There’s a familiar truism about retirement planning: The earlier you start it the better off you’ll be. Where does that leave those who aren’t able to plan for retirement in their 20s, though? Where does it leave those who make it past 40 without really putting a long-term financial plan in place? Is it too late for them? By no means! Here, another important truism is relevant: It’s never too late to start planning for retirement. While those in their 40s will be playing catch-up, and may need to approach things fairly aggressively, effective retirement planning is still very much possible.
Approaching Retirement Planning in Your 40s
The question is, how does the fortysomething need to approach retirement planning? Consider a few suggestions:
Get the right accounts. First and foremost, make sure you have a retirement planner who you can speak with about setting up a retirement account of some sort—likely either a Roth or Traditional IRA. You’ll want to take full advantage of these tax-sheltered savings vehicles.
Know how much you’ll need. Working with your financial planner, calculate a basic amount of money you’ll need in order to retire in confidence and security. This can provide you with a good target to hit, and a sense of just how much work you’ve got to do to catch-up.
Be bold. Yes, you’ll probably have to be a bit more aggressive in your 40s than you might have been in your 20s; remember, you’re trying to make up for lost time, so making maximum contributions to your retirement accounts is really recommended. This may mean cutting your expenses, downsizing, and avoiding new debts as best as you are able.
Live within your means. This may be the hardest part: To ensure that you’re putting aside plenty of money for retirement, and not burdening yourself with needless debt, you may need to delay things like vacations or sports car purchases. You’ll need to make a household budget and really stick with it.
Time it right. Something to talk about with your financial planner is when you might retire. In some cases, it may be necessary to delay your retirement for a few years as you continue to play catch-up. Working and saving for even a couple of additional years can make a big difference.
This isn’t a process you want to delay any longer than you have to, of course; get started with your catch-up retirement planning today by contacting Stonepath Wealth Management.