I’m 55 years old with zero savings — have I lost all hope of a comfy retirement? Not yet. But do these 3 crucial things ASAP

This could leave many people relying on Social Security benefits alone, which carries its own risks as you consider how you will cover your expenses for the two decades the average American can expect to spend in retirement.

If you’re in a comparable situation, a comfy retirement may seem out of reach, but there are three key steps you can take right now to catch up in the race to reaching your retirement goals.

Cut expenses

Many American households aren’t saving enough because there isn’t much left over after expenses each month.

The average household income in 2022 was $94,003 before taxes, while average household expenditures — including housing, transportation and food — added up to $72,967, according to data from the U.S. Bureau of Labor Statistics. After taxes, the average Americans households’ funds are almost all gone.

If this sounds like your budget, start taking a hard look at your spending. Be honest with yourself about which expenses are wants and which are needs. For instance, could you cut back on takeout and delivery? Could you choose a less expensive vacation? Could you make do with a used car instead of a new car? You may have to make some sacrifices now to ensure financial security in the future.

Don’t forget about tax deductions

Taxes are an expense that many households often forget to consider. Ensure you’re taking advantage of all possible deductions.

In some cases, it might make more sense to itemize deductions rather than take the standard deduction (this could be the case if you pay a lot of mortgage interest or have business-related expenses). On the other hand, the standard deduction is higher for people over 65 years of age.

Maximize contributions to 401(k)s and Roth IRAs

Once you’ve cut back on expenses, you’ll need to start ramping up your savings.

If you can contribute to a 401(k) plan through your employer, consider contributing as much as you can up to the allowable limit. The 401(k) employee contribution limit for 2023 is $22,500. but if you’re over 50, there’s an allowable catch-up contribution of $7,500, which means people over 50 can contribute up to $30,000 a year.

Even if you can contribute only a fraction of that, the power of compound interest means that your account balance could add up significantly over the next 10 years.

The tax-deferred nature of 401(k)s — i.e., you don’t need to pay tax on the contributions or investment earnings until you withdraw the money in retirement — may help you find some wiggle room in your budget.

Since 401(k) contributions are deducted from your taxable income, maxing out your account might result in a tax refund, which you could then reinvest in additional contributions, setting off a virtuous cycle of tax savings and reinvestment.

There is also the Roth IRA. Contributions are made with after-tax dollars so you won’t get a tax deduction today, but your investment earnings grow tax-free, and withdrawals can be made tax-free after the age of 59 and a half if the account has been open for at least five years.

The yearly contribution limit for 2023 is $6,500, with an allowable catch-up contribution of $1,000 if you’re over 50. Use the tax-free income to help stretch your retirement dollars further or to give yourself a little breathing room.

Draw retirement cash from existing assets

Not all of your retirement income needs to come from investment accounts. For example, you might consider a home equity line of credit (HELOC) to provide some liquidity in retirement.

However, tapping into the equity of your home is a complex decision you should take into account for market conditions and tax consequences.