For many of us, certain birthdays trigger specific emotions. At 16, it is all about freedom and being able to drive. At 21, we start to think about life as an adult. And at 40, it hits us like a ton of bricks: “I am retiring in 25 years, and I haven’t saved a dime!”
If this is you, don’t worry, you can relax. There are many ways that you can save for retirement and life during your later years without the stress of assuming you are starting too late.
All it takes is some planning and a bit of action. Start with one of the tips below and add on as time goes by. Here are some smart ways to get started.
If your plan is to save money with a goal of full retirement at the age of 65, then you need to start a budget so you know how much you will need when the time comes.
It is a general rule that you should plan to have 70% of your current income saved for when you are no longer working if you plan to have the same lifestyle. If you plan to downgrade, you can plan for less.
It may seem like a daunting task, but if you break it down, it becomes more manageable. For example, if you start with $5,000 at age 40 and add only $50 per month, you would have just under $30,000 at the time of retirement.
Increase that amount each month and you will end up with even more. That could be just one account. Combine this money with the other strategies below and you will grow a larger nest egg.
2. Maximize Your 401k
One of the perks of growing older is that you can invest a larger sum into your employer-sponsored retirement accounts.
Boosting your 401k plan with your employer is a smart idea, especially if your job matches a certain percentage. This is a great way to save money as it comes directly out of your paycheck so you barely notice it is gone.
Once you hit 50 years of age, the maximum you can invest jumps several thousand dollars, which can make a big difference.
The beauty of a 401k plan is that it stays with you even if you aren’t working. So, if you took time off to be a caregiver for your children and you are returning to work midlife, you can rollover your 401k to the new employer and continue your savings.
If you are not going to a new job, you can still roll over the 401k into an IRA.
3. Work On Your Savings
While your 401k is doing its thing, you can save money with a high-interest savings account that will accumulate extra interest as time goes on.
Some of these accounts go up to 0.60% interest, which means you are making more money just by having an account. When it comes to saving, one of the best ways to keep it going is to set up an automatic withdrawal every month.
You can do this from your checking account or set it up with the payroll department at your job.
Saving is a great idea for retirement, but it is also important to save for the unexpected. You never know when a car will break down or a major life event will leave you looking for a new home.
In addition to saving, you can better prepare yourself for these unexpected purchases by ensuring that your credit score is in a good place. With a good score, you can get a better rate on these purchases so you can save more money on the side.
If you currently have a low score, focus on paying back credit cards and check your credit report for potential errors. If you find any, report them to the credit bureau.
4. Question The College Savings
Many parents put a large chunk of money aside each month to save for their child’s college, but you may want to reconsider if that fund is taking away from your future savings.
While closing the college account may seem unfair to the kids, it is okay to do so, especially if you don’t know which route your kids may take. They may decide to skip college or go to a community college that they can pay for themselves.
Even if they want to go to a more expensive school in the future, there are many other ways to pay school fees, such as with grants and scholarships. Then there is always the option of student loans.
For now, put more consideration into securing your financial future, and if there is money left over, reopen the school fund.
5. Consider Retiring Later
For older folks that still don’t have the money they need, it may be time to consider delaying retirement a few years.
Doing so could mean that you remain at your current job past age 65, or it could mean that you take side gigs or part-time work and only partially retire. There are many freelance jobs you can do at any age that can bring in a good income, including being a tutor, writer, or delivering food for a restaurant.
6. Go To An Expert
If all the ideas listed above are a bit out of your comfort zone or you are not sure where to find the extra money you need, then it is a smart idea to go to an expert.
This could be a financial advisor or your bank, which can provide free financial tools that come included with your membership, such as budget worksheets and information about savings accounts.
Those who need help with budgeting or debt counseling should find an expert in their area that can help set them on the right path.
As you can see, midlife is not too late to start saving for retirement. By putting away a few bucks a month and setting a smart budget, you can be financially sound in your golden years.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.