"Save early and save often" is one of the few pieces of financial advice almost everyone agrees on. There are huge benefits to starting early. But if you've missed that chance to start saving in your 20s or early 30s, all hope is not lost.
Get Rich Slowly explains how to get back on track if you're 40 or older and just now starting to save:
The good news is there are ways to get on track. The bad news is that none of them are ideal or even easy. You, therefore, have to decide which one (or more) of the following impositions of imperfection you will pursue for your best shot at recovery:
- Invest three times more than someone who started 10 years earlier
- Accept a higher level of risk
- Get more involved in your investing activities
To make up for the lost time without taking on more risky investments, you'll have to invest much more than someone younger. See how much you should have saved, by age, in your retirement account.
If you're willing to take on more risk, you can invest in more aggressive investments. Yes, this is risky and there's no assurance that it will pay off, but as Get Rich Slowly points out, the question isn't whether or not to risk with your savings but how much to risk. You could take on a little more risk in exchange for the probability of higher returns.
The third strategy is to get into more active investments, such as rental property. It's a second job, but "in 20 years, you can turn this investment into a self-perpetuating income stream with a built-in hedge against inflation.
None of these choices are pleasant, but at least there's hope — if you start saving now.
Starting to save for retirement at 40 [Get Rich Slowly]