Missed Saving for Retirement in Your 20s and 30s? Here's Your Game Plan.
Key Points
You may have neglected retirement savings while paying off student loans, saving for a home, and getting established.
Take advantage of your peak earning years to capture all the 401(k) matching dollars you can.
Avoid added spending, and make sure to invest strategically.
- The $23,760 Social Security bonus most retirees completely overlook ›
If you didn't prioritize retirement savings in your 20s and 30s, you're not alone. During those two decades, you may have been focused on paying off your mountain of student loans, saving for a house, and building an emergency fund. It's easy to see how your IRA or 401(k) may have fallen by the wayside.
The good news is that if you're new to your 40s, you might easily have two full decades or more to boost your retirement savings. Here's how to get on track and grow your nest egg substantially.
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1. Cut expenses so you can start saving immediately
If you're serious about catching up on retirement savings, it's important to free up money for that purpose immediately. Look at your budget and identify at least a few spending categories to reduce. The sooner you put money into a retirement account, the better.
If you truly can't cut anything, you may want to consider a side hustle. Working even a few hours a week could get you started on IRA or 401(k) contributions.
2. Don't leave any 401(k) matching dollars on the table
If you have access to a 401(k) plan through your job, find out what workplace match you're entitled to, and make sure to snag every single dollar of it. That's free money you can save and invest for your future years.
3. Avoid taking on large new expenses
You may be getting to the point in your career where your earnings start to increase nicely. It can be tempting to take on new expenses when your income picks up, like a nicer car or the extension you've wanted to put on your house. But instead of doing that, funnel that money into your retirement savings so you're able to make good progress.
4. Invest your money strategically
Being a couple of decades away from retirement gives you an opportunity to take on some risk in your portfolio. You can make the most of your upcoming IRA or 401(k) contributions by investing your money in the stock market, which has a long history of producing strong returns.
And that doesn't mean you have to pick stocks individually if you're not comfortable doing so. Loading up on an S&P 500 (SNPINDEX: ^GSPC) ETF, for example, gives you broad exposure to the stock market without having to do a lot of research or legwork.
Getting a late start to retirement savings isn't ideal, but it's also not a hopeless situation. Focus on boosting your savings rate and making smart spending and investing decisions so you can make up for lost time and work toward your goals.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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