5 Retirement Savings Catch-Up Strategies to Help You Secure Your Financial Future 

Accumulating sufficient savings during your working years helps paves the way for a secure and comfortable retirement. However, many individuals find themselves facing the daunting reality of starting their retirement planning later than ideal.

Indeed, competing financial responsibilities, fluctuating income levels, and even a lack of awareness about the importance starting early can create significant financial stress as you approach retirement age. In many cases, leveraging effective “catch-up” strategies—specific approaches designed to accelerate savings in the years leading up to retirement—is essential.

These strategies not only help bridge the gap in savings but also offer practical solutions to maximize the growth of your retirement resources. In this article, we’ll delve into some popular and lesser-known catch-up tactics that can significantly enhance your financial well-being and readiness for retirement.

America’s Looming Retirement Crisis

America is facing a potential retirement crisis, with a significant portion of the population feeling financially unprepared to stop working. In fact, a recent CNBC and SurveyMonkey survey found that 53% of respondents are behind on their retirement planning and savings, with many expecting to rely on government programs such as Social Security during their golden years. 

This financial anxiety can stem from a variety of factors, including insufficient financial resources, the rising cost of healthcare, and a general lack of confidence when it comes to personal financial management. Not to mention, the widespread shift from employer-sponsored pension plans to 401(k) and similar plans in the U.S. has transferred the burden of saving from the employer to the employee, complicating retirement planning for many people. 

Without adequate savings, many workers may face the prospect of having to delay retirement or adjust to a lower standard of living in their later years. However, by understanding and taking advantage of the various catch-up strategies available to older adults, it’s possible to narrow the savings gap and enjoy a financially secure retirement. 

Consider these 5 retirement savings catch-up strategies: 

#1: Take Advantage of Catch-Up Contributions

Catch-up contributions are additional amounts over the standard limits that you can contribute to your retirement accounts once you reach age 50. 

In 2024, for example, retirement savers who are 50 or above can contribute an additional $7,500 to their 401(k) or 403(b) plans (above the standard contribution limit of $23,000) for a total of $30,500 per year. For individual retirement accounts (IRAs), including SEP and SIMPLE IRAs, the catch-up contribution limit is currently $1,000, enabling older savers to contribute a total of $8,000 to their IRA accounts in 2024. 

These higher limits provide a way for those who might not have saved enough in their earlier years to significantly boost their retirement savings during their peak earnings years. However, to be eligible for catch-up contributions, you must turn 50 by the end of the calendar year in which you’re making the contribution. 

#2: Maximize Your Employer Match

Maximizing your employer match in a 401(k) or similar retirement plan can be a valuable retirement savings catch-up strategy for eligible employees. An employer match is essentially a retirement plan contribution your employer makes on your behalf, matching a portion of your own contributions up to a set percentage of your salary.

For instance, suppose your employer offers to match 50% of your annual 401(k) contributions up to 6% of your salary (currently $100,000). That means they’ll add an additional 50 cents for every dollar you contribute to your retirement plan until you reach the $6,000 limit. In other words, you must contribute at least $12,000 to receive the full match. 

Failing to take advantage of this employee benefit is like leaving free money on the table. By contributing at least enough money to receive the full match, you can significantly boost your retirement savings over the course of your career, particularly as you near retirement age.

#3: Contribute to a Health Savings Account (HSA)

Health Savings Accounts (HSAs) are primarily designed to help individuals save for future medical expenses. However, contributing to an HSA can also be a powerful retirement savings catch-up strategy, particularly due to its unique tax advantages. 

Specifically, contributions to the account are tax-deductible, the funds within the account grow tax-free, and withdrawals for qualified medical expenses are also tax-free. This combination can significantly boost your retirement funds by reducing your tax burden and allowing your investments to grow more efficiently over time. 

Furthermore, once you reach age 65, the rules surrounding withdrawals relax, allowing you to withdraw funds for any purpose without facing a penalty. It’s important to note, however, that withdrawals for non-medical expenses are still subject to ordinary income taxes. 

To be eligible to contribute to an HSA, you must have a qualifying high-deductible health plan. In 2024, the annual contribution limits are $4,150 for single coverage and $8,300 for family coverage. Additionally, the IRS allows those aged 55 and older to contribute an extra $1,000 above their annual limit.  

#4: Consider a “Mega Backdoor Roth”

Some 401(k) plans allow you to make after-tax contributions in addition to the standard pre-tax or Roth contribution limits. While they don’t provide an immediate tax deduction, after-tax contributions allow you to save significantly more money within your 401(k) plan, up to $46,000 above the standard limits in 2024. 

As a retirement savings catch-up strategy, the primary advantage of after-tax contributions is the ability to convert these funds into a Roth IRA, a strategy often referred to as a “mega backdoor Roth.” This process enables your after-tax dollars to continue to grow tax-free until you need them. Plus, you can withdraw them tax-free in retirement. 

Executing a mega backdoor Roth can be complex and depends on the availability and specific rules of your employer’s 401(k) plan. It’s a good idea to work with an experienced financial professional, who can help you navigate the conversion and avoid unintended tax consequences. 

#5: Utilize a Spousal IRA

Contributing to a Spousal IRA can be a valuable retirement savings catch-up strategy for couples that only have one source of employment income. With a Spousal IRA, a working spouse’s income can qualify as earned income for both, provided the combined contributions don’t exceed the working spouse’s earned income or the annual IRA contribution limits, whichever is lower.

Based on 2024 contribution limits, couples over age 50 can contribute up to $16,000 to their IRAs, even if one spouse isn’t working. Consequently, utilizing a Spousal IRA can meaningfully increase your overall nest egg, providing additional security in retirement. 

TrueNorth Wealth is here to help.

Navigating the complexities of retirement planning can be challenging, especially if you’ve fallen behind on your savings. If you’re nearing retirement and looking for personalized strategies and guidance, TrueNorth Wealth is here to help. Our team of fiduciary CFP® professionals can offer expert insights and help you develop a comprehensive plan to maximize your financial resources, empowering you to achieve a secure and comfortable retirement. 

TrueNorth Wealth is among the top Wealth Management firms in Utah and Idaho, with offices in Salt Lake City, Logan, St. George, and Boise. At TrueNorth Wealth, we focus on helping our clients build long-term wealth while maximizing the enjoyment they receive from their money. We do this by pairing our clients with a dedicated CFP® professional backed by an incredible team.

For our team at TrueNorth, it’s about so much more than money. It’s about serving families all across Utah and helping them achieve freedom and flexibility in their lives. To learn more or schedule a no-cost consultation, visit our website at TrueNorth Wealth or call (801) 316-1875.