Saving for Retirement When You Are 40
Are you in your forties? If you are, retirement may be something that you occasionally think about. After all, you have been in the workforce long enough to wish you could get out of it. With the right retirement plan, you may be able to do so a little bit sooner than originally planned.
Of course, retiring a year or two early sounds nice, but it isn’t as easy as you may have thought. The good news is that you are at the right time in your life. The amount of money that you are able to save and put towards retirement in your forties can have a significant impact on when you are able to retire.
If you have been putting aside a little bit of money in an Individual Retirement Account (IRA) or if you have been contributing to your 401(k), there is a good chance that you sat down and set retirement goals for yourself. This may include where you want to live and what activities you want to enjoy. Since your goals may have since changed, they should be reexamined. This is important in the event of a cost increase. If the costs of your retirement goals have increased, you need to work on saving more money.
It is also important to look at your spending. If you are a parent, now may be the time when your children are getting ready for college. Are you footing the college bills? If you wish to do so, first make sure that you can. As important as it is for your children to get an education, do not go into debt and do not dip into you retirement savings to pay for that education. Instead, examine other avenues of financing, which may include student loans for your children, scholarships, and grants.
If you have any debt, now is the time to get it paid off. Request a copy of your credit report. If any bills are marked as unpaid, work on getting them paid off. You cannot comfortably and securely retire if you are suffering from debt. The average consumer debt can be quite high. If yours is high, you may need to spend five to ten years paying it. That is why you should start now.
As it was previously stated, most individuals start contributing to their 401(k) plans or open an Individual Retirement Account (IRA) in their late twenties or thirties. If this is a step that you have yet to take, do so. The sooner, the better. On average, experts recommend contributing at least 5% of your income to be put in a 401(k) or an Individual Retirement Account (IRA). With that said, if you are just getting started now, at least 10% of your income should be contributed.
Now is also the time to look at how retirement works. For example, most financial advisors state you will need at least 70% of your income to comfortably retire. Do you have this money? Can you reasonably come up with it? If not, now is the time to take further action. You do not want to rely on social security payments, as they are only able to provide most retirees with an average of 40% of needed income.
To make is so that you are able to relax and enjoy life in retirement, as opposed to working through it, it is a wise idea to start cutting corners now. Are there any unnecessary purchases that you can eliminate to help you save money? Can you reduce the packages for your television, internet, or cable? Are there ways for you to reduce your car insurance payments? If so, do so. Any money that you save can be put into a checking account or deposited into your IRA.
The above mentioned steps are just a few of the many that you, a person around the age of forty, can take to prepare for retirement. Remember, each year that passes by is one less year for you to save money for your retirement. Don’t be left out in the cold or be unable to enjoy your favorite activities later on in life because you didn’t start planning for retirement when you should of.