Too Old to Save?

One of the worst things that could happen to you when you get older is that you can get too old to work without any savings. Without any savings to use, you are practically begging until you pass away. But now, you are in your 40s and you still have nothing. You have been constantly planning to save but no real action has happened. Now that you are a little bit older, you might think that it is too late.

But it is never too late to save. There are ways of accelerating your savings to ensure that you have something to spend when you have reached the retirement age.

The Ballpark Figure

Before you start saving, create a rough estimate on how much you would need when you retire. There are calculators you can use online to determine how much you would need once you stop working. You do not need to have a specific figure as it would take time and looked really hard to achieve. Give yourself a ballpark figure on how much you would need. Remember to give an estimate on what you need and not on what you can do. If you think of the reality, it is a little bit too late so be idealistic and aim for something that would like to have.

The Calculator

Now that you have written down your estimate, it is time to calculate how to reach that amount fast. Frankly, the calculator is a little bit depressing because it will require you to cut your budget to as much as 50% if you want to catch up on your savings.

But that should not be the case. Only aim for half of ballpark figure you are aiming for. We will explain the other sources of savings later. This time, half of the savings you are aiming for should come from your personal savings. This calculator will give you an idea on how much you would save from your pay checks.

There are online calculators who do this but they typically run this way:

50% of Ballpark Retirement Savings / Number of Years Left before Retirement / 12 Months.

The result will give you the required monthly savings. This should be implemented as soon as possible if you want to have a higher chance of achieving the amount that you want. Remember that every month you miss; you are slashing a significant amount of future savings. The money that you deposit will earn interest that by the time you retire; you will significantly increase your savings because of interest. If you miss out one payment, you will reduce the total savings including the interest.

Other Sources

Now that you have calculated how much you would save every month, it is time to increase the source of additional savings. Here are additional ideas that would increase your savings by the time you retire:

401(k) or 403(b) – These are voluntary retirement plans offered by your employer. Do not fail to grab the opportunity if your employers offer this type of benefit. Since you are near your retirement age, be sure pay the maximum amount that you would save. It is estimated that every 65 cents you deposit will be a dollar when you cash them in. That is already a great deal especially when your employer pays 50% of your contribution.

Roth IRA – Named after Senator William Roth, this type of contribution will give you additional funds when you retire without tax cuts. It is like contributing to the IRA but with expected return. The money given to Roth is invested and may be withdrawn anytime which could be done at the age of retirement. This could be combined with 401(k) which means additional source of funds upon retirement.