in mind, postponing the day you call it quits is another way to catch up on retirement savings. Postponing retirement allows you to build a more substantial retirement portfolio while also decreasing the amount of time you will need to rely on that money. This gives you more flexibility in retirement. In addition, Americans who work longer can increase their Social Security benefit because working longer should allow them to delay the day they start taking Social Security payments. Men and women who can wait until age 70 to accept such payments will receive larger monthly payments as a result.

Studies have shown that men and women are simply not saving enough to finance their retirements. But there are myriad ways for those over 50 to start catching up.