How to catch up on retirement savings if you're behind

Here are the simple steps to fix your finances and boost your retirement if you're starting late.

Transcript

00:00I think the smartest thing that you can do is to sort of examine your budget.

00:04What are your essential expenses?

00:06What are your discretionary expenses?

00:08And think about it this way.

00:0950% of your money should be going toward essential.

00:1230% could be going toward discretionary expenses and 20% towards savings and debt payments.

00:19So if you're not using that 50-30-20 rule, you might adopt that and say,

00:22I need to cut back on my discretionary expenses.

00:25Maybe there's some essential expenses I can cut back on.

00:27But whatever you do, if you're behind the eight ball, start saving now.

00:32And you won't be able to take advantage, as some 20-year-olds will be, of the benefits of compounding.

00:39But you can still catch up.

00:41And that's the important thing is don't think that all hope is lost.

00:44The other thing that you should think about, too, is once you hit age 50,

00:47you can take advantage of the catch-up contribution.

00:50So if you're participating in a 401k or you have an IRA,

00:53you can make additional contributions once you hit age 50.

00:56So I would start doing that.

00:58The important thing to do is to think about it this way.

01:02Saving is important.

01:03But if you're behind the eight ball, the other thing that's sort of equally,

01:07if not more important, is actually working longer.

01:10In fact, if you were to work two years longer than what your anticipated date of retirement is,

01:15that will go a long way toward helping you improve your retirement security.

01:19So if you were planning on retiring at 62, consider making it 64.

01:22If you were thinking about 65, make it 67.

01:26And that's sort of like, in addition to saving more,

01:29working longer are the two big things that you can do to sort of improve the odds of you

01:34retiring to a standard of living that you want.

01:36you