Retiring rich is something we all dream of, but it requires dedication and planning to make this dream a reality. For many Generation X-ers, it’s a dream that could be beyond reach without intervention. A new study from the Transamerica Center for Retirement Studies showed that only 14 percent feel they will have saved up enough to live comfortably in retirement. This stunning statistic illustrates the importance of using your forties to examine your financial preparation for your retirement years.
Let’s face it: saving isn’t easy. However, it’s becoming more and more important to prioritize your savings over other financial goals. According to the Social Security Administration, 33 percent of people aged 65 or older today will live to age 90. At the same time, health care costs are likely to increase, meaning you will very likely need more money in retirement than previous generations who had shorter life expectancies.
Luckily, it’s not too late to get your retirement savings on firm footing. If you’re in your forties, take control of your financial future today with these three steps:
Take Your Financial Temperature
It’s important to understand the health of your finances in your forties because this decade is a great time to gauge whether you’re on the right track. After all, you’ve had several decades to shore up your savings, but you’ve also got a few more decades to go in the event you need to make changes to secure your financial comfort in retirement.
It can be tricky to determine exactly how much you should have saved up to this point, but a great starting place for a financial check-up is to use a retirement calculator. This tool can help you understand whether you’re on track to meet your goals. For example, if the calculator recommends saving $300 per month to create the retirement of your dreams but you’re currently saving just $200, you’ll know it’s time to make a change and focus more resources on savings.
Another way to ball-park the health of your retirement savings is to use the income method. According to the experts at Fidelity Investments, you should plan to have saved ten times your salary by age 67 if you wish to retire then. To hit that goal, there are a few important milestones along the way. By the time you turn 40, you should have saved approximately three times your annual salary. You should have four times your salary by age 45, and that figure changes to six times by age 50.
Perfect Your Balancing Act: Retirement Savings Versus College Tuition
When you have children, it’s natural to think about helping them pay for college. After all, a degree will pay lifetime dividends, but it’s costly up front and many parents don’t want their children saddled with student loan debt. There’s nothing wrong with wanting to help your children in this way – as long as you don’t sacrifice your own future to do it.
The Consumer Financial Protection Bureau says that the number of parents still paying off student loans after age 60 has quadrupled over the last decade. On average, these parents owe just shy of $24,000 – a pretty penny during a time when you want to be socking away as much as possible for a dreamy, comfortable retirement. Unless you want to work well into your seventies – or later – you should seriously consider just how much financial assistance you can provide to your kids without sacrificing the very real and important goal of retirement savings.
Save More, Spend Less
Lucky for you, your forties are the prime decade to earn. However, you’ll need to fight the urge to celebrate your hard-earned salary status with budget busters like expensive homes, cars or vacations. It’s natural to want these things, and it can be difficult to harness your spending when you’ve worked so hard to get to where you are, but keep your eye on the ball. Pay future-you first by always setting aside your retirement savings from each paycheck before you splurge on something less important to your future. If you can, think about using your forties to super-charge your savings to make up for lost time or to provide yourself with a bit of a cushion moving forward.
Remember: It’s Not Too Late to Make Your Dreams Come True
If you’re in your forties and feeling behind the curve on retirement savings, it’s not too late to take control of your financial future. See this crossroads in time for what it is: a chance to check your financial health, make balanced decisions about how to spend and level-up your savings while you can. If you follow this forties formula, you just might get the chance to retire rich and live your dream come true.