What to Do if You Don’t Have Enough Retirement Savings

Portrait of Senior Man at Home

In a 2021 survey of workers ages 40 to 73, the Insured Retirement Institute found that only 44% of non-retired people thought they had saved enough money to retire. Some of these people could be right: 51% of respondents had less than $50,000 in retirement savings. Guidelines from Fidelity Investments suggest you should have 10 times your annual salary saved by age 67, the age at which people born after 1960 can retire with full Social Security benefits.

Whatever your age, now is the right time to figure out how much you'll need to save by the time you hit retirement age—and to create a plan for reaching that goal. If you're approaching retirement without adequate savings, consider the following steps to size up your resources and map your way forward.

Step 1: Review How Much You Currently Have Saved

Retirement income usually comes from a variety of sources, and you may already have money saved using several of them. Here's a short list of resources you may be able to tap:

  • Social security benefits
  • Employer-sponsored retirement, such as a pension, 401(k) or 403(b) plan
  • Individual retirement accounts (IRAs)
  • Non-retirement savings or investments
  • Large assets like a home or business

You can estimate your Social Security benefits on the Social Security Administration's website. Wondering how far your savings will stretch in retirement? AARP has a retirement calculator that can help you estimate how much you'll need and how much you're likely to have based on current savings.

2. Calculate How Much More Money You Need to Save

Fidelity's guidelines help you gauge how much in savings and investments it might take to retire comfortably. Assuming you'll need to draw about 45% of your pre-retirement income from savings (with the rest coming from Social Security), and that you plan to squirrel away 15% of your income while you're still working, here's a snapshot of where your savings should stand at different age milestones:

  • By 30: Have the equivalent of a year's annual salary in retirement savings
  • By 40: Three times your annual salary
  • By 50: Six times your annual salary
  • By 60: Eight times your annual salary
  • By 67: 10 times your annual salary

Fidelity's guidelines are helpful, but you may want to do some alternative calculations as well. Working from your current budget, try to estimate what your expenses could be in retirement. If you currently support kids, have high work-related expenses or pay a mortgage you expect to be finished with by the time you retire, factor those out. Compare your projected monthly expenses with any monthly Social Security or pension income you're expecting. How much more will you need each month?

For quick calculation purposes, you can plan to pull 3% to 5% of your retirement savings each year to help cover expenses. For example, if you need $3,500 monthly to meet your expenses and expect $1,800 in Social Security benefits, you'll need $1,700 in additional monthly income, or $20,400 per year. That's 3% of $680,000 or 5% of $408,000.

3. Play Catch-Up if Your Savings Are Short

If your savings are a little slim, take whatever steps your budget allows to save more for your retirement:

  • Maximize your 401(k) contribution and take advantage of any employer matching your company provides.
  • Contribute to an IRA and/or a Roth IRA.
  • Use any bonus money, tax refunds or side income you get to build your retirement savings.
  • Look for ways to streamline your current budget to make room for more retirement savings.

What happens if your savings are more than a little short? If your savings prove the old adage that the best time to start saving for retirement is 40 years ago, ratcheting up your retirement contributions is even more important.

If you have a few years until retirement, you not only have time to accumulate more money, but you have time to grow your money with compound interest, investment income and asset appreciation.

You may also want to brainstorm creative ideas for extending your career, adjusting your lifestyle or leveraging your assets. Here are a few to get your thinking started:

  • Continue working. Staying at your job for an additional few years may increase your Social Security benefit. If you keep working until 70, for example, your benefit could increase by 8% per year over what you'd receive at age 67. Working longer also gives you more time to contribute toward retirement and reduces the length of time you'll spend withdrawing money from your retirement savings. Also consider whether it'll be possible to scale back your employment by working part time, requesting a "demotion" to a less demanding position or signing on as a consultant. You could even look for an encore career you might enjoy as you transition out of your current job.
  • Change your lifestyle. Can you cut your expenses by making a radical lifestyle change? Maybe you can sell your home and move to a less expensive home and community—or convert part of your home to an income property. Could you live without a car, a high-end cellphone plan, travel or dining out? Are there friends or family you might move in with?
  • Sell your assets. If you own your home, selling it might be a way to generate cash for retirement. Alternatively, you could consider a reverse mortgage to bring in monthly income without leaving your home. Other assets you might sell for a profit: a business you own or have a stake in or vehicles you no longer drive.

4. Take Advantage of Tax Incentives

Tax incentives can take the edge off saving aggressively toward your retirement. Contributions to many employer-sponsored retirement plans and traditional IRA accounts are tax-deductible with higher catch-up contribution limits for taxpayers 50 and older. Note that you may have additional limitations depending on your income.

2021 Limits on Retirement Contributions and Benefits
Retirement FundMaximum Contribution
IRA $6,000 ($7,000 if you're 50 or older) for all IRAs combined, including Roth IRAs
SIMPLE Plan$13,500 ($3,000 if you're 50 or older)
401(k), 403(b) and Profit-Sharing Plans$19,500 ($6,500 if you're 50 or older); total contributions, including employer matching contributions, cannot exceed $58,000

Source: IRS

For 2021, the IRS also offers a saver's credit that lets you deduct as much as 50% of your contribution to a qualifying retirement plan directly from your income tax bill; the credit is worth up to $1,000 for single filers or $2,000 for married filing jointly. Credits are limited based on your income: Check with the IRS for details.

5. Consult With a Financial Expert

Planning for retirement is a huge undertaking and can be even more difficult if you're working with limited funds. Getting solid, knowledgeable financial advice can be a game-changer. A trusted financial advisor can help you devise a savings strategy, create and build a portfolio of investments, explore your post-retirement options and more.

You may have access to free or low-cost advice through your employer's retirement plan or from your credit union or bank. If you're interested in finding your own financial advisor to help you long-term, be methodical about finding someone you can trust. The U.S. Securities and Exchange Commission offers these tips for selecting an investment professional.

Get Started Now

Thinking about life without regular income can be a little frightening, especially if your savings are sparse. Wherever you are in your journey, take heart. Marshall your resources, redouble your efforts to save, think creatively about the choices ahead and look for the best advice along the way. Even if you should have started many years and thousands of dollars ago, there's never going to be a better time to start than now.