How to Start Saving for Retirement at 40

Nicolas Cesare  | 

Retirement is the apple of every American worker’s eye, but recent reports about the imminent Social Security shortage, and the inability of individual Americans to save for their own retirement, have contributed to an environment of uncertainty and fear. Some middle-aged Americans are afraid that they may never get to retire.

In response to these worries, experts have argued that individual workers must start saving for retirement as early as possible, and save as much money as they can afford. Shockingly, as many as one in three Americans have no retirement savings at all. The large numbers of Americans without retirement savings stand as proof of one thing: saving for retirement is easier said than done.

In recent years the average cost of living has begun to rapidly outpace wage growth, especially for workers in lower income brackets. The increased strain on people’s wallets in their day-to-day lives has made it more difficult than ever to put aside money for retirement. Thus, it’s not uncommon to be over the age of 40 without any retirement savings.

If this sounds like you, then you probably know how hard it is to start saving for retirement when you’re over 40. You face unique challenges in getting a retirement savings account going, here are some tips toward tackling some of those challenges.

1. Analyze How Much You Need

Determine how much money you’ll need in order to retire comfortably. When you are trying to expedite your process towards retirement, you want to become aware of what your financial situation currently looks like. You should look at how much money you have set aside, your debt, and any investments in your portfolio. Take this information and utilize online retirement calculators to help plan out what your route will look like — in terms of time, and money.

2. Get Rid of Accumulated Debt

Having debt — whether it be credit card debt, student loans, or a mortgage — means you always have somewhere your money needs to go before you can start thinking about saving for retirement. The most important thing you can do to start saving is to create a budget for your everyday expenses as well as your loans. Budget enough to pay them off in a timely manner, while having some money left over to put into savings for retirement.

Paying off your debt responsibly will help you accumulate your retirement savings, but it has other side benefits as well. Good debt practices will help you create good credit, an important factor in any sort of financial activity.

3. Avoid Taking on Additional Payments

It is important to avoid taking on additional payments. The more payments you have to make, the more debt you have. Even if the payment is small, it needs to be taken care of right away. If you are unable to pay for something outright, you should decide whether you truly need the purchase in the first place.

Some people think that investing their money is a good way to compensate for their late start, but this is not the case. While some may see returns, it is harder to recover from a bad investment in your 40s than in your early 20s.

4. Repair Your Credit

If you haven’t started saving for retirement by 40, then it’s probably because you have other financial fires to put out in your life. This sort of fiscal chaos can cause serious problems for your credit score and having a bad credit score makes navigating any part of your monetary life more difficult. Banks are less eager to work with you and loan agencies consider you more of a liability to loan money to.

If your credit score is in bad shape, the most important thing you can do is repair your credit. Paying off debt is an important part of this, but you may need to call in professional help if your situation is dire enough.

5. Save More, Faster

For many people, saving for retirement is like being the tortoise in a race — you take it slow and steady and save a little bit at a time until you reach the finish line. Saving for retirement early is good because you can save smaller amounts of money each year and still end up with a large enough sum at the end.

On the flip side, saving for retirement after 40 is much harder because you need to invest more money each year in order to reach an amount that will let you retire comfortably. Thus, the key to saving for retirement if you are over 40 is to find ways to pour more money into your 401(k). One viable route for doing just this is to open a Roth IRA. Once you have maxed out your 401(k), you should work towards maxing out your Roth IRA to grow retirement savings that are tax free.

As things start coming together for you in your 40s, you will tend to find that you have more disposable income to put towards retirement. It’s important that you do so. It’s fine to splurge every once in a while, but it can be very helpful to maintain the lifestyle that you had in your 30s. By living comfortably in a lower spending bracket than your income bracket, you will be amazed at the amount of money you can pour into savings.

Saving for retirement after 40 is difficult. It’s always preferable to start early, but this isn’t possible for everyone. By paying off your debt, stabilizing your credit, and making use of improved income in your 40s, you can find the money to save for a comfortable retirement.


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Nick Cesare is a writer from Boise, ID. In his free time he enjoys rock climbing and making avocado toast.