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3 Things to Do if You're in Your 40s With No Retirement Savings

By Katie Brockman - Feb 12, 2020 at 6:04AM

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It is possible to build a healthy nest egg if you're off to a late start, but you'll need a strategy in place.

Preparing for retirement takes decades of hard work, but if you're behind on your savings you're not alone. In fact, a whopping 42% of workers don't even want to think about saving for the future until they get closer to retirement, according to a report from the Transamerica Center for Retirement Studies.

If you've reached your 40s and haven't begun preparing for retirement yet, now is the time to start. The longer you wait, the more difficult it becomes to catch up. So before you fall too far behind, take these three steps to get your savings back on track.

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1. Set a savings goal

It's tough to know whether you're on track or not if you don't have a goal to strive toward, so figuring out how much you should aim to save by retirement age should be your first step.

Before you can calculate your savings goal, you'll need a few pieces of information. First, you should think about what age you plan to retire at. Be honest with yourself here, and try to be as realistic as possible. If you're drastically behind on your savings, you may choose to work longer to make up for it. But if you're battling health issues or are miserable at your job, you may not be able to work as long as you expect. And if you're forced into an earlier-than-expected retirement, your savings may not be ready.

Second, consider how much you expect to spend each year in retirement. This number may be similar to what you're spending now, or it could be significantly higher or lower. Consider your everyday expenses like housing, food, and transportation, but don't forget about potentially big expenses like healthcare, taxes, and travel. Also, check your Social Security statements online to get an idea of how much help you'll get from your monthly checks. From there, you can figure out how much of your retirement income will need to come from your savings.

Finally, try to estimate how long you'll live in retirement. This can be a tough figure to estimate, as nobody can predict their life expectancy with 100% accuracy. But if you underestimate your lifespan and end up spending a lot more time in retirement than you'd planned, you risk running out of money far too soon. So the more thought you put into this factor, the better prepared you'll be.

Once you have all these numbers, plug your information into a retirement calculator to determine your savings goal.

2. Be prepared to make sacrifices in order to reach that goal

If you're in your 40s and don't have a penny saved for retirement, you'll likely need to save several hundred (or even a couple thousand) dollars per month to reach your goal. In that case, you may need to make some serious budget cuts.

If you don't do so already, start tracking your expenses to see just where all your cash is going every month. From there you can begin making cuts.

Start by eliminating any unnecessary costs, like subscription services you never use or pricey gym memberships. Next, try to cut back on the nice-to-have expenses, such as dining out or online shopping. Finally, see if there are ways you can lower your essential costs, like by sealing your windows and doors to save money on your energy bills.

Depending on just how much you have to save every month, you may need to make bigger budget cuts. For example, you might choose to downsize to a smaller home or move to a more affordable neighborhood to potentially save hundreds of dollars per month on housing. Or you may decide to pick up a side hustle and allocate all that extra income to your retirement fund. Budget cuts are never fun, but keep your end goal in sight -- the more sacrifices you make now, the more enjoyable retirement will be.

3. Consider tweaking your expected retirement lifestyle

If you've made all the budget cuts you can and it's still not enough to reach your monthly saving target, you may need to take a different approach and adjust your expected retirement lifestyle.

For example, you may tweak your retirement budget so you won't be spending as much every year. That in turn will mean you won't have to save as much now. Be careful not to trim your future budget too much, however, because you'll still need enough to cover basic living expenses. You likely won't be able to survive on Social Security benefits alone, so you'll still need a significant amount in savings to make ends meet.

You may also choose to take a non-traditional approach to retirement, which is becoming a more popular option among retirees. In fact, more than 60% of workers in their 40s say that instead of taking the traditional retirement route, they'd prefer an "unretirement" approach, according to a survey from TD Ameritrade. In other words, they would rather work longer in their lifetime, but take several mini-retirement breaks every few years instead of stopping work completely at a certain age. This type of retirement approach can help you stretch your savings further while still enjoying long leisure periods.

Saving for retirement isn't easy, but it's even more challenging if you're off to a late start. That said, it's not impossible to reach your savings goals even if you don't start saving until your 40s. Although you'll need to make some sacrifices, saving as much as you can is far better than doing nothing.

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