Did you know that 80 percent of 40-years-olds are behind on their retirement savings? This is according to GOBankingRates.coms recent retirement savings survey.
If youre in your 40s, the clock is ticking; you only have about 20 or so years until you reach retirement age. If you havent already started, you need to save for retirement now. And before you say, Im already 40-something its too late to start saving for retirement, remember this: Its never too late to start saving for retirement.
Find out what you need to do immediately to start planning for retirement while youre in your 40s.
DETERMINE YOUR RETIREMENT NUMBER
Opinions vary on how much money is needed to retire comfortably. Some experts argue that you should be shooting for eight times your ending salary, others say you should be building toward $1 million, and some even say you need closer to $2 million.
In reality, your retirement savings are very particular to you, so theres not really a one-size-fits-all approach. Whats most important is that you determine your retirement number, so theres no guesswork. Then, you can start building your plan around that number.
START INCREMENTALLY INCREASING YOUR SAVINGS
Generally, experts recommend that you save between 10 percent and 15 percent of your yearly income for retirement. But that might not actually be enough, especially if youre getting a late start.
So, start upping the ante: See if you can start socking away 20 percent from your paycheck alone. If the added financial discipline is hard to muster, set up an external savings account and have a portion of your paycheck automatically deposited there.
SAVE FOR YOURSELF FIRST
You know those pre-flight safety drills before takeoff? Like, Put your oxygen mask on first before assisting others? That sentiment holds true with finances, too.
To help others, we must first help ourselves, and that means putting our retirement savings before other important money responsibilities, like college tuition for your kids.
Does that sound insensitive? Well, remember its not about denying your family financial help its merely about prioritization. After all, your kids have a lot of options to pay for their education, such as scholarships, loans and work-study. You, unfortunately, dont have these resources for retirement.
LOWER YOUR DEBT
Tackle any outstanding debt you have, and prioritize by starting with high-interest loans first, like credit cards. Seek out alternative solutions if your debt is too large, or it could compromise your retirement. See if you can consolidate your debt with a zero-interest credit card or a low-interest personal loan.
Think about how much frivolous spending can add up over time. According to Financial Mentor, the value of a $5 latte bought when youre 40 can compound to over $1,000 by the time youre 80.
Now, imagine how much money youre missing out on by spending that extra $5 several times a week potentially tens of thousands. Alleviate this monetary loss by spending less on low-priority items you dont need like cable or magazine subscriptions, dining out and shopping and pocket the savings in your growing retirement fund.