Tayne, founder of New York City-based law firm Tayne Law Group, says that when she was building her business and career throughout her 20s and 30s, she didn’t have any extra funds for retirement. She also went through a divorce that set her back financially.
Ideally, it’s best to start saving for retirement as early as possible — and certainly before your 40th birthday. But as Tayne’s story proves, there are still ways to turn a late start into a well-funded retirement.
Today, her business is stable. She’s earning more money. So she’s been able to quickly build her retirement savings.
‘Money was not plentiful when I was building my business,’ Tayne says. ‘I had student loans until my late 30s because of law school. So don’t have a heart attack if you look down and you don’t have any retirement savings when you turn 40. I say, look at what you’ve accomplished, not what you haven’t accomplished. You may have done some great things career-wise. Now it’s time to shift priorities and work on retirement.’
Here are six steps for getting back on track if you’re 40 or older with little or no retirement savings.
1. Crunch the numbers
Laurie Samay, a financial planner and associate at Palisades Hudson Financial Group in Scarsdale, New York, says that 40-year-olds need to first determine how much they need to save to cover all of their expenses for their retirement years.
This means first determining your guaranteed income during your retirement years. This is the amount of money you’ll receive each year from Social Security, retirement accounts, pensions, annuities and other sources. You’ll then need to estimate your retirement expenses, focusing on big-ticket bills like food, housing, utilities, transportation and health care.
The difference between your guaranteed retirement income and your projected retirement expenses is your savings gap.
‘This is the amount that you’ll need to save using a combination of tax-deferred retirement plans and taxable accounts,’ Samay says.
Once you determine how much you need to live on, you can start making adjustments. Samay says that cutting the amount of money that you plan to spend on cable, dining out, entertainment and clothes shopping can make a big difference in freeing up funds for saving.