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How to Start Saving for Retirement After 40, Even if You Haven’t Saved Anything at All

If you are 40 years or older, you may feel like it’s too late to start saving for retirement. You’re not alone: 49% of Americans between the ages of 55 and 66 also don’t have any savings for their golden years. But it’s never too late to start saving for retirement.

What follows are some tips you may find helpful for saving for retirement after 40. As with any financial choices you make, you may wish to first consult a certified financial planner and obtain personalized advice.

How to build wealth in your 40s, 50s, or 60s for retirement

When it comes to saving for retirement, age doesn’t have to be a stop sign. Even if you’re in your 40s, 50s, or 60s, you can start saving today.

With that said, saving for retirement at this stage of your life may come with some unique challenges. You may have already started a family, contributed to college funds, bought a house, and more. But while these factors may add layers of difficulty to saving for retirement, doing so is by no means impossible.

For example, you may be eligible to make additional catch-up contributions to your retirement account. You can also calculate a personal retirement savings goal by estimating how much money your preferred retirement lifestyle would cost, then subtracting your current retirement savings from that amount.

These are just two of the many ways experts suggest for creating a retirement savings strategy.

By what age is it too old to save for retirement?

It’s never too late to start saving for retirement. The earlier you start saving, the more time your savings has to generate compound interest, even if that’s only five or ten years. Plus, if you’re between the ages of 50 and 60, there’s a chance that you’re earning the highest wages of your career, which can give you the margin to set aside extra funds for retirement now.

Establish your retirement savings goal.

Before you start saving for retirement, you may want to have a goal in mind. Not only will having a goal give you a real number to work toward, but it will also help you stay motivated and consistent in your actions. In a July 17, 2022, article for Investopedia, Julia Kagan says, “Having realistic expectations about post-retirement spending habits will help you define the required size of a retirement portfolio.”

If you don’t know where to start with your retirement goal, ask yourself these questions first:

  • What does your dream retirement lifestyle look like?
  • Will you continue working part-time after retirement?
  • Does your current savings imply a single-choice path, or is it flexible enough for multiple retirement scenarios?
  • Do you want to travel or engage in other expensive hobbies that need to be considered?

Once you work through some of these questions, you can narrow down your savings goal into one that can realistically be accomplished when—or before—you retire.

Start with your employer.

If you’re currently employed, you may want to get in touch with your employer’s human resources (HR) department. Specifically, ask to talk to a benefits specialist.

A benefits specialist can help you map out what employer-sponsored retirement plan options are available to you and provide guidance on the steps you need to take to make those options realities.

For example, your employer may help you set up automatic withholdings and extra contributions from either payroll or your own bank account.

Try to reduce credit card debt.

The interest in your savings account is likely lower than the interest rate you are paying on your credit card debt. If you have accrued credit card debt, many advisors suggest paying it down as quickly as possible. This helps free up more money to put away in savings.

Experts suggest a number of ways to get out of credit card debt. You may wish to explore several options to find or create a plan for paying off credit card debt that works for you and allows you to stick with it.

Consult a financial planner.

If you need extra assistance, don’t be afraid to reach out to a financial planner.

One of the biggest benefits of working with a financial planner is that they can view your savings through an objective third-party lens. As such, they will be able to provide you with realistic advice and retirement savings tips tailored to your unique retirement savings goals.

Explore your retirement account options.

A retirement account, whether it’s a 401(k), IRA, or other type of retirement savings plan, has its own unique benefits. With some options, for example, you may incur penalties for taking money out early, which may help keep you from dipping into your retirement savings before you retire. Different tax benefits may also come with each type of retirement account, each of which may help set you up for success.

One type of IRA you might consider is a precious metals IRA, a self-directed IRA that allows precious metals to be included as assets. You can download our free Gold IRA Information Kit to learn more about the benefits of this unique type of retirement account.

Maximize the amount you save in your accounts.

Here are six common types of retirement plans, each of which has different benefits, contribution limits, and factors to consider:

401(k): the standard employee retirement plan

If you have an employer that offers an employer-sponsored retirement plan, they will set this up for you. This is one of the most popular and widely used types of retirement plans in the United States. If your employer does not offer a 401(k) plan, you still have many options available.

Contribution limits: You can contribute up to $20,500 to a 401(k) in 2022, or $27,000 if you’re 50 or older. The total contribution limit for 2022, including both employer and employee contributions, is $61,000 (or $67,500 if you’re over 50) or an employee’s total compensation, whichever is less.

Traditional IRA: a retirement plan with tax-free contributions

Think of this as a self-managed retirement fund. It’s available to everyone and provides flexibility. Taxes on contributions are deferred until retirement, with taxes then paid on distributions. It may be a great choice if you have multiple ideas for your retirement lifestyle.

Contribution limits: $6,000 in 2022, or $7,000 if you’re 50 or older.

