Waiting Until 40 To Invest? Here's Why It Can Cost You $312,000
If you don't plan on setting aside money for retirement until you turn 40, you may want to rethink your long-term plan. Though it's technically never too late to start investing, waiting until you're 40 to start taking retirement savings seriously means you may not be able to spend your post-work years the way you imagine. In fact, it could cost you $312,000. Here's why.
Let's say your brother starts investing $315 a month at 30. He'll have around $567,042 by the time he retires at 65 (assuming a 7% return). Now, even if you do the exact same thing for 25 years, starting at 40, you'll have just $255,042 by the time you retire. That $312,000 difference is the result of compound interest. Because your brother's money had a decade longer to grow and snowball on itself, it would take a lot of catching up for you to close that gap.
Here's a quick rundown on how to get going on investment if you're behind at middle age.
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What To Do If You Haven't Started Investing at 40
If you feel behind in terms of your retirement savings, you're not alone. According to an AARP survey, 20% of adults over age 50 have no retirement savings and 61% are concerned they won't have enough to support their retirement.
However, simply feeling bad about your situation won't help you make up for lost time. Here's what to do instead:
Tackle debts and cut down spending. If you haven't already, start prioritizing paying off high-interest debt like credit card debt and setting spending limits.
Create new income sources. There's only so much you can save each month for retirement if you're living paycheck to paycheck. To reach your retirement savings goals faster, find ways to make more money or make your money work harder for you.
Max out your 401(k) contributions. If your employer offers a 401(k), make the most of it. At a minimum, you should be taking advantage of any employer match programs.
Max out your Roth IRA. Besides putting money into your 401(k), try to also max out your contributions to a Roth IRA if you satisfy the necessary requirements based on income and tax-filing status.
If you're 40 and just getting started, the worst thing you can do is nothing. Use the steps above, get aggressive about your contributions and remember that the second-best time to start is right now.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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