A retired financial adviser breaks down practical options for people who face a retirement savings shortfall. The reality is direct: you have limited but workable paths forward.
Your first move is increasing contributions to existing retirement accounts. If you're 50 or older, the IRS allows catch-up contributions. For 2024, you can add an extra $7,500 to a 401(k) (beyond the standard $23,500 limit) and an extra $1,000 to an IRA (beyond $7,000). These tax-advantaged accounts remain your most efficient savings vehicle.
If you lack employer retirement plans, open a SEP IRA or Solo 401(k). Self-employed workers can stash significantly more than traditional IRA limits allow. A SEP IRA accepts up to 25 percent of net self-employment income, capped at $69,000 in 2024.
For aggressive savers, taxable brokerage accounts offer unlimited contributions. You'll pay taxes on gains and dividends annually, but you gain flexibility and no withdrawal age restrictions.
Work longer. This strategy addresses two problems simultaneously. Every additional year of employment boosts your nest egg while delaying when you actually need those savings. Delaying Social Security claiming from 62 to 70 increases your benefits by roughly 76 percent, dramatically improving lifetime income security.
Consider lower-risk adjustments to your lifestyle. Move to a lower cost-of-living area. Downsize your home. Relocating from an expensive coastal city to a lower-tax state or smaller town can reduce annual expenses by 20 to 40 percent, stretching savings considerably further.
Part-time work in retirement provides income while you draw down savings more slowly. Many retirees work consulting roles, freelance positions, or seasonal jobs that match their expertise and schedule preferences.