Many workers fall behind on retirement savings during the earlier stages of their careers, when student loan payments, housing costs, and other expenses eat up most of their income. Thankfully, those who are 50 and older get a prime opportunity to make up for lost years of savings in the form of catch-up contributions.
If you're saving in an IRA and are at least 50 years old, you can currently put in an additional $1,000 each year for an annual total of $6,500 (workers under 50 can contribute just $5,500). If you're saving in a 401(k), you can make a $6,000 catch-up contribution for an annual total of $24,500 (compared with $18,500 for younger workers).
Unfortunately, many folks don't take advantage of catch-up contributions, and as such, wind up falling short by the time their golden years come around. In fact, only 14% of 401(k) participants aged 50 and over made catch-up contributions in 2017, according to data from Vanguard.
If you're behind on savings, it's imperative that you take steps to pad your nest egg, whether it be by cutting expenses to free up cash or taking on a side job and using its proceeds to fund your retirement plan. Otherwise, you may be in for a major disappointment when your golden years arrive and you realize you don't have enough money to do the things you've always dreamed of.
