Retiring rich is something most people dream about, but few are able to achieve. Generation X-ers, in particular, are struggling with their savings, with a median amount of just $66,000 saved for retirement, according to a report from the Transamerica Center for Retirement Studies. Furthermore, only 14% of Generation X workers say they're very confident they'll have enough saved to retire comfortably.
Saving enough for retirement is more challenging than ever. With life expectancies continuing to climb (a third of today's 65-year-olds are expected to live until at least age 90, the Social Security Administration reports) and healthcare costs continuing to balloon, you'll likely need several hundred thousand dollars (if not $1 million or more) saved to last through retirement.
Even if your savings are sparse, and you're just a couple short decades away from retirement, there are a few steps you can take in your 40s to ensure you have enough savings to last the rest of your life.
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1. Give your finances a checkup
Your 40s are a prime time to gauge your retirement progress because you've had a couple decades to save, but if you're off track, you still have a couple more decades before you reach retirement age.
Ideally, you should have a good chunk of money saved in your retirement fund by your 40s, but it can be tough to tell exactly how much you should have stashed away by this age. One way to check your progress is to plug your information into a retirement calculator to see whether your goals are still within reach. If the calculator says you should be saving, say, $300 per month to reach your goal and you're only saving $200 per month, you know you'll need to boost your savings from now until retirement age.
Another way to gauge whether you're on track is to compare how much you have in savings to your income. Workers should have about three times their salary saved for retirement by age 40, four times by age 45, and six times by age 50, according to Fidelity Investments. These figures are assuming a retirement age of 67 and that you want to have ten times your income saved by that age, so if you plan to retire earlier or later or expect to need more or less than that amount in retirement, you may need to adjust your calculations accordingly.
The most important thing is to ensure you know where you stand in terms of retirement saving. If you're behind, you still have time to catch up -- as long as you make adjustments sooner rather than later.
2. Balance retirement saving with college tuition
It's understandable to want to help your kids pay for college, but it shouldn't come at the expense of your retirement. However, too many parents are putting off retirement and taking on student loans instead.
The number of people over the age of 60 carrying student loan debt has quadrupled between 2005 and 2015, according to the Consumer Financial Protection Bureau, and the average borrower over the age of 60 owes around $23,500. When you're spending hundreds of dollars per month on student loans for your child's tuition, that makes it harder to save toward your own goals. And as much as you may want to help your kids financially, you also don't want to have to work well into your 70s or 80s because you can't afford to retire.
If you're going to help your children pay for college, be sure you're still prioritizing retirement. Saving for retirement is a long-term goal, and the longer you put it off, the harder it will be to catch up. So if you wait until after your student loans are paid off, you may not have enough time to save enough to reach your retirement goals.
3. Keep your spending in check and supercharge your savings
Your 40s are some of your prime earning years, and it may be tempting to start splurging on all the luxuries you've always wanted. After all, you've been working hard for decades to reach this status in your career, so why not buy that fancy new car or move into an expensive new house?
If you can afford these luxuries and still save for retirement, then splurge all you want. But if you're spending more at the expense of your retirement fund, you may need to rethink your priorities. It's OK to treat yourself occasionally, but make sure you're still saving as much as you can at the same time.
Because you're likely in your peak earning years, this is also a good opportunity to supercharge your savings -- especially if you're falling behind or have yet to get started. Because you still have a couple decades before you reach retirement age, your goals are still within reach if you make the effort to put as much of your income as possible toward your savings.
No matter where you are on your journey toward retirement, your 40s are a prime time to check up on your finances and make sure you're on the right path. If you've been saving diligently for years, keep up the good work. And if you're falling behind, your 40s are a good opportunity to jump-start your savings and catch up so you can retire rich and make the most of your golden years.
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