When you reach your 40s, retirement’s no longer a vague concept… it’s a reality looming in your future, and one you’d better be investing for properly. Are you?
A good rule of thumb for a 40-something is to allocate about 10% of your after-tax income to your retirement. Pay special attention to contributions to your company’s 401K. Does your employer match funds? If so, you should certainly be contributing as much as possible… then check out other investments like IRAs.
But, don’t be too conservative, you should be investing in the stock market as well. How much? Well, simply take 100 minus your age, and put that percentage of your retirement funding into stocks. In other words, if you’re 45, you should have 55% of your long-term savings in the stock market.
What about your kid’s college? If you’re in your 40s with a “less than robust