Dear Carrie: I am 39 years old and have saved no money. How can I retire at 65? -- A Reader
Dear Reader: You have a challenge ahead of you, no doubt about it. And according to a new survey on retirement by the Employee Benefit Research Institute, so do a lot of other folks: More than 25 percent of respondents said they have less than $1,000 saved. Those numbers are certainly concerning. But on the positive side, your question means you're ready to take action -- and that's what you need to do, starting right now.
To retire at any age, you have to save, save, save. Starting from scratch at 39, you should ideally save 20 percent to 25 percent of your yearly salary. Chances are you can't just sock this much away all at once, so you need to break things down into a strategy that maximizes your ability to save. Then you have to commit to actually following it. Here are some ideas:
GET A HANDLE ON YOUR SPENDING
If you don't know what you're spending, you can't save effectively. Try this to get a clearer picture:
-- Track your spending for 30 days.
-- Divide your expenses into two categories, nondiscretionary (the must-haves) and discretionary (the extras). Put savings at the top of your nondiscretionary expense list.
-- Compare your projected expenses to your actual cash outlay. If you spend less than projected in one area, put that extra money toward your savings.
If you need to cut back in order to save, focus on the extras such as dining out or entertainment. Even small changes in your spending and saving habits can make a big difference. Think about it. Spend just $2 a day less on lunches or coffee, and you could save over $700 a year.
PUT MONEY IN A 401(k) or IRA
You say you haven't saved anything. Does this mean your employer doesn't offer a 401(k) or that you just haven't contributed to it? If you can take advantage of an employer-sponsored retirement plan like a 401(k), don't waste another minute. Contribute as much as you can -- at least up to any company match. This is one of the best automatic ways to save. And because your contribution is pre-tax, it won't even affect your take-home pay that much.
If a 401(k)-type plan isn't an option, open an IRA (or a Roth IRA if you're within the income limits). Currently, you can contribute a maximum of $5,000 a year. That's only about $13.70 a day. Can you carve this much out of your daily budget by, for instance, bringing your lunch to work or taking public transportation?
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