Closing the Retirement Savings Gap: 3 Ways to Catch Up

Do you feel behind in your retirement savings? If everyone had to do it over again, we’d all start saving 10-15% of our income at the outset of our careers and continue uninterrupted until that magical retirement date decades into the future. In reality, our financial lives rarely follow this linear path, and retirement is no longer viewed as a binary decision.

As parents, if you’ve ever paid for preschool, while also saving for college, this topic is right up your alley! Recent research by Boston College’s Center for Retirement Research has found that many retirement savers fall behind during the child-rearing years. For obvious reasons, this appears to be the budget casualty that parents utilize to manage their cash flow. The research also finds that this doesn’t have to be a permanent setback, as long as there is a plan to catch up after these expenses subside.

To close the retirement gap, you may be able to take advantage of these 3 ways to catch-up on your savings:

  1. THE ‘CATCH-UP CONTRIBUTION’: Once you hit the round age of 50, you’re provided an additional benefit of being catch-up eligible. This allows you to defer even more of your income into your 401(k) plan or IRA. In 2018 and 2019, the additional catch-up contribution is $6,000 for 401(k) participants, increasing the maximum salary deferral to $24,500 (2018) and $25,000 (2019). For IRAs, it is $1,000, bringing the maximum contribution to $6,500 in 2018 and $7,000 in 2019. Take advantage of this milestone!


  1. SPOUSAL IRA CONTRIBUTION To make any type of IRA contribution, you must have earned income equal to or greater than the amount of the IRA contribution. For a spousal IRA contribution, as long as one of you has enough earned income, you can make a spousal IRA contribution for a spouse that has no earned income. This means you can contribute to a spousal IRA for a non- working spouse. There are additional considerations you need to take into account (deductibility, income limits, Roth vs. Traditional IRA) but if used correctly, a spousal IRA contribution can allow you to put more money into tax-advantaged accounts.


  1. BUSINESS OWNERS’ OPTIONS: The self-employed individual has even more ways to supercharge their retirement savings. Depending on the size and structure of your business, a defined benefit plan or a cash balance plan are definitely worth some investigation. They won’t be a good fit for the majority of business owners, but when they do fit, they can be an absolute home run. For solopreneurs or couples who run a business together, you may be able to take advantage of an Individual 401(k) and receive employee deferral and employer contributions. These options are more complicated, but open up your savings’ possibilities.


Closing the retirement savings gap is a challenge, but it is definitely not an insurmountable one. Catching-up requires a plan and some good old-fashioned financial discipline.