How to catch up on retirement savings

A recent report from Bank of America revealed that when it comes to saving for retirement, women are lagging far behind men. On average, women have 50% less saved in their 401(k) accounts, with the average 401(k) balance among women at $59,000 compared to $89,000 for men.

The good news is that this gender gap is starting to close among younger generations. While Baby Boomer men (ages 58-76) have an average of 87% more saved in their 401(k) accounts than Baby Boomer women, that gap narrows to 23% when comparing millennial men and women (ages 28-42).

Still, that can leave a lot of catching up to get retirement-ready, especially if your golden years are right around the corner. Luckily, there are steps you can take to catch up on saving for retirement.

Bump up your savings rate

If you have the means, a good first step towards bolstering your retirement savings is to increase the amount you're putting away. One of the reasons women lagged behind men in the Bank of America data was that they were saving 6.6% less than men on average, according to Kiplinger's analysis. "Only 7% of women contribute the maximum amount the IRS allows in 401(k)s, vs. 10% of men."

Depending on what your budget allows, you can save up to $22,500 annually in a 401(k) plan as of 2023. You should be aiming to save "closer to 15% of your income" once you enter your 30s, according to Bankrate. Though at the very least, make sure you're saving enough to take full advantage of any match your employer offers.

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Capitalize on catch-up contributions 

If you're age 50 or up, you can contribute even more to your retirement account each year. For 2023, the maximum catch-up contribution is $7,500 — meaning you can stash away a grand total of $30,000 a year.

Wondering how much of a difference that catch-up contribution could make? If you turn 50 and only contribute up to the annual limit without the catch-up contribution, "your account would grow to $20,865 by next year," assuming an annual return of 7% on your investments, explained SmartAsset. However, "by taking the full catch-up contribution, it would grow to $27,820'' by the next year assuming that same rate of return.

Sacrifice now to save for later

Tightening your purse strings now can also pay it forward for your retirement later. If you're worried about the state of your retirement savings, try living a little more frugally. Consider "reducing those non-essential expenses (you may classify these items as 'wants' instead of 'needs') and making lifestyle changes that will save you money," said Discover. If you don't already have a budget, now would be a great time to make one.

Further, think about funneling any "extra" money that comes your way straight into your retirement account. This might include your annual bonus at work, your tax refund, or inheritance. Doing so "will allow it to start earning interest right away, and it may help you avoid the temptation to dip into the funds for another purpose," explained Discover.

Make sure your investments are working for you

Periodically review your portfolio and asset allocation, suggested Wells Fargo. Specifically, you want to "make sure your investments are on track to help you meet your retirement goals." 

Off-track investments are one of the reasons women are behind on retirement savings. "Money invested too conservatively won't grow at a quick enough pace to grow your retirement balance at an adequate rate," explained Kiplinger. Invest your account in a target-date fund, which "automatically funnels your money into the appropriate mix of stocks, bonds and cash based on your age and years to retirement."


Boost your earning potential

The other often discussed gender gap is related to pay for men as opposed to women — and this gap is partly to blame for women's lower 401(k) balances. As such, one way to help close that gap and get caught up on saving for retirement is to increase the amount you earn.

For example, consider "taking on a side hustle you can start today to supplement the earnings of your primary job," suggested Discover. Or you might take "a second job before you retire or a part-time job during your early retirement." Based on data from the Federal Reserve Bank of Atlanta, "those who switched to new jobs have consistently seen their salaries increase faster than those who stayed with their employers," reported Insider. You might also just think about staying at your current job for a bit longer than you'd initially anticipated.

Regardless of how you do it, make sure you funnel that extra money you're bringing in straight into your retirement.

Get specific (and realistic) with your retirement goals

In some situations — particularly if you're already nearing retirement age — it's also helpful to reassess what you were aiming for in the first place. If you're in your 60s and "behind in your savings, it's time to start assessing the lifestyle you want and the living expenses you'll pay after you stop working," said Bankrate.

For example, you might wait to start taking Social Security benefits until you're 70, as Bankrate explained you'll "receive a larger benefit later on." Or you might think about sticking around at your job a little while longer or even dreaming of a simpler lifestyle in your golden years.

And if you're set on continuing to strive for your original retirement goals, it can help to get specific, said Discover. "The more specific the goal (how much you want to have in retirement savings, and by what age, for example), the more focused your efforts will be."

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week. This article is in part based on information first published on The Week's sister site, Kiplinger.com.

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