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How late is too late to start saving for retirement?

This question is difficult because the answer depends on your income and assets, your goals for retirement, and many other factors. Ideally, you should begin saving for retirement in your 20s. More time to save enhances your chances of having the kind of retirement lifestyle you want.

If you're in your 40s or older and haven't saved much (or anything) yet, you may face a challenge in building the retirement fund you need. The shorter your time frame, the less room you have for error. But don't panic — it's never too late to start saving. You may still be able to secure a comfortable retirement for yourself, but you may have to make some tough choices to do so. Here are a few tips if you're getting a late start:

  • Save as much as possible: The more you save, the more you'll have when you retire. Try to maximize your contributions to IRAs, 401(k)s, and other tax-advantaged vehicles. Then supplement your retirement fund with mutual funds, savings accounts, and other investments.
  • Cut current expenses: Chances are, not all of your expenses are absolutely essential. If you can wipe out or trim certain expenses, such as expensive coffees and daily lunches out, you'll free up more money to invest for retirement.
  • Invest more aggressively, if you're comfortable doing so: This may help you build a retirement fund in a relatively shorter period time. Certain stocks and mutual funds may offer potential for your savings to grow more quickly. The tradeoff: These investments are subject to market risk that will expose you to greater volatility, including a possible loss of principal. Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which are contained in the prospectus available from the fund. Review the prospectus carefully, including the discussion of fund classes and fees and how they apply to you.1
  • Delay retirement: You may have no choice but to delay your retirement. This strategy will not only reduce the number of years without a paycheck, it will also buy you more time to potentially build a nest egg.
  • Rethink your retirement goals: Set more realistic goals for your retirement (no beach house on the Riviera, for example). That way, you won't need as much money to fund your retirement.

If you fear you're getting too late a start, or you're not sure where to start, consult a financial professional. He or she can help you map out a plan to bridge the gap between where you are now and where you need to be when you retire.

1Investments seeking to achieve higher rates of return also involve a higher degree of risk. There is no guarantee that any investment strategy will be successful.