Many experts believe that you have to start saving for retirement as early as in your twenties. But, what will happen if now you’re over 40, and haven’t started your retirement savings yet?
It is normal to face obstacles in saving for retirements. Things always seem to get in the way of your important saving goals, whether it’s debt, the kids’ tuition, hard times, or the fact that you’re busy making and doing other plans. After you opened your 40th birthday cards, you realized you should learn about retirement savings. But you think that it’s been too late to start it.
Do not worry; the “better late than never” phrase still applies in this situation. These tips should help you to start your retirement saving, even if you start a little bit late:
Determine your number
Opinions on how much money is needed to retire comfortably vary—some experts agree that you need about US$ 1 million. In reality, your retirement savings really depend on you; your needs, your lifestyle, or your retirement plan in overall. The point is, you need to determine the exact amount that you’ll be saving for.
Since you’re starting a little bit late, you’ll need to run faster. This means putting aside as much as you possibly can from every paycheck you get. You can apply for an automatic withdrawal plan from your paycheck so you never see the money in the first place. It’ll be less painful.
Eliminate all unnecessary expenses
You really need to tighten your belt this time. A few pennies here and a few pennies there can add up to huge amount of money. The value of a US$ 5 cup of coffee at age 40 can compound to over s US$1,000 by the time you’re in your 80s. Examine your expenses closely and get creative, because little differences in spending today can make a big difference in your retirement savings tomorrow.
Put your retirement savings before other important money responsibilities, for example college fee for your kids. It does not mean that you deny your family’s financial help, but you need to make priorities. Your kids still have a lot of options to pay for their education, such as student loans or scholarship. But you don’t have such resources, right?
Lower your consumer debt
Although seems trivial, credit card debts are actually wasteful, especially if you tend to make only the minimum payment each month. Never spend more in a month than you can afford so you don’t accumulate new debt. The sooner you stop overspending and pay down existing debt, the sooner that money can be redirected to investments.
Cut down on major costs
Reducing large monthly expenses is one of the best ways to boost your retirement fund. If you’re planning to buy a new car, maybe you can try to extend the life of your current vehicle. Or, since the biggest spending for most of us is housing, consider whether you can downsize or even relocate somewhere cheaper. Cutting yearly travel expenses also will also helps.
Plan your future
Hire a financial planner and start building an investment strategy or generate dividends that can’t be matched by a simple savings or money market account. A financial planner may also help you track your net worth over the years, checking in frequently to see how your money is doing and if you’re keeping on track with your retirement number.