Feeling behind on retirement savings? Here are 4 ways to get you on track

It can be difficult to know how much is enough when it comes to your retirement savings rate.

“We tend to advocate for a 15% deferral rate, and that includes both employee and employer contributions,” said Lorie Latham, principal defined contribution strategist at T. Rowe Price, during of the panel on the company’s 2022 retirement outlook.

That may surprise some workers, given that auto-enrollment rates can be as low as 3% or less, though those plans also have automatic annual increases, according to Vanguard.

Experts generally recommend contributing enough to at least get some matching from the employer, if one is available. Also remember that you will need to save even more if you are also investing on behalf of your spouse.

Increasing your retirement savings carryover rates, even a little as you earn raises or promotions, can have a big impact on your total savings, according to Greg McBride, chief financial analyst at Bankrate. over time.

“The habit of increasing the amount you set aside can go a long way,” McBride said.

One of the main reasons many workers don’t save more is that they don’t have access to a retirement savings plan at work.

According to T. Rowe Price, only 64% of workers in the private sector have access to a defined contribution plan such as a 401(k) plan.

As long as you or your spouse have earned income, you can open an Individual Retirement Account yourself and save that way, McBride said.

For young workers, the ability to save in a Roth IRA with money they’ve already paid taxes on could earn them decades of compound growth, he said.

There are limits to the amount you can set aside each year through 401(k) or IRA plans.

In 2022, workers can save an additional $1,000 in their 401(k) plans for a total of up to $20,500. The limit for traditional and Roth IRAs will remain the same at $6,000.

If you’re 50 or older, you can save even more with catch-up contributions — an additional $6,500 for 401(k) accounts and an additional $1,000 for IRAs.

If you are approaching retirement age, another strategy to consider is to work longer.

Even a year or two of extra income can help bolster your financial security in retirement, McBride said.

The reason: you have more time to save and grow your assets and less time for your money to support you in retirement.

Working longer can also allow you to delay your Social Security application, which can significantly increase your potential monthly retirement benefit checks.

Eligible workers can first apply for retirement benefits at age 62, but their benefits will be reduced for life.

While waiting for full retirement age — usually 66 or 67 — they will receive 100% of the benefits they have earned. And for every year they wait until age 70, their benefits increase even more.

The difference between an application at 62 and 70 can reach 77%.

“You basically get a permanent pay raise every year, you can delay taking Social Security from age 62 to age 70,” McBride said.