If you’re in your 40s and you haven’t started saving for your retirement, don’t panic. While you can’t turn back time, you can make the most of the time and money you do have to catch up and plan for retirement.
It means you’ll have to invest more, protect the income you do have and get creative on ways to cut your spending.
1. Avoid Money Mistakes
You can always make more money. But, you can’t make more time.
When you’re young, do it yourself financial planning mistakes were hard to take but you had time to recover from them. Now that you’re older you can’t afford to make those same mistakes.
The best way to avoid future costly mistakes is to get help from a financial professional. If you have a pension plan at work, your company may have someone you can talk to. If not, find a financial advisor you can talk to. Ask friends and family for a recommendation.
2. Save More
In the long run, you and your family’s financial well-being in retirement will depend largely on what percentage of your income you’ve managed to save.
When it comes to financial success, your ability to save and invest is the ultimate financial variable.
While asset allocation is important when investing, if you haven’t saved any money so you can invest it doesn’t matter what your views are on investment selection.
If you’re in your 40s and you haven’t established a savings habit, start now. Decide to save a certain amount of money each month. Then when you get comfortable with this amount aim to increase the amount until you’ve reach 20% of your income.
You’re approaching your peak earning years so turn some of your income into wealth by saving and investing it.
3. Protect Your Income
An injury or illness can set you back significantly.
Protecting your income potential is essential to your retirement planning and your family’s financial well-being. You can’t afford expensive medical bills on top of the income loss.
Review your group disability insurance in your employer’s group plan. The amount of workplace disability insurance is often limited to save costs.
You may need to top up your disability coverage with an individual plan. Critical illness insurance is an excellent complement to your disability coverage because it often pays a lump sum of money usually 30 days after the diagnosis of a critical illness listed in your policy. The elimination period in your disability insurance is usually much longer – sometimes 90 or 120 days.
It’s important to understand your needs and get the appropriate coverage while you’re healthy. Check out this insurance calculator from Manulife.
Think about how much you spend on car and home insurance each year. Shouldn’t you invest at least that same amount in protecting your income? After all, it’s your income that pays for the car, the home and the related insurances.
4. Use Technology Tools to Track Your Spending
The best way I know to carve out money to save and pay for increased disability coverage premiums is to track your spending.
To make it easier to track your spending, get an app like Mint. Your bank may also have tools that allow you to keep track of your spending.
The idea is to cut back on discretionary spending and invest more.
There may be good reasons that you’re in your 40s and haven’t started your retirement savings. You may have had your children later, you may have had a job loss, or you may have decided to become an entrepreneur.
No matter what your circumstances, you can take positive steps today to protect your lifestyle for the rest of your life.