Got a Late Start on Retirement Savings? Don't Panic and Do These Things Instead

Key Points

• The idea of having to play catch-up on retirement savings can be daunting.

• Start prioritizing your nest egg as soon as possible, and rethink some of your spending.

• Be creative in generating extra income, and reconsider your ideal retirement age.

• The $23,760 Social Security bonus most retirees completely overlook ›

"The best-laid plans of mice and men often go awry." It's an expression a lot of us are familiar with. And in the context of retirement savings, it's something that happens far too often.

Many people tell themselves, "This will be the year I start contributing to my IRA" or "I'm going to start funding my 401(k) as soon as I pay off my credit cards." And then the inevitable happens. You don't start funding your IRA because a surprise expense pops up. And by the time you finish paying off your credit cards, you're burned out from that and want to treat yourself to something you can enjoy immediately, as opposed to using the money for a 401(k) plan contribution.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

It's very easy to see how you might reach a point where retirement is suddenly getting closer and you haven't made much -- or any -- progress on building your nest egg. But don't panic. You may have gotten a late start, but that doesn't mean all is lost. Here's what to do.

1. Begin saving immediately

So you procrastinated a bit (or a lot) on retirement savings? You can't go back in time and change that. Rather than harp on it, focus on what you can do, which is to begin contributing to a retirement account immediately.

Even if you're only able to put $25 into your IRA or save $50 a month in your 401(k), just do it. Once you get into the habit of saving, it could get a lot easier.

2. Reassess your spending

If you're deep in retirement savings catch-up mode, you'll soon want to be making more than $25 or $50 IRA or 401(k) contributions. To that end, review your spending and see where you can cut back.

This does not mean that you can no longer take vacations, have dinner at restaurants, or keep your lawn service if it saves you a lot of time each week. It just means you have to plan your spending on extras like these with the goal of freeing up more money for your long-term savings.

3. Look to the gig economy for extra income

Many people find that it's actually easier to work more than cut back on spending. If you feel similarly, then it pays to explore the gig economy and see how lucrative it could be for you.

You may find that working a side gig for four or five hours a week puts $100 or more in your pocket. Multiply that by four weeks, and suddenly, you've got $400 a month for your IRA or 401(k) without having to make potentially painful spending cuts.

4. Consider working a bit longer

You may have a certain retirement age you're aiming for. But if you're late to the savings game, delaying retirement could be a smart idea.

This doesn't mean that if you were planning to retire at 65, you now need to pledge to work until your mid-70s. But if you were aiming for a retirement age of 65, you might consider targeting 68 instead.

Yes, that does mean having to work three extra years. But it also gives you three more years to save for retirement and, just as importantly, leave your nest egg untouched a bit longer.

Plus, you should know that Social Security's full retirement age for people born in 1960 or later is 67. And if you delay your Social Security claim to age 68, your monthly benefits will get an 8% increase -- for life. That's a great way to make up for the fact that your savings balance may not be as robust as you'd like.

It's not uncommon to be behind on retirement savings. But rather than stress over it, take action. You may find that with modest yet realistic changes, you're able to make headway on your savings and salvage your retirement after all.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.