Posted on Wednesday, January 22, 2025

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by AMAC, D.J. Wilson

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There are many reasons why beginning to save early for retirement is beneficial. Mainly, it allows people time to accumulate and build savings. However, folks who start late still have opportunities to save and possibly catch up. Read on to learn why it’s better to save later than never!

Experts say it’s never too late to start saving for retirement. Per How to Money, here’s why latecomers to retirement savings should be proactive: “Remember, financial freedom is not about having millions of dollars in the bank. Every single dollar you save contains a tiny bit of freedom and security. Save as much as you can with the time and resources you have – you won’t regret it.”

Create a strategy

In business, and in life, strategies are useful tools that help people achieve one or more goals, whether long-term or under conditions of uncertainty. The number one place to start is by examining your finances to see where you stand. The next step is to figure out a way to accelerate your savings, whether it be:

• Working longer – While it’s not ideal for everyone, working past one’s initial retirement eligibility age can be of significant help to late savers. Not only does this increase time to earn more savings, but folks may also reap the benefits of a delay in claiming Social Security benefits by ultimately increasing their monthly payout.  Per nber.org, working longer and postponing the start of Social Security benefits “…can raise annual retirement income by as much as a modestly higher saving rate over several decades of work.”
• Working harder to raise your current income – Bringing in more income is a terrific way to speed up saving for retirement. Increasing the hours you work, accepting a higher position, or gaining a second job to supplement one’s income are helpful ways to accelerate your retirement savings. If you have tax bracket concerns, speak to a qualified accountant to understand the financial impact of your actions.
• Increasing retirement contributions – This simply means putting more money into retirement savings accounts. Note that there are many types of retirement accounts to choose from to include 401(k), Traditional IRA, Roth IRA, SEP and others. Since there are independent factors to determine which types of accounts are best for you, gain professional guidance. If you wish to accelerate savings by being aggressive, understand your risk level first before possibly jumping in.
• Embracing frugality – Many people live beyond their means. This is a terrible practice that can harm one’s potential to save for retirement. By stopping wasteful spending and by reducing other expenses, one may stop the destructive money bleed and gain resources toward retirement. Taking charge of one’s finances and embracing frugal spending can have a dramatic impact on one’s ability to save.
• Utilizing tax-advantage strategies – This encompasses making smart decisions that can save you money in taxes. Note that some types of savings accounts offer special tax benefits. For instance, traditional 401(k) and IRA contributions may be made before tax, thereby reducing taxable income. As a bonus, that money can grow tax-free until withdrawn for retirement. Then, it becomes taxed as ordinary income.
• Changing your retirement expectations – Most people have a mental picture of what they expect retirement to look like. However, there may be a gap between a picture-perfect lifestyle and what one can truly afford or achieve. Retirement planning can help determine the realistic means by which one may live. Sometimes, it is necessary to adjust plans by lowering retirement expectations to make ends meet.

Start today!

People getting a late start on retirement savings should not waste time fretting. Rather, energy should be channeled into launching a retirement savings plan immediately. For late savers, it’s optimal to speak to a financial planner, someone well versed in personal finances, taxes, budgeting and investing. Strategies which involve risk should be carefully evaluated as the sensibility of aggressively investing diminishes with age. For late savers, financial guidance is of the utmost value.

Interested in reading about retirement experiences? Visit our related article entitled Reflections on retirement.

Disclosure: This article is for general purposes only and is not intended as a substitute for professional advice.