Kate Stalter, Paul Curcio, David Tony
Jul 30, 2024
A financial planner can help you figure out how to begin saving for retirement in your 40s, or even later, and still achieve a successful financial outcome.
For one real-life example, Anthony DeLuca, a certified financial planner (CFP) and financial advisor at Delta Advisory Group in Maitland, Florida, has a client who didn’t begin saving in a 401(k) until she was around 50 years old
DeLuca added that investors need a hefty dose of discipline when it comes to contributing to a retirement plan, as well as the ability to stick to a budget. “But for our client who is now enjoying her retirement, she will attest that the challenge was worth it,” he said.
Starting to save for retirement at 40 is not ideal but is certainly not too late. Here’s a summary of key points and expert advice from financial planners:
Starting Late: Although starting retirement savings in your early 20s is ideal, many people begin later. According to Vanguard’s 2023 report, the median retirement balance for those aged 35 to 44 was $35,537. If you're 40 with no savings, you're not significantly behind your peers.
Planning for Retirement: Financial experts recommend taking proactive steps if you're starting at 40. Taylor Kovar advises, “At 40, you still have about 20 to 25 years until retirement, which is a considerable amount of time to grow your investments.” He suggests a balanced investment mix and considering index funds or ETFs for broad exposure.
Catch-Up Contributions: While catch-up contributions are specifically for those over 50, Kovar emphasizes that starting early with maximum contributions can significantly benefit your retirement savings.
Saving and Investing: According to Anthony DeLuca, a certified financial planner, starting late requires disciplined saving. “With the right education and financial stability,” he notes, “you can still achieve significant savings by contributing the maximum allowable amounts.” DeLuca's client, who began saving at 50, successfully accumulated over $800,000 by focusing on a growth-oriented approach initially.
Investment Strategy: DeLuca advises that while being riskier at a later age can be necessary to catch up, it comes with risks. “There’s uncertainty in being so risky at a later age because your time horizon narrows,” he notes. It’s important to regularly review and adjust your investments.
Financial Planning: For those starting at 40, regular portfolio reviews and utilizing tax-advantaged accounts are crucial. DeLuca recommends, “A hefty dose of discipline... is essential for retirement planning.”
Lifestyle Adjustments: Cutting back on lifestyle expenses can help increase savings. DeLuca suggests, “Starting your retirement savings at 40 allows you to take more risk with stocks than you would if you started a decade later.”
Insurance and Health Care: Incorporating life insurance and planning for rising medical costs are key parts of retirement planning. DeLuca highlights the importance of tailoring insurance coverage to your situation and regularly updating policies as circumstances change.
Future Considerations: Preparing for retirement involves planning for healthcare and long-term care. Regular evaluations of Medicare options and maintaining a healthy lifestyle can help manage future expenses.
In summary, starting to save for retirement at 40 requires a strategic approach, disciplined saving, and regular investment reviews. DeLuca’s real-life examples underscore that with proper planning and commitment, even those who start late can achieve a secure and comfortable retirement.