It can be a bit of a shock to realize you have zero retirement savings the day after you celebrated your 40th birthday in style. If you go online or pick up a guide on saving for retirement, you will find experts recommending starting to save when you are in your 20s. While delaying planning for retirement is not ideal, there is no need to panic because you can still make amends. Some handy tips:

Save More Than One Million by the Age of 63

If you are 40 years old with nothing in retirement savings, you can contribute $20,500 yearly to a 401(k)-retirement plan. After you turn 50, you can save an additional $6,500 every year in catch-up contributions, according to the IRS. Assuming your savings can generate a 7% rate of return, the balance of your 401(k) account can grow to more than a million by the time you reach the age of 63.

Establish How Much Savings You Need

You may think you are not likely to need a million dollar after retiring. However, if you do the math, you will discover it may not suffice. Most financial planners recommend you withdraw no more than three to four percent of your savings every year after retirement. If you have a million-dollar corpus, you will need to manage with a $30,000-40,000 yearly budget. Of course, it does not consider other income in the form of pension, Social Security, or rent.

Open a Roth IRA 

You should open an IRA account to maximize your contribution after you have maxed out your 401(k). As a 40-year-old, you can add a lot of money to your retirement savings every year. The advantage of a Roth IRA is both the contribution and qualified withdrawals are tax-free, and you can also avoid capital gains tax. If you are self-employed, check the source for contribution limitations.

Don’t Assume More Risk

Many people try to make up for the lost time by making investments with a higher risk profile. If you make investments with an anticipated rate of return of 12% instead of 7%, you will achieve your investment goals faster but run an increased risk of loss of principal. If you had been in your 20s, the risk may have been acceptable, but when you have hit 40, you need to accept less risk in your portfolio. Consult a financial planner to arrive at a suitable investment strategy.

Buy Adequate Insurance

To reduce the risk of unexpected expenses due to calamities, you should buy adequate insurance coverage, like health insurance, car, home insurance, disability insurance, etc. Life insurance is a must if you have dependents relying on your financially.


When you start planning for retirement at the age of 40, you need to take a conservative stance on debt. If you have already accumulated high-interest-rate credit card and personal loan debt, you should pay it off as quickly as possible because the interest rate is much more than what you will earn on your savings. If you don’t have much equity in your home, you can consider making extra payments on your mortgage.