It’s not uncommon for younger workers to neglect their retirement savings. After all, many people spend the bulk of their 20s paying off student loans and saving for a home. And they spend their 30s grappling with child care expenses and the ever-climbing cost of raising kids.
As such, if you’re entering your 40s with no money in retirement savings, you’re no doubt in good company. But it’s also time to get serious about building a nest egg.
The good news is that you might still, conceivably, have several decades in the workforce ahead of you. But it pays to make these three smart moves if you’re midway through your career without any money in your 401(k) or IRA.
1. Choose a major expense to slash
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If you have a family and ties to a community, selling your home and moving to a less expensive neighborhood might not be desirable. But that doesn’t mean you can’t cut back on another large expense.
It could be possible, for example, to go from a two-car household to a single-car household. And unloading a car could free up thousands of dollars each year for your nest egg.
If that’s not doable, look at other large costs you can play around with. If your family commonly takes a $6,000 yearly vacation, skip it this year and use that money to max out your IRA ($6,000 is the annual contribution limit for workers under the age of 50).
These types of sacrifices aren’t easy. But if you don’t make them, you might have to make even tougher sacrifices during retirement.
2. Boost your income with a second job
The gig economy is booming these days, which means there are plenty of opportunities to pick up work you can do on top of your main job. If you’re juggling a career and a family, that may not be easy. But it’s necessary nonetheless. And you could find that working a second job and boosting your income is easier than having to slash expenses at this stage of your life.
3. Invest aggressively
You may be a naturally skittish investor who would prefer to stay away from stocks. But if you’re currently playing catch-up with retirement savings, now is not the time to be too conservative.
While stocks are far more volatile than more-stable investments like bonds, they also tend to deliver higher returns. And loading up on stocks could help you make up for lost time if you’re behind on building your nest egg.
If you’re worried that you lack the knowledge to choose the right investments for your portfolio, there’s an easy solution: broad market index funds. Buying these gives you instant diversification without all the guesswork. And if you’re nervous about owning stocks, you might feel more secure investing your money in the broad market rather than taking the chance on a few specific companies.
It’s not too late
The more time you give your nest egg to grow, the more retirement wealth you’re likely to accumulate. But that doesn’t mean all is lost if you’ve reached your 40s without any retirement savings.
Rather than stress about the time you’ve lost, focus on what you can do to improve your long-term financial outlook. If you make an effort to pump more money into your savings and invest strategically, you may find that you end up with plenty of cash to fund the retirement of your dreams.
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