3 Steps to Restart Your Retirement Savings Plan


You don’t want your retirement savings to be a case of “shoulda, woulda, coulda.”

But for many of us, the biggest problem is that we take a little “savings vacation,” stop socking money away, then never get back on track.

Let’s say, for whatever reason—from an unexpected medical bill to paying for college tuition—you took out a loan from your 401(k) or cashed out your retirement savings when you changed jobs. And you have yet to replace the money you took out.

If that describes you, you’re hardly alone. One in every five participants who withdrew money from a 401(k) plan in 2011 hadn’t paid themselves back by the end of the year, according to the Employee Benefit Research Institute (EBRI). New research from financial technology firm HelloWallet shows that more than one in every four participants are using their retirement money to pay for nonretirement needs.

Of course, sometimes, life interrupts your best savings plans. We get it. But take heart—saving for retirement is a lot like riding a bike: If you fall off, you can always get back on. Here are three key steps to get you saving again.

Step #1: Rebuild Your Emergency Fund

First things first: You need an emergency fund, so you won’t be tempted to stop saving for retirement or use money earmarked for it when a crisis hits. “You still need to make sure you have some sort of emergency savings so you don’t crawl back into the same hole,” says Judy McNary, a financial planner in Broomfield, CO.

An emergency fund, which should be at least six months of net income set aside in a separate account, is also the smartest place to pull money from in a financial crisis, says Joel Bengds at HSC Wealth Advisors in Forest, VA. “Folks always feel they can make up the difference in the years to come,” he says, but most never replace money in a retirement account.

  • Myrt

    While I enjoy and benefit from Learn Vest advice, the consistent thread in these articles suggesting that one can earn 5%+ baffles me. What sorts of investments — aside from the volatile stock market — yield this kind of return?

    • j_may

      They are assuming you are using a 401(k) plan and the growth-oriented funds available in those plans (for the 25-year-old who can take on the risk). 7% is a hard average to achieve, but it’s doable. Aside from that, there are still long-term bonds out there with 5% yields, and as the Fed easing continues to let up, we’ll see some higher rates in more fixed-income products. =)