Follow and listen to our podcast

StashLearn
Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Life

Over 40? Here’s How to Start Planning For Retirement

November 09, 2018

3 min read

Age may be just a number. But so is the balance of your retirement account—and that’s a number that can really count as you head into the home stretch of your career.

If you’re 25 and thinking about retirement, then you’re ahead of the curve. If you’re 30, you’re still in the game, but probably aware that you need to start thinking about your post-career life.

But what if you’re 40 or older? If you’ve never given any serious thought to retirement planning, or it’s just dawning on you that you should’ve been stashing money away for the past decade or two, you might feel a twinge of panic.

While you shouldn’t panic, you’re natural fight-or-flight instinct could be steering you in the right direction. It’s time to take action.

Retirement planning at 40: Take stock of your situation

Your first move should be to examine your whole financial picture. That means taking a hard look at what you’re earning, and what you’re spending money on. And then building a budget with one goal in mind: maximize your retirement savings.

If you’re over 40, you may need to contend with some variables that younger people do not, such as kids, mortgages, and car payments. But on a positive note, you’re at an age where you’re at or near your maximum lifetime earning potential—so, hopefully, your paychecks are bigger than they were in your twenties or thirties.

Data source: Payscale via CNBC, 2017

Open up a retirement account

Your budget tells you how much you can save for retirement. The next step should be to start stashing those savings away in a retirement account.

First, though, build an emergency, or rainy day fund, if you don’t have one. This fund should comprise between three or six months’ worth of expenses, and be easily accessible (kept in a savings account, for example). Once you have an emergency fund as a financial buffer, you can take aim at your retirement goals.

The two main types of accounts are 401(k)s and Individual Retirement Accounts, or IRAs.

Read more: The differences between an IRA and a 401(k)

A 401(k) is usually provided through an employer and can have an employer-match benefit, whereas anyone can open an IRA at a bank or other financial institution. If you’re under 50, you can contribute up to $18,500 pre-taxed income into a 401(k) before penalties apply, and once you hit 50, up to $24,500.

For IRAs, the contribution limit is $5,500 (and $6,500 after 50). You can have both accounts at the same time, too, and it may be beneficial to open a Roth IRA or 401(k), which can offer more advantages, depending on your situation.

One key here is to figure out how much you can contribute to these accounts on an annual basis, and to get as close as you can to the contribution limit as possible.

Your retirement checklist

Get Stash Retire

If you’re in your 40s, it’s not too late start planning for your retirement.

With Stash Retire, you can start planning your retirement right now. With as little as $5, you can create a balanced portfolio with a traditional IRA or Roth IRA.

Make your future money

Learn more about Stash Retire

Start now

By Sam Becker
Sam Becker is Stash's financial writer.

Next for you
Introduction to Retirement

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
love and money politics money lessons Retirement budgeting
Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.