Tips for Retirement Saving after 40

After you finished school and university, you were launching into a new career and busy enjoying a thriving social life, basking in independence from home, having fun with your friends…it’s a story we’ve all heard time and time again. The trouble is, eventually you turn 40 and realise that you’ve got very little in the way of financial security.

Some people might tell you that you’re too late to start planning your retirement savings after you turn 40, but is that true? Here are some useful tips for those coming late to the planning party.

  1. Work with an Advisor

It could be that you’ve never enjoyed working with financial types, but a retirement planning financial advisor will quickly become your best friend when you’re trying to save and plan after 40. If you start saving in your early 20s, then you have so much space and room to try things out, experiment, take risks and whatnot, or just invest in slow and steady things and let the years do all the work for you. An advisor will help you to create a roadmap to similar results but starting at a different point along the road.

Advisors know the markets, the products, the services and can translate your situation into a real workable and clear plan. To try and do it on your own can leave you feeling somewhat lost.

  1. Don’t Go Crazy on Risk

Depending on your goals, you might feel as though the only way to make up for extra time is to pile on the risk to crazy levels. In fact, you don’t need to do this. Risk means you might lose as well as gain, it’s better to find a middle ground that perhaps is riskier than those who started in their 20s, but isn’t considered overly risky and certainly wouldn’t wipe you out if it failed.

The highest level of acceptable risk that someone in your position could deal with is likely an investment percentage of 120 in stock funds (minus your age), and the rest in bonds. It’s not risk-free by any means but it’s acceptable to those who want a fair chance at a good return.

  1. Start Working on Your Debts

If you still have significant amounts of debt when you’re 40, that’s one area you’ll need to work to pay down before you can get really serious about longer-term planning. The only kind of debt that’s acceptable is mortgage debt, because things like credit cards, car loans, store cards and other debts are high in interest and are weighing you down, preventing you from reaching your financial potential.

A mortgage is acceptable not just because it’s typically a low-interest debt, but it’s contributing to equity in a valuable asset in the form of your property. In that sense it’s a kind of “productive debt.”

  1. Prioritise Yourself and Your Spouse

This one seems completely counterintuitive to parents who have spent their entire lives putting their kids first. To say that you should first focus on your own retirement savings before thinking about things like your kids’ college fund seems wrong-headed, but it’s not. Kids these days have many options for student financing that in the short term can get them through their school years. In your own 40+ savings situation, you’ll also be advising them and pushing them to start saving in their 20s.

With this in mind, the best thing you can do in the longer term is first secure the financial stability of you and your spouse, and when you’re in that more secure position, you can help your kids if they still need it, or just let them carry on standing on their own two feet. In the end, you’ll be glad you did it that way.

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