How to Save for Retirement if You Started Late

Are you behind in saving for retirement? These are some tips to help get your saving strategy on track.

Life gets busy and time seems to fly faster every year. I have spoken with hundreds of retiring feds who all said that it feels like just yesterday that they took their first federal position. 

And for those that started saving for retirement early, they are often surprised at how much their TSP has grown as the years came and went. 

But for many of us who got a later start it can feel much slower and far more discouraging. The good news, however, is that if you are reading this, that means that you are looking to take action.

It is never too late to prepare for the future! Here are some things you should do (or not do) to prepare for retirement if you started late.

Pay off Debt

Debt is one of the major reasons why many people don’t feel prepared for retirement. If you have high-interest debt you will want to attack it as aggressively as you can. 

Once you have your high-interest debt taken care of, you will want to come up with a plan to continue paying down your lower-interest debt (ie mortgage, car loans, etc.) while also saving more for retirement.

Catchup Time

The government understands that there are many people that may need to put extra money aside for retirement. Because of this, they allow catchup contributions for retirement accounts such as the TSP or IRAs for those age 50 and over.

In 2021, the normal annual contribution limit for the TSP is $19,500 but if you are 50 or over you can put in as much as $26,000 per year. The normal limit for IRAs is $6,000 for 2021 but you can put a total of $7,000 in if you are 50 or older. 

Catchup contributions can be a great way to make up for a slow start, but even if you can’t afford to max out your retirement accounts just make sure to try to do a little more every year. 

Don’t Invest in Extremes

Whenever we feel that we are behind the 8 ball, we often make rash decisions that we wouldn’t otherwise. I see this all the time as people are trying to catch up for retirement.

I have noticed that when people feel that they are behind in saving for retirement they either invest very aggressively or very conservatively. Those that invest aggressively say they want to make up for lost time and those that invest conservatively say they can’t afford to lose a dime because they don’t have time to make it up. 

But in reality, a more balanced approach that takes into account their age and retirement plans is often a much more appropriate and effective investment strategy. 

Prioritize You

Helping pay for kids’ college is a great goal that many people are currently doing or planning on doing, but I am always worried when I see parents sacrificing their own retirements to do so. 

There are many ways to pay for college including scholarships, grants, and loans, and young people have years of earnings power to make their investment into their schooling worth it. But when it comes to retirement, there are far fewer financing options. 

I certainly support those that want to help their kids, but I would think twice before sacrificing your own future to do so. 

Plant the Tree Today

Regardless of where you are at today or how much you have in savings, don’t get discouraged. We all wish we would have saved more in the past but the past is long gone. We have to look forward and make plans on how we are going to change our future today. 

“The best time to plant a tree was 20 years ago. The second best time is now.”

Chinese Proverb

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.

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