How to Start Saving for Retirement Right now if You’re Over 40

Nicolas Cesare  | 

Retirement is the apple of every American worker’s eye, but recent reports about the quality of retirement welfare programs, and the ability of individual Americans to save for their own retirement, have contributed to an environment of uncertainty and fear. Some middle-age Americans are afraid that they may never get to retire.

In response to these worries, experts have argued that individual workers must start savings for retirement as early as possible, and save as much money as they can afford. Shockingly, as many as 1 in 3 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 our wallets in our 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 over 40. You face unique challenges in getting a retirement savings account going, so let’s tackle some of those challenges together.

Accumulated Debt

Having debt — whether it be credit card debt, student loans, or a mortgage — means that you always have somewhere that your money needs to go before you can start thinking about saving for retirement. The most important thing that 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 leftover to put into savings for retirement.

Paying off your debt responsibly will help 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.

Repair Your Credit

Let’s be real for a moment. If you haven’t started saving for retirement by 40, then it’s probably because you have a ton of 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 won’t be willing to give you good deals.

If your credit score is in bad shape, the most important thing that you can do is to 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. For more credit score tips and guides, visit our credit score learning center.

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 we can save smaller amounts of money each year and still end up with a large enough sum at the end.

On the flipside, saving for retirement after 40 is much hard 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 of pouring more money into your 401(k).

This sounds hard and the fact of the matter is that it is. However, there is some good news. Once you’re over 40, your career should finally be kicking into gear. The hard work that you put in throughout your 20s and 30s is paying off and you have a strong position from which to ask for a raise or find a better paying job. You have probably also had some success in paying off your student loans and, hopefully, your mortgage is in good shape. This helps improve your credit and gives you a stronger bargaining position in debt negotiations.

As things start coming together for you in your 40s, you will 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 awhile, 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 that you can pour into savings.

Saving for retirement after 40 is difficult. It’s always preferable to start early, but this isn’t always 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.