Those who’ve waited until later in their career to start planning for retirement may have an uphill road ahead, but certain tactics can help build financial reserves while you’re still in the workforce. Below we discuss catch-up strategies for building a nest egg when you’re late to the savings game.

Figure Out How Much Money You’ll Need in Retirement

This information will help you determine how aggressively you need to start saving. Consider the type of lifestyle you’re aiming for, and think about the 4% rule, where you withdraw no more than 4% of your retirement portfolio each year during your retirement. This percentage is adjusted each year to account for inflation. The idea is to have enough for roughly 30 years before depleting your retirement funds.

For instance, if you want to live off of $30,000-$40,000 each year of retirement, you would need a portfolio of at least $1 million, plus a little extra to counterbalance inflation. The 4% rule isn’t steadfast, and there are varying factors relevant to each individual’s circumstances that could affect it (i.e., maybe you have rental properties that can contribute to your retirement income), but in general this is a widely recommended place to start when deciding how much you’ll need in retirement.

Eliminate Consumer Debt

Credit card debt is expensive and will only hold you back. A proven method for paying off debt fast is the snowball method. Pay off the card with the highest interest balance first while making minimum payments on all other credit cards. Once the first card is paid off, apply that monthly payment to the card with the next highest interest balance, and so on until all credit cards are paid off. Be sure you have established an emergency savings account of at least $1,000 before you begin to pay off debt. That way if you’re faced with a financial emergency, you have access to funds without needing to rely on credit cards.

The road to becoming debt free requires commitment. To avoid accumulating new debt, be sure to never spend more in a month that you can afford. Once your debt is paid off, you can begin redirecting investments in ways that fund your retirement as a wealth builder.

Play it Safe

If you’re a late saver, now is not the time to be risky when it comes to investing. While it’s a natural inclination to want to speed up the process when you’ve fallen behind, the potential for loss to your principal is too great. Consider building a well-diversified portfolio through disciplined savings. Think about applying one of the following asset allocation formulas:

• High (but acceptable) risk: Invest in stock funds a percentage of 120 minus your age. Invest the rest into bond funds.
• Moderate risk: Invest in stock funds a percentage of 110 minus your age. Put the rest into bond funds.
• Conservative risk: Invest in bond funds a percentage equivalent to your age. Put the rest in stock funds.

Contribute to a Roth IRA

Roth IRAs allow investors to save and grow money on a tax-deferred basis. Provided you’ve maxed out your 401(k), the next step is to open an IRA and fully fund that as well. Contributions to a Roth IRA grow tax-free, and qualified withdrawals are tax-free. You’ll even evade a capital gains tax on the earnings of your contributions.

Buy Adequate Insurance

Unanticipated events are one of the most prevalent causes of personal bankruptcy. Lower your possibility by buying sufficient health insurance, disability insurance, home insurance, and car insurance. That way, you won’t need to rely on retirement savings should you be faced with a financial crisis. Additionally, think about term life insurance if you have dependents. Generally, term life insurance is recommended over whole life insurance. Finally, make sure any insurance agent you work with has a fiduciary duty to you. This means they have a legal and ethical duty to act in your best interest.

Prioritize Retirement Saving Over Paying College Tuition

Most financial professionals widely advise against withdrawing from retirement funds to send children to college. First, your particular 401(k) may not permit a loan on your retirement account balance. Furthermore, your children have a lot more time to build their wealth and retirement savings. Pulling out all the stops to send your kids to college may seem like the right parental move, but securing your own financial future helps to ensure that you won’t be a financial burden on your children down the road.