If you're behind on your retirement savings, you're not alone. In fact, GOBankingRates.com's 2017 Retirement Savings survey found that a shocking 55 percent of Americans will retire with less than $10,000 in the bank. Another 11 percent have less than $49,000 to carry them through their twilight years.
Just because you're in your 40s doesn't mean it's too late to turn things around financially. Here are some tips to start planning today so you can avoid retirement regrets tomorrow.
Determine Your Retirement Number
Opinions vary regarding how much money you need to retire comfortably. Although some financial pros recommend saving eight times your ending salary, others suggest building a million-dollar nest egg. Still other experts advise individuals to save $2 million for their retirement.
The truth is that there's no one-size-fits-all solution to saving, and your retirement number is unique to you. Someone who plans to travel extensively in her golden years will likely need more cash on hand than someone who intends to stick close to home. Additionally, your retirement number could be affected by your health and the area of the country in which you reside.
What's important is that you determine your specific retirement number so there's no guesswork. Then, you can start building a plan around your goals.
Increase Your Savings Incrementally
In general, money experts recommend that you save between 10 percent and 15 percent of your yearly income for retirement. But that might not actually be enough, especially if you're getting a late start.
If you're in your 40s and just starting a retirement fund, aim to sock away 20 percent from your paycheck alone. If the added financial discipline is hard to muster, set up an external savings account and arrange to have a portion of your paycheck automatically deposited there. If you don't see the money in your checking account, you won't be tempted to spend it. Additionally, you should transfer the money from any raises or bonuses you receive. Since you aren't used to having this money, you won't miss it when it's gone.
To increase the amount you take home each month — and make your income stretch further — check out these tips to double your paycheck.
Save for Yourself First
Just as a flight attendant cautions you to put on your oxygen mask before assisting others in an emergency, a savvy financial advisor will tell you to tend to your own savings needs before investing in friends and family.
To help others, you have to help yourself first, and that means putting retirement savings ahead of other expenses, like college tuition for your kids or help with a cousin's car payment.
Although this advice might sound insensitive, the truth is that people in their 40s need to start prioritizing their own fiscal wellness. After all, your kids have multiple options to pay for their educations, such as scholarships, loans and work-study. You won't have these resources during retirement.
Lower Your Debt
When you're in your 40s, it's not enough to put money aside for retirement. You also need to tackle outstanding debt. For best results, start by paying off high-interest loans, like credit cards. Seek out alternative solutions if your debt is too large or could compromise your retirement. For example, you might be able to consolidate debt with a zero-interest credit card or low-interest personal loan.
Also, take a look at your other sources of debt. If you still owe money on your mortgage, check to see if refinancing your home loan will help lower your rate. If you have a home equity line of credit, find out if you can refinance it for a reduced rate as well.
When you're saving for retirement, it's important to recognize that small purchases can add up fast. You might not think all those frivolous purchases matter. However, according to Financial Mentor, the value of a $5 latte bought when you're 40 can compound to more than $1,000 by the age of 80.
Think about how much money you're missing out on by spending that extra $5 several times a week. Then take steps to limit this monetary loss by spending less on low-priority items — like cable, magazine subscriptions, dining out and shopping. You won't regret skipping those costly cappuccinos when you're luxuriating by a pool in your retirement years.
Max Out Your Retirement Accounts
If you're not taking full advantage of your employer-sponsored retirement accounts, you're basically leaving free money on the table. According to the IRS, in 2017 the total amount you can contribute to your IRAs, both Roth and traditional, is $5,500 — that number jumps to $6,500 when you're 50 or older. Put as much money as you can into your retirement accounts each year, and don't miss out on the chance to have your contributions matched by your employer.
Additionally, 40-somethings should approach other benefits with retirement in mind — your raises, bonuses, cash gifts and any other windfalls should go straight into your retirement savings. And never stop looking for new employment opportunities with better pension programs — you're only in your 40s, after all.
Cut Down on Major Costs
Reducing large monthly expenses is one of the best ways to boost a lackluster retirement fund. Since most of us spend a fortune on housing, consider whether you can downsize or even relocate somewhere cheaper. Apart from a lower mortgage, you could save on property taxes.
Additionally, you can put off buying that new car and try to extend the life of your current vehicle; the money you save on an auto loan down payment is instant retirement padding. Plus, you won't have to worry about shelling out for a more expensive insurance policy.
Also, stop going on pricey summer vacations and instead take seasonal, affordable road trips with the family — or go into all-out "staycation" mode. If you do decide to splurge on a trip, look for ways to cut costs on travel.
Find Income in Your Insurance
You might not realize that you can use life insurance for something other than, well, insuring your life. However, many older Americans are using their life insurance policies to tap into tax-free income. Sure, withdrawals will lower death benefits, but there might be a point at which you don't need to worry about keeping those numbers high.
Talk to your financial advisor about taking out a life insurance policy for this purpose — or about cashing in if you already have one.
Map Out Your Future
In our age-obsessed culture, turning 40 can feel like the beginning of the end. However, the truth is that most people in their 40s still have 20 to 25 career years to go. Rather than rely on your own fiscal savvy — or lack thereof — seek advice from a financial planner.
Sit down with a money planner and start building an investment strategy to generate dividends that can't be matched by a simple savings or money market account. The goal is to invest wisely, yet aggressively.
An advisor can also help you track your net worth over the years. Check in frequently to see how your dollars are doing and if you're staying on target with your retirement number.
If you really want to boost your retirement fund, consider working past the standard retirement age. You can use the calculator on the Social Security Administration's website to determine your retirement age based on your birth year.
Working longer and retiring later could allow you to earn more money and delay collection of your Social Security benefits. The longer you wait to start collecting your benefits, the more money you'll have to enjoy your golden years.
Keep Reading: 21 Questions to Ask Yourself Before Deciding to Retire