Roth IRA: a retirement plan with tax-free distributions

With a Roth IRA, you pay taxes on your funds before you contribute. This allows you to receive distributions tax-free once you’ve retired, which means every dollar in your account can go straight into your pocket.

Contribution limits: $6,000 in 2022, or $7,000 if you’re 50 or older.

SEP IRA: for small business owners or those who are self-employed

An advantage of a SEP IRA is that you can contribute much more to your retirement savings each year than with a traditional or Roth IRA.

Contribution limits: If you’re self-employed or run your own business, you can contribute up to 25% of your compensation, or $61,000, whichever amount is smaller. However, with an SEP IRA, contributions must be equal for all employees.

SIMPLE IRA: for small business retirement plans

SIMPLE stands for “Savings Incentive Match Plan for Employees” and is targeted at small businesses with 100 or fewer employees.

Contribution limits: Employees can contribute up to $14,000 from their salary in 2022. If they’re over 50, that increases to $17,000.

Solo 401(k): for solo entrepreneurs

This is similar to a traditional 401(k), but your savings are boosted because you contribute to the plan as both employer and employee.

Contribution limits: As an employee, you can contribute up to 100% of your self-employment income. The maximum is $20,500 in 2022, or $27,000 if you’re age 50 or over. As your own employer, you can add an additional 25% of your business’s income.

Diversification is key.

Since there is risk involved in any retirement plan, many financial advisors suggest a diversified approach to preparing for retirement, which may help lower your retirement portfolio’s overall risk exposure.

One way to diversify your accounts is to consider purchasing physical gold or silver. Check out our shop and talk to one of our Account Executives to learn which precious metals products may be right for your portfolio.

Take advantage of catch-up contributions.

Making annual catch-up contributions may be an excellent way to kick-start your retirement savings plan if you begin saving after the age of 40.

The following plans allow you to make annual catch-up contributions of up to $7,500 in 2023:

  • 401(k) (other than an SIMPLE 401(k))
  • 403(b)
  • Governmental 457(b)

Use technology to help save money for retirement.

There are many software applications you can add to your smartphone, tablet, or computer that may help you get serious about your budgeting and retirement efforts. Many offer free as well as paid plans, so you can dip your toes in and find the right software for you before spending any money.

You may also be able to find smart phone apps designed to help you break down your expenses and get started with savvy saving tips.

Balance (or rebalance) your portfolio.

Studies show that many Americans don’t look at their retirement plans or the current trajectory their savings is putting them on. Unfortunately, this may set retirees up for failure further down the road.

It is suggested that you regularly review your retirement assets and create asset allocation strategies. As you approach retirement, you may prefer to allocate funds to less risky assets because your accounts will have less time to recover from losses.

As to how often you should rebalance your portfolio, analysts usually suggest two main options:

  • once a year at tax time
  • when your asset mix is no longer in line with your current allocation strategy

For further assistance, you may wish to consider contacting a financial advisor to help you set up an action plan unique to your portfolio.

Consider starting your own business or side hustle.

The older you are, the wiser you become. So why not use your knowledge and experience to make more money via your own business?

The income you gain from your business may help fund your retirement more efficiently. Plus, who doesn’t love the idea of being their own boss?

Your spouse’s income may help fund your retirement.

If you are married and not employed, your spouse could support you in establishing and funding a spousal IRA. This type of retirement account allows a working partner to open an IRA that the non-working spouse can use to save for retirement.

To qualify, a joint declaration must be filed.

Know your state’s laws if you get married or divorced.

Getting married or divorced may significantly impact your retirement, depending on state laws.

If you’re getting married, your financial contributions can include your spouse’s assets, income, and any shared expenses. However, if you get divorced, you and your former spouse may be required to share your retirement assets with one another.

Other helpful tips

Below are extra tips for you to consider when creating your retirement plan.

  • You can use our retirement worksheet to evaluate your current retirement plan and discover opportunities for further diversification.
  • Saving 15% of your yearly earnings, including employer contributions, is an often-suggested starting goal if you’re not sure where to begin.
  • While it’s great to have a savings benchmark to work toward, a comprehensive budgeting plan may help you stay consistent in achieving your retirement goal.
  • Remember to be realistic with your retirement goal so you can create an achievable plan.

Savings benchmarks by age

Here are some savings benchmarks (as provided by CNBC) for you to consider, depending on your age:

  • 40 years old—3 to 4 times your annual wage
  • 45 years old—5 times your annual wage
  • 50 years old—6 times your annual wage
  • 55 years old—8 times your annual wage

Consider opening a precious metals IRA.

A precious metals IRA is a retirement account where physical gold and other approved assets can be stored in custody for your retirement benefit.

Having a precious metals IRA can help you diversify your assets, build your portfolio, and give you full control over your asset mix.

Learn more by downloading our Gold IRA Information Kit.


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