Majority of boomers and Gen X Americans wish they’d started saving for retirement 10 years earlier, study says. Here are 3 ways to catch up if your savings have fallen behind

They say hindsight is 20/20 — and for those on the cusp of retirement, that statement has never been more true.

Looking back, many baby boomers and Gen X Americans say they wish they’d started saving for their retirement earlier, according to Fidelity Investments’ 2024 State of Retirement Planning study.

But it doesn’t mean you’re up the creek without a paddle if you’re starting late — though it will require some effort in order to catch up.

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“Across generations, inflation, consumer debt and building emergency savings are the main barriers to reaching retirement savings goals,” said the study. Because of these barriers — and our uncertain economic times — all generations surveyed regretted not setting money aside for retirement earlier, particularly Gen X and baby boomers.

The study found that Gen X respondents (ages 43-58) started saving for retirement, on average, at age 36 — although they wish they had started a decade earlier, at age 26. Meanwhile, baby boomers (ages 59-77) started saving at age 44 and wish they had started at age 33.

Interestingly, Gen Z (ages 18-26) started saving at age 20 — much earlier than their Gen X or baby boomer counterparts — and even then, they wished they’d started earlier (around age 18).

3 ways to start saving for retirement

Unfortunately, starting late means you won’t benefit as much from compound interest, which is interest paid on the principal plus any interest already accrued. You’ll also likely have had less years to save, which means you’ll probably have to increase your contributions as you get older to catch up.

But don’t panic! You can determine how much your money could grow with compound interest — over various periods of time — with an online compound interest calculator.

For example, investing $100 a month with 8% APY (compounded monthly) will net you $18,294 in 10 years. If you continued to set aside $100 a month, you’d have $58,902 in 20 years and $149,035 in 30 years.

The earlier you start, the more you’ll benefit from compound interest — but there are other ways to build a nest egg as you get older.

1. Maximize your savings

Householders aged 45 to 54 have the highest median income (as of 2021) at $97,089, according to census data, which makes sense because that’s when most people are in their peak earning years.

Many financial advisors recommend putting aside 15% to 20% of your income for retirement. So, if you’re bringing in a median income of $97,000 a year and saving 15% of it, you’d have $14,550 a year to contribute to your retirement savings. If you can live a bit leaner and save 20%, you’d have $19,400.

However, your peak earning years also come at a time when you may have higher expenses — for example, you might be saving for your retirement and your kids’ university tuition, while also paying off a mortgage.

Therefore, you might need to revisit your budget (consider canceling subscriptions and memberships) and look for other ways to curb your spending (dining out less or downgrading your vehicle). You might also want to consider a side hustle to bring in additional cash.

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2. Maximize your contributions

Once you’ve revised your budget, you can maximize those savings by contributing to your 401(k) — if that’s an option for you — and taking advantage of your full employer match.

For example, if you make $97,000 a year and contribute 15% to your 401(k), and your employer matches 50% of your contribution, you can end up with $880,811 at age 65 — which is equivalent to $592,761 in purchasing power today (assuming an annual return of 8%, an expected inflation rate of 2% and an annual salary increase of 2%).

You can play around with the numbers on a 401(k) calculator to see what works for you.

Another option is to contribute to an individual retirement account (IRA). With a traditional IRA, you contribute pre-tax dollars and then pay tax when you withdraw the money in retirement — presumably when you’re in a lower tax bracket.

With a Roth IRA, however, you contribute after-tax dollars and can make tax-free withdrawals after age 59½. In either case, your money grows tax-free.

The annual contribution limit for both traditional and Roth IRAs is $7,000 for 2024. For those aged 50 and older, you can also take advantage of catch-up contributions — allowing you to contribute an extra $1,000.

3. Take a ‘phased’ approach to retirement

The Fidelity study also found that “many Americans now opt for a non-traditional approach to retirement,” whether that’s continuing to work part-time in their golden years or even starting their own business in retirement.

“Across generations, two-thirds look forward to pursuing work for pleasure while in retirement and hope for a phased retirement — working full-time at first, then part-time, before stopping altogether,” the study stated.

Even if you regret when you started saving for retirement, it’s never too late to start.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.