If you’re behind in your retirement savings, trying to catch up can feel daunting, especially as you approach retirement. We’re often told that the key to a successful retirement is to start saving from your very first pay cheque and stay invested until retirement. But life happens. Retrenchment, divorce, medical emergencies, starting a business, or global crises can derail even the best-laid plans. If you’re behind, don’t let panic or guilt paralyse you. Instead, take heart that there are practical steps you can take.
Push out your retirement date: Delaying your retirement by a few years can significantly improve your financial outcome. Retirement marks the shift from building wealth to relying on it. By working longer, you reduce the number of years you’ll draw from your capital, increase your total savings, and benefit from additional compounding.
Top Tip: Even delaying retirement by two to three years can make a big difference.
Cut non-essential spending: Scrutinise your budget and identify non-essential costs that can be redirected into retirement savings. Subscriptions, takeaway coffees, streaming services, and impulse purchases may seem small, but trimming these expenses can free up meaningful cash flow over time.
Top Tip: Revisit your budget every few months to keep expenses in check.
Eliminate high-interest debt: Paying off high-interest debt—like credit cards or store accounts—should be a top priority. Debt erodes your ability to build wealth because the interest you pay often outweighs your investment returns. Create a realistic debt reduction plan to get compound interest working in your favour rather than against you.
Top Tip: Start with the smallest debt and snowball payments for motivation and momentum.
Reassess your insurance cover: Ask your financial adviser to review your life and disability cover. As your wealth grows and liabilities reduce, your need for cover may decline. If your bond has decreased, you may no longer need the same level of cover. Reducing excess cover can unlock extra funds to invest for retirement.
Top Tip: Schedule a policy review every two years or after any major life event.
Explore side hustles: Look for creative ways to generate additional income. The gig economy has made it easier than ever to earn extra money through tutoring, freelance work, renting out a room, or offering pet-sitting or delivery services. Every bit of extra income can help close the savings gap.
Top Tip: Start small—one paying client or task can turn into regular income.
Redirect your savings:
As you free up cash by cutting expenses, paying down debt, or earning more, channel those funds directly into your retirement savings. Stay disciplined and avoid lifestyle inflation. Strike a balance between using tax-efficient retirement products and discretionary investments to retain flexibility.
Top Tip: Increase your contributions every time you receive a bonus or salary increase.
Automate your savings: Set up a monthly debit order into your retirement fund or investment account. Automating contributions removes the temptation to skip payments. You can also make a top-up contribution at the end of the tax year to maximise tax benefits.
Top Tip: Set your debit order for payday to prioritise savings over spending.
Align risk with your new timeline: If you’re planning to retire later, adjust your investment strategy accordingly. With a longer time horizon, you may be able to increase your exposure to growth assets. Be mindful of inflation risk and aim for returns that grow your capital in real terms.
Top Tip: Review your investment portfolio annually to ensure it matches your risk profile.
Prioritise your health: If you plan to work longer, maintaining your health becomes crucial. Avoid cutting back on medical aid or gap cover, as unexpected medical expenses could deplete your retirement savings. Your healthcare costs are likely to rise with age, so make them a non-negotiable in your budget.
Top Tip: Include medical aid and gap cover in your essential, non-negotiable expenses.
Build a proper plan: A comprehensive retirement plan developed by an independent advisor will give you a clear, realistic path to follow. Hoping for the best is not a strategy. A well-constructed plan will include investment scenarios, assumptions, and steps you can take now to catch up on your savings.
Top Tip: Ask your advisor to stress-test your plan using different return assumptions.
Final thought: If you’ve fallen behind in saving for retirement, the worst thing you can do is nothing. The best thing you can do is start today. With a clear plan and deliberate action, it’s possible to close the gap and move toward the retirement you deserve.
Top Tip: Take one actionable step today—small, consistent progress is powerful over time.
Have a great day!
Sue
