By Eric Reich
For those nearing retirement, the realization that savings may not be sufficient can be daunting. However, there are several strategies to boost retirement funds in the final working years. By maximizing contributions, adjusting spending habits, and making smart investment decisions, it is possible to build a more secure financial future. Here are key strategies to help catch up on savings before retirement.
- Maximize retirement account contributions
One of the most effective ways to help accelerate savings is by taking full advantage of retirement account contributions:
401(k) and 403(b) plans: Individuals aged 50 and older can make catch-up contributions beyond the standard limit. For 2025, the standard limit is $23,500, with an additional catch-up contribution of $7,500, allowing total contributions of up to $31,000. For those between ages 60-63, the catch-up contribution is raised to $11,250.
IRAs: The contribution limit for IRAs is $7,000, with an additional $1,000 catch-up contribution for those 50 and older, totaling $8,000.
Health Savings Accounts (HSAs): If enrolled in a high-deductible health plan, individuals can contribute up to $4,3000 (or $8,550 for families) in 2025, with an additional $1,000 catch-up contribution for those 55 and older. HSAs provide a tax-efficient way to save for healthcare expenses in retirement.
- Reduce expenses and redirect savings
Cutting unnecessary expenses can free up extra funds for retirement savings:
Downsizing: Moving to a smaller home or a more affordable location can reduce housing costs significantly. For many, housing is the biggest expense in retirement. Moving to a lower-cost area or downsizing to a smaller home can free up significant funds for savings.
Eliminating debt: Paying off high-interest debt, such as credit cards and personal loans, can free up additional income for savings.
Reducing discretionary spending: Cutting back on luxury expenses, such as dining out and subscription services, can make a big difference over time.
- Work longer or take on part-time work
Extending the working years can significantly improve financial security in retirement:
Delaying Social Security: Waiting until full retirement age (or even age 70) can result in larger monthly benefits. This strategy, however, is not for everyone. A surprising number of retirees can benefit from taking Social Security sooner.
Part-time or freelance work: Continuing to work in some capacity can help cover living expenses and allow investments more time to grow.
- Invest wisely for growth and stability
A well-balanced investment strategy can help enhance retirement savings.
Diversify investments: A mix of stocks, bonds, and other assets can help balance risk and reward. Adding assets that are not correlated with the stock markets can reduce risk and potentially enhance returns.
Avoid excessive risk: While growth is important, taking on too much risk across the entire portfolio close to retirement can be dangerous. Structuring investments properly can help you manage the sequence of return risk, which is, in my opinion, the biggest investment risk retirees face.
Consider dividend stocks: Investing in dividend-paying stocks can provide a steady stream of income while preserving capital.
- Utilize tax-efficient strategies
Taking advantage of tax benefits can help maximize savings:
Roth conversions: Converting traditional IRA or 401(k) funds to a Roth IRA can provide tax-free income in retirement. This strategy should be universally considered, but just know that it doesn’t make sense for some investors given their unique situations.
Tax-loss harvesting: Selling investments at a loss can offset gains and reduce taxable income.
Utilize employer matching: Contributing enough to receive the full employer match in a 401(k) is essentially free money that should not be left on the table.
- Seek professional financial advice
Consulting a financial advisor can provide personalized strategies to optimize savings, minimize taxes, and ensure long-term financial security.
Catching up on retirement savings in the final working years requires a proactive approach. By maximizing contributions, reducing expenses, extending work years, investing wisely and leveraging tax advantages, individuals can significantly enhance their financial future. With careful planning and disciplined savings, a comfortable and secure retirement is still achievable.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
