Ask an Advisor: I’m a 'Late Starter' With Just $17K Saved for Retirement at Age 44. What Should I Do?

I’m 44 years old but I’m a late starter in regard to thinking about my retirement. I have a little over $17,000 in my 401(k) and I would like to know what options would be best suited to get the maximum return considering my age and late start. I would also like to work with a financial advisor but I have no clue what I’m doing.

– Dewaylon

First off, kudos to you for recognizing an opportunity to take control of your financial life. With a focused strategy, you can still make meaningful progress toward your goals and a comfortable retirement, if that’s what you’re aiming for. Instead of chasing the highest potential return, focus on constructing a plan tailored to your current needs and long-term objectives. Let’s walk through what this process could look like, step by step.

If you need help planning and saving for retirement, consider working with a financial advisor.

Step 1: Create a Plan and Start with Your Cash Flow

Before you figure out how much to save and where to invest in your 401(k), step back and assess your financial situation. Many people jump ahead, but without a plan it’s like running a race without knowing how far you have to go.

A helpful framework we often use to start the planning process is the debtor-saver-investor continuum.

If you’re a debtor, you’re carrying high-interest debt like credit cards or certain types of student loans. Paying these off first should be a priority given the burdensome interest rates they charge. Once you’ve paid off these loans you can turn your attention to saving.

Aim to build an emergency fund with enough money to cover four to six months of living expenses. This will provide a cushion to accommodate potential job transitions, medical bills or other surprise costs like home or car repairs without putting you in a precarious position. With a sufficient emergency fund established, you can become an investor. At this point, you can direct excess cash to investments designed to help you achieve your long-term goals.

Where you fall on this continuum will shape how you approach your 401(k). If you evaluate your situation and determine you’re still a debtor or saver, then it might not make sense to max out your 401(k) contributions quite yet. However, it doesn’t mean you should fully ignore contributions, for reasons we’ll discuss next.

(Need help assessing your current financial needs? Speak with a financial advisor who can provide personalized guidance on how to balance short-term goals with long-term retirement planning.)

Step 2: Take Advantage of Employer Matches

If your employer offers matching contributions in your retirement plan, contribute at least enough to get the full match. That is, unless your cash flow situation, based on your earnings and expenses, dictates otherwise. Again, that’s the importance of developing a plan.

For example, if your company matches 50% of contributions up to 6% of your salary, then that’s an immediate 50% return on that portion of your contribution. For many late starters, this is low-hanging fruit. It boosts your retirement savings without significantly impacting day-to-day cash flow.

(And if you’re interested in finding a financial advisor to help you plan for retirement, this matching tool can connect you with fiduciary advisors for free.)

Step 3: Pick a Deferral Rate and Investments that Align with Your Goals

Let’s assume you’ve arrived at the “investor” stage of the aforementioned continuum and can contribute beyond any available employer match. A sound financial plan considers your other assets, investment accounts, and cash flow needs to guide both the amount you contribute to your 401(k) and how you invest those dollars for long-term goals.

Here it helps to define what we mean by deferral rate. This simply refers to the amount of your salary you choose to “defer” into your 401(k), expressed either as a percentage of pay or as a dollar amount. For example, deferring 10% of a $100,000 salary means contributing $10,000 annually to your 401(k).

Ideally, everyone would defer the maximum amount to their 401(k), which is $23,500 in 2025 (plus an additional $7,500 for those age 50 and older). But that’s not possible for everyone. If cash flow is tight, start with an amount above the employer match that you can handle, say 1–2%. If you can handle more, maybe think about it in dollar terms, such as $5,000, $10,000 or even $15,000. Moreover, consider setting up auto-escalators that will automatically increase your contributions each year to make saving easier.

After settling on a deferral rate, turn to investment selection. The key is to frame the decision not around chasing the highest return but around identifying the return that aligns with your goals and risk tolerance.

While getting a bit of a later start might entice you to pursue the highest prospective returns, this might not always be the best approach given the level of risk you can and want to expose yourself to. So, return to the plan. What rate of return and what level of risk are required to achieve your goals?

This might lead you to select a mix of low-cost index funds that help you keep more return in your pocket, or perhaps a target date fund that adjusts the mix of stocks and bonds according to your anticipated retirement date and risk tolerance. Or, it could be actively managed funds that seek to outperform the market on a risk-adjusted basis.

(And if you need additional help selecting investments or managing your portfolio, you may want to consider working with a financial advisor.)

How It Could Work for You

To see how this works in practice, imagine your plan calls for a $10,000 annual deferral and a 7% return. You might target a 70/30 mix of stocks and bonds to pursue that return. (This is just an example, not a guaranteed return given this allocation.)

With that savings rate and return, your $17,000 in assets could grow to about $475,000 over 20 years. If you take a little more risk and increase your anticipated return to 8%, $10,000 in annual deferrals could potentially yield over $530,000 after two decades of saving and investing. Increasing annual contributions to $15,000 could leave you with $680,000 or $765,000 after 20 years with 7% and 8% returns, respectively.

(This is where guidance from a fiduciary financial advisor can make a difference. Consider connecting with an advisor who can tailor an investment plan to your situation.)

Putting it All Together

Before you jump to maxing out contributions and picking the highest-octane investment available in your 401(k) plan, consider creating a financial plan. Doing so will not only clarify your goals, but also help to avoid a major pitfall: overcompensating for perceived lost time. Taking time to go through the planning process will inform the optimal contribution levels and return requirements that will define your 401(k) strategy.

Retirement Planning Tips

A financial advisor can help you assess your income needs for retirement and build a plan to meet them. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Plan around required minimum distributions (RMDs). If most of your wealth is in tax-deferred accounts, start strategizing before age 73 (or 75 depending on birth year). Roth conversions in lower-income years can help reduce future RMD burdens and potential Medicare surcharges.

Jeremy Suschak, CFP®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Jeremy is a financial advisor and head of business development at DBR & Co. He has been compensated for this article. Additional resources from the author can be found at dbroot.com.

Please note that Jeremy is not a participant in SmartAdvisor AMP, is not an employee of SmartAsset and he has been compensated for this article.