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Not Saving for Retirement? Here's the Cost of Waiting

Retirement Planning
Grandparents with grandbaby laughing not saving for retirement heres the cost of waiting

Key Takeaways

  • The longer you wait to start saving for retirement, the harder it becomes to accumulate a substantial nest egg. Compound interest plays a significant role in growing your retirement savings over time.
  • Investing in retirement savings accounts like a 401(k) or an individual retirement account (IRA) can help your money grow as the stock market generally outpaces inflation rates, providing a better chance of achieving your retirement goals.
  • If you find yourself behind on retirement savings, consider increasing your income, reducing expenses, and making catch-up contributions to your retirement accounts. Extending your working years and delaying retirement can also significantly boost your retirement savings and improve your Social Security benefits.
  • Contributions to tax-deferred retirement accounts like 401(k), 403(b), or traditional IRA can reduce your taxable income and lower your overall tax burden, helping you save more for retirement.
  • While starting early is beneficial, it's never too late to begin saving for retirement. Implementing the right financial strategies, such as catch-up contributions and increased income, can still improve your financial future.

Even if retirement is decades away, it could pay to start early. Approximately 27% of individuals aged 59 or above possess no retirement savings.1 And for working families with retirement account savings, the EPI found that the mean retirement account savings is just under $121,000. When you consider that someone retiring at age 65 could easily have a 20-year-long retirement, a total savings of $121,000 isn't nearly enough.

If you're wondering when to start saving for retirement and to catch up if you didn't start saving soon enough, here's what you could consider.

The Cost of Waiting

Many financial experts generally say you'll need at least $1 million in retirement savings to fund a comfortable retirement for 30 years. This figure is based on the well-known assumption that you'll withdraw 4 percent of your retirement savings every year (adjusting for inflation after the first year).2 This would total an annual salary of $40,000 in retirement.

To achieve a seven-figure savings, you'll likely need to start early. Someone who begins saving at age 20 and makes an annual contribution of $6,000 to their retirement accounts would have almost $1.7 million in retirement savings when they turn 60, assuming an 8 percent annual rate of return. Now, if that person started saving the same amount annually at age 40 instead (with the same 8 percent annual rate of return), they would only have around $296,000 at age 60 — about $1.4 million less.

Compound Interest

Why such a huge gap? Compound interest. When you put your money into a savings account, it just sits there and loses its value due to inflation — prices increase, and your dollar buys less than it would have as time goes on.

Retirement Savings Accounts

When you place your money into a retirement savings account like a 401(k) or an individual retirement account (IRA), it tends to grow, as the rate of return on the stock market generally outpaces the rate of inflation. Of course, the stock market goes up some years and down in others. But overall, placing your money into an IRA or a 401(k) could help you secure your savings, especially if you start early.

How You Could Catch Up

If you have fewer working years ahead of you, some experts believe you should have three times your annual salary saved by your 40s. By your 50s, those experts believe your retirement savings should equal five to six times your annual salary. But if your savings are nowhere near these numbers, there are several things you could take into consideration.

How Much You Can Contribute

The Internal Revenue Service sets limits on the amount employees can contribute to their retirement accounts each year.3

  • For 2024, this figure is $23,000.
  • If you're 50 or older, you can make an additional $7,500 in catch-up contributions to your 401(k) or 403(b) (for nonprofits), which are retirement plans offered by employers where an employee contributes a certain percentage of their pretax earnings to retirement.4

Some employees or self-employed professionals may have an IRA as well. 

  • If you have a SIMPLE IRA plan, you can make salary deferrals (salary reduction contributions) of up to $16,000 in 2024. If you’re age 50 or over, you are allowed to contribute an additional $3,500 in catch-up contributions in 2024.
  • If you are a self-employed individual with a SEP plan, your contributions are limited to 25% of your net earnings from self-employment (not including contributions to yourself), up to $69,000 for 2024.

How Can You Save For Retirement

  • Increase your income and reduce your expenses. If you have a job where overtime is readily available, you could volunteer for it. Advancements in technology have created more opportunities for remote work, and the rise of the gig economy has created more freedom for you to work on your own schedule. If you have a skill set, consider using it beyond your 9-to-5 to increase your income.
  • Create a budget. You could create a budget and find ways to cut back on discretionary items — whether that's eating out, monthly subscriptions, multiple vacations every year or going to the movies or concerts. 

Extending Your Working Years

Though this isn't the first and most attractive solution, working longer could be an effective way to build your retirement savings, especially if your employer matches your retirement contributions. If you planned to retire at 62, working until you're 70 — and maximizing your savings, catch-up contributions and any employer match — could potentially add a cushion of more than $268,000 to your retirement savings. Consider taking advantage of a tax-deferred retirement account like a 401(k), 403(b) or traditional IRA. When you put money into these accounts, your earnings grow tax-free, and what you contribute to these accounts could also help reduce your taxable income and lower your overall tax burden.

Another advantage of delaying retirement? You'll delay collecting Social Security. If you delay retirement until age 70, according to the Social Security Administration, you'll collect about 1.3 times the monthly benefit you would have received had you started collecting at age 66.6 This, along with the interest you'd earn on additional contributions by extending your working years, could put you in a more comfortable position.

It's never too early to start saving for retirement because it could allow time for your money to grow thanks to the beauty of compound interest. Even if you started late, making the right financial moves today — like catch-up contributions and an increased income — may help your financial future.


  1. Millions of older Americans are nearing retirement without a penny in savings. https://www.cbsnews.com/news/retirement-baby-boomers-with-no-retirement-savings/.
  2. Can You Retire on $1 Million? Here's How Far It Will Go. https://money.usnews.com/money/retirement/articles/can-you-retire-on-one-million.
  3. Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits.
  4. COLA increases for dollar limitations on benefits and contributions. https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions.
  5. Simplified Employee Pension Plan (SEP). https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep.
  6. If you were born between 1943 and 1954 your full retirement age is 66. https://www.ssa.gov/benefits/retirement/planner/1943-delay.html.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.