What is the best strategy to save for retirement when you are just starting to do so in your 40s?

Asked by Christina

4 Answers

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Answered by Paul Carag, Financial Adviser in Renton, WA
Hi Christina, if you are diligent, you'll be able to meet your retirement goals but I can share some examples with you first. You should definitely look at vehicles which offer guarantees so you don't have to make up losses associated with the stock market or bear the burden of time to make up those losses. Also, if you have goals on the income you want in retirement, using guaranteed products will show you exactly how to get there & when. Here are a couple of examples for you: There is cash-value life insurance that will do several things: 1) Allow you to store your cash in the safest place possible along with earning a guaranteed minimum interest crediting rate as well as dividends - all tax-free growth and access under current tax laws, 2) Allow you to access those funds as you need whenever you want in order to take care of emergencies, invest in other opportunities, such as Real Estate, pay off debt to save on interest, etc. all at any time and well before 59 1/2, and 3) Give you permanent death protection for your family. The options you have with this tool are too numerous to name here. Another option is to put funds into an annuity - again, you get guarantees on interest rates as well as access to lifetime income that is guaranteed. There are other options as well but the foundation of these vehicles will allow you to do other things with that money without worrying about losing your precious capital and time to make up the loss. Let me know if I can help you in more detail. | 09.13.15 @ 00:19
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:23
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Answered by Christina
Thank you Paul.I definitely need to explore these options further. I very much appreciate having a place to start. | 09.14.15 @ 13:07
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:23
Answered by Paul Carag, Financial Adviser in Renton, WA
Christina, any time you want to explore your options in detail using your particular information, feel free to message me and we can talk personally. | 09.14.15 @ 15:41
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:23
To "start" saving for retirement at 40, you're playing catch-up, but the good news is that you still have time to develop a plan and execute it...the key word being "execute." It's going to take discipline on your part, and you'll have to learn to pay yourself first.

One of the first questions I'll ask is about your debt-load...how much debt are you carrying? Priority number one is paying off your highest-interest debt first, and subsequently paying off the rest of your debt in order of highest interest rates (that interest you pay will KILL your retirement).

Assuming no debt, if you don't already have a liquid emergency fund established, this should be priority number two (I like between 9 to 12 months' worth of living expenses). And it becomes much easier to get to the 9-12 months' worth mark once you roll the dollars you had going toward debt into your emergency fund. For this money, I like money market accounts, as they pay you a slightly higher interest rate than a typical savings account.

Once your debt is paid off and you have an emergency fund established, only then should you start to invest for retirement. Take the money you had going toward debt and toward building your emergency fund and put it to work for you. Assuming at least 20 to 30 more years of work, you have plenty of time to accumulate a nice retirement WITHOUT exposing your money to risk. In your 40's, like Paul stated, you cannot afford to lose money in the market, especially when there are safe-money strategies that will allow for a reasonable rate of return, typically 4% to 8%, with ZERO risk of losing principal. If you haven;t read Patrick Kelly's book "The Retirement Miracle" I suggest you do, and incorporate that as one of your strategies.

I love the Roth IRA, but depending on how much you make (unless you're a Federal Employee), the maximum contribution allowed is rather limiting. I also love the idea of establishing a home-based business, not only for the tax savings, but also to establish a SEP if the company you work for doesn't offer a retirement plan. But if you can learn to live below your means and adjust your budget to do so, saving 15% to 20% of your annual salary will allow you to catch up rather quickly. If you can do more, than do more.

I'd be happy to answer any questions you might have throughout the process...just reach out.

Mike Zaino
www.TZGFinancial.com | 04.02.16 @ 16:15
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$commenter.renderDisplayableName() — {comment} | 12.11.16 @ 00:23
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