How to Catch Up Retirement Savings When You Are ‘Behind’
Wealth Wise is Kiplinger’s advice column on navigating retirement-related dilemmas. Got a question? See below for how to send it.
Dear Wealth Wise: My husband and I have saved about $300,000 for retirement combined, but we recently paid off some debt and are saving about $1,000 a month. We are in our mid-to-late 40s with one child. We could move from our current home (with almost $400,000 equity) to a smaller condo once our daughter graduates in a few years. Our parents have pledged to pay for our daughter’s college, but we will still need to support her financially until she gets a job.
Realistically, what can we expect to retire with and are we saving enough? Should we cut back on things like cable, or is our situation not that bad? — Late to the Party
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Dear Late to the Party: It’s not so unusual to reach your mid- to late 40s with modest retirement savings. Student loans, home down payment savings, and high mortgage costs can eat into your paychecks, making it hard to fund retirement until your earnings increase.
The average 401(k) balance among savers ages 45 to 49 was $163,200 in 2026, according to Fidelity. By that measure, this couple seems to be in good shape.
At the same time, Fidelity’s average balance of $264,500 among savers 70 and over isn’t so promising. Under the popular 4% rule, that’s roughly $10,600 in annual withdrawals. So while our couple may be ahead of their peers, that doesn’t mean they’re in excellent shape. Here’s what our experts suggest given their situation.
Don’t get hung up on small changes
When you’re trying to catch up on retirement savings, you’ll often hear that every little bit helps. But one thing you don’t want to do is cut out small luxuries to the point where life is miserable.
“Before deciding whether to cancel cable or eliminate every discretionary expense, I’d first determine whether they’re actually on track,” says Ernie Cave, CFP, founder and wealth manager at Cave Wealth Management. “The biggest strategy many families miss isn’t finding another $200 per month. It’s building a retirement income plan.”
As Cave explains, if this couple is in their mid- to late 40s, they may have 20 years before retirement.
“Consistent savings, investment growth, and future raises can dramatically improve their financial position over that time,” Cave insists.
Before cutting cable, Cave suggests a few things. First, figure out when you want to retire, how much annual income you’ll need, and how much money Social Security will provide.
“Without that roadmap, it’s impossible to know whether another $200 or $300 per month will meaningfully change the outcome,” he says.
Next, Cave recommends focusing on big opportunities to build meaningful savings rather than small ones like cutting cable.
“Make sure both spouses are receiving the full employer retirement match. Increase retirement contributions every time income rises. Redirect every debt payment that disappears into retirement savings before that money quietly becomes lifestyle spending,” Cave says.
Given that the couple is approaching 50, they should also plan to take advantage of catch-up contributions. Once they turn 50, they will be eligible to sock away an extra $8,000 each in their 401(k)s or $1,100 in IRAs. (Since they are not yet 50, these contribution limits will likely increase in future years)
These changes, he explains, may get you where you need to be without eliminating the smaller bills that make life more enjoyable.
Sabrina Carlson, CFP and owner of Carlson Wealth Solutions, agrees with Cave.
“Regularly review expenses less to squeeze dollars for more retirement savings, and more to ensure they are really valuing what they pay for and to keep the habit of frugality in retirement,” she says.
Carlson also says that based on her calculations, increasing retirement savings by $300 a month could add around $120,000 to this couple’s total assets in retirement. And, she says, while every little bit helps, “this amount could also be accounted for in many other ways.”
Of course, we don’t know whether the couple has saved in a traditional or Roth 401(k) or IRA. If they’ve invested in traditional accounts, they’ll need to plan for substantial taxes when they withdraw funds in retirement.
Use home equity to your advantage
Another advantage this couple has is a nice amount of home equity.
“With approximately $400,000 in home equity, downsizing after their daughter graduates could reduce future housing costs and potentially free up additional retirement assets,” says Cave. “I wouldn’t count the entire $400,000 as retirement savings because they’ll still need somewhere to live, but it should absolutely be part of the retirement plan.”
That said, downsizing right after the daughter finishes college may not be feasible. A growing number of recent graduates are having trouble landing entry-level jobs in today’s market.
You may be able to downsize eventually. But it’s best to build a retirement savings plan that doesn’t rely on downsizing at a fixed point in time.
The outlook may be better than expected
All told, the situation here isn’t dire. If you take $300,000 in savings, add $1,000 per month, apply a 7% annual growth rate, and let it compound for 20 years, our couple could end up with roughly a $1.65 million nest egg.
A 4% withdrawal rate yields about $66,000 in annual income, not including inflation adjustments. And if we apply the average $2,084 Social Security retirement benefit today, that adds roughly $25,000 a year for one beneficiary or about $38,000 for a couple.
That average benefit, of course, will likely be much larger once this couple retires, so it’s an imperfect measure. But throw in cashed-out home equity, and they may be looking at a $100,000 annual retirement income, which isn’t shabby.
Carlson says that if our couple runs projections based on their current plan and finds that their estimated annual retirement budget should work for them, then they’re “likely in good shape.” But they should ask themselves what they want retirement to look like.
Carlson also recommends creating a strategy now for how to contend with potential long-term care.
“This couple is likely to be the most susceptible to one or both having a costly long-term care event, as they will have some assets which must be used before Medicaid would step in, but not enough assets to cover the bill without worry,” Carlson explains.
A word from Wealth Wise
The internet is loaded with tips on how to save for retirement, with cutting your daily latte being a common one. The reality is that with a solid savings plan, you don’t need to deny yourself small indulgences or sweat every penny. A better idea is to prioritize what’s important to you and enjoy those small splurges without guilt.
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