If you've been reading financial advice for a while, you'll probably have heard repeatedly that saving for your retirement is one of the most important things you can do to secure your future. You’ll probably spend the rest of your life working on a pension plan, and those plans will continue to change. You may wonder if you can make up for lost time or whether it is too late to start saving for retirement. The answer to both of those questions is yes; however, you must put in serious effort. If you have been working for any time, it may not be too late to catch up on retirement savings.
Can You Catch Up on Retirement Savings?
While it's not possible to catch up on retirement savings at age 40, it is possible to catch up on retirement savings at age 60. You can get as close as you want to having as much saved up as someone who started saving at 25. Retirement savings are all about the power of compound interest. The best way to catch up on retirement savings is to start saving as much as possible.
The Importance of Starting Early
The best way to catch up on retirement savings is to start saving as soon as possible, but it's also important to remember that the earlier you start investing, the better. The power of compound interest means that you'll see that investment grow much faster if you start young.
How Much Should You Have for Retirement
You'll need to start saving more to close the gap between what you've saved and what you should have saved in your 40s and 50s. That doesn't mean you should go out and double your monthly savings; saving as much as possible is essential, but you also need to ensure you don't cripple your finances. Instead, try to find ways to save a little more each month.
Is It Possible to Make Up For Lost Time?
Absolutely. The earlier you save, the more you'll benefit from compound interest. That means that even if you start saving for retirement at age 40, you can still compensate for lost time. However, if you try to save too fast, you risk quitting and giving up. Start slow, build up your savings, and you can make up for the lost time in the long run.
How To Catch Up on Retirement Savings in Your 50s
If you're in your 50s and suddenly realize you're way behind on your retirement savings, there are a couple of steps you can take to try to catch up. First, calculate how much you need to save to reach your retirement savings goals. Then, look at your budget to see where you can cut to free up more money for retirement. Start by re-evaluating your insurance plans. You may have insurance policies you no longer need, such as life insurance, disability insurance, and health insurance. Cut back on your insurance spending as much as possible, especially if it's unnecessary.
Retirement is a long-term goal; you should start saving for it as soon as possible. Generally, you should save 10-20% of your monthly income. In your 20s or 30s, you'll have plenty of time to save a significant nest egg and retire comfortably. However, in your 40s or 50s, you may feel like there's no way to catch up on retirement savings.