Your 40s Is Not Too Late to Save for Retirement

Did you know that 80% of 40-year-olds are behind on their retirement savings? The good news is, it is never too late to start saving. Although saving for retirement in your 20s and 30s is highly recommended by most financial professionals, it is oftentimes put on the back burner or simply isn’t a financially suitable option at the time.

Typically, people in their 40s have more financial flexibility to be able to put away money for retirement, as well as the motivation to do so. People in their 40s have a stable career, have settled down, and most the time have children. This is a great opportunity to begin saving for retirement if you haven’t already done so.

Higher Income, Increased Retirement Savings

A stable career means a higher income, therefore the more you can put into a retirement account. Your 40s are generally looked at as the best earning years of your life, but an important issue to note is as your income increases your consumption may increase as well. Developing good spending habits while you’re young is crucial to keep you on track as your income grows and not submit to foolish spending.

The most well-used method of saving for retirement is a paycheck deduction, if you never get the money, you never miss it. This is the best way to save for retirement without cutting into the money you have to pay bills and keep your current lifestyle. Most employers will set up an automatic paycheck deduction in the amount you choose when you enroll in their retirement plan. (For related reading, see: Payroll Deductions Pay Off.)

Take Advantage of Your Options 

People in their 40s should also begin taking advantage of being able to max out their IRAs and 401(k)s. Many 401(k)s continue to increase the contribution rate each year which allows you to put more away every year, take advantage of this until you’re maxed out. Be sure you’re also taking advantage of your employer matching rates and don’t miss out on the extra earning you could be accumulating there.

Plan, Don’t Just Save

Retirement isn’t all about saving, it is important to have a plan in place for your retirement years and the years leading up to it.

  • Do you have debt? In your 40s you should be putting any extra available funds to pay off outstanding debt. Debt is the enemy, especially during retirement. You shouldn’t enter retirement trying to shoulder the burden of debt with a reduced income, it should be taken care of long before that. Therefore, your retirement plan should also include a debt reduction strategy. (For related reading, see: Why Retirees Are Carrying More Debt Than Ever.)
  • Evaluate your taxes. Make sure you’re staying on top of your tax situation and contributing to your retirement funds accordingly to reduce taxes now and in the future when you want to withdraw from your accounts.
  • Pick a retirement age. Do you have an ideal retirement age? If you do, you should base all of your retirement goals off of retiring by that age. If you don’t, you should evaluate when you think you’d like to retire. Maybe you have enough saved and want to retire early? Do you want to retire as soon as you turn 65? Or are you passionate about your career or have a financial need to work past age 65? These are all questions to ask yourself and figure out a suitable retirement age for your situation.

Although many haven’t started yet, 40 is a great time to start saving or increase what you’re putting into retirement. Don’t fool yourself into thinking if you haven’t started yet it’s too late. It’s never too late, get started today with a comprehensive retirement plan.

(For more from this author, see: How the Federal Reserve Impacts Investors Like You.)