Ask anyone who’s been or is there: ages 40 to 49 are a busy time. There are quite a variety of expenses to consider. For many people, funds aren’t just being allotted to the costs of raising children; aging parents may need some financial assistance as well. And let’s not forget about existing debt and mortgages.
While it may seem like your accounts are being pulled in several directions, it’s equally – if not more –important that you are moving money into a retirement savings account, too. Approximately one-third of people aged 30-49 years old don’t have a retirement account. If you’re in this category, you need to start thinking even further ahead.
Up and Over The Hill
Most people hit their peak earnings during their 40s. Now, don’t get caught up in thinking that means it is time to buy that dream home. Because what comes after a peak? That’s right, a downhill slide. If you’re presently struggling to live within your means, imagine how you’ll feel when you’re facing life without a steady paycheck.
What kind of costs can you expect at or after 40? It’s undeniable that health care costs will continue rising as you age because you will likely need more care. There are two sure fire ways to delay spending time in doctors’ offices and taking more medication – diet and exercise. Yes, we know these aren’t fun, but numerous studies have shown time and time again that taking care of yourself helps ward off conditions that come with aging.
Mid-life is also when many think about purchasing or upping life insurance for themselves or family members. This can be a matter of dollars each month and is definitely something to look into. None of us believe the unexpected will happen, but its best to be prepared, for your family’s sake, in case it does.
A Different Angle
If your retirement savings are minimal or non-existent, you need to strongly consider a lifestyle change. Many families are joining what’s being called the tiny house movement. Downsizing is key but moving into a 500 square foot home is not. It’s more about reducing unnecessary living costs, such as cable, leisure expenses and debt. While you’re decreasing across the board, you can more easily max out your retirement vehicles.
Up your retirement savings up as high as you can to make up for any lost wages later. Not sure how much you’ll need to retire? Use a retirement savings calculator that tailors suggested deposits to your age, income and even estimated inflation. For reference, you should be saving 12 to 15 percent of each paycheck in your 40s, at a minimum.
A Bite Out of the Sandwich
You may feel like your retirement savings should be put on the backburner when you’re faced with more immediate financial concerns at home. Many of today’s 40 year olds are in what’s considered the ‘sandwich generation’ meaning they’re in between caring for children and for their parents. While it can be daunting, the best approach to sensible retirement saving is a pragmatic one.
Hopefully, you or your spouse’s parents have put money aside for retirement. If they didn’t or lost funds due to an emergency, you will need to work together as a family to cut expenses and find ways to provide for their needs. Help get your parents’ paperwork in order and you’ll have a clear picture of what to expect.
Your kids will likely need help with expenses before, during and after college. The best way you can help them out? Teach them some self-sustaining habits, such as cooking, basic car maintence, simple sewing or even gardening. Remember, they can always get a loan for their education and you cannot do the same for retirement.
With all the choices you make and the busy activities of your 40s, use this momentum to move your retirement savings forward. Doing so makes the next 40 years something to look forward to, not fear.
For 50-year-olds, retirement is a looming prospect. Next week, we’ll talk about what can still be done to maximize savings and diversify portfolios. For more advice on navigating financials or saving for retirement, click here for friendly advice from the CommunityAmerica Credit Union Savin’ Mavens.