Your 40s may not seem like the time to buckle down and get serious about retirement. But if your savings are nonexistent, it means you have plenty of work to do.
The average American aged 44 to 49 has $81,347 in retirement savings, according to the Economic Policy Institute. The median savings balance among that age group, however, is just $6,200. And because that median is much lower than the average, it means most folks in their mid to late 40s have less than $81,000 and change saved. It also means there’s a good chance a large chunk of 40-somethings have no savings at all. If you’re in that camp, you’ll need to take steps to do better effective immediately. However, the good news is that if you’re willing to make an effort, you can quickly start building some savings to ensure that you get to retire on schedule. Here’s how.
1. Lower some major living costs
By the time you reach your 40s, you’re generally earning substantially more than you did in the earlier stages of your career and, as such, feel comfortable taking on greater expenses. But if you’re serious about building some retirement savings, you’ll need to start slashing your living costs to free up cash to put away. So, take a look at your budget, see where the bulk of your money is going, and figure out which major expenses you’re going to cut.
Make no mistake about it — you will need to cut at least one major expense if you want a shot at a financially secure retirement. Scaling back your cable package might put another $50 a month in your pocket, as might packing lunch twice a week rather than buying it. But if you have virtually nothing saved in your 40s, it’s going to take more than $50 a month to make up for two decades of neglecting your nest egg.
So, prepare to think big. Decide that instead of holding onto two vehicles, you and your partner will share a single one. Or, downsize to a smaller home and bank your resulting savings.
Will doing so impact your quality of life? Yes. But it’s better than compromising your retirement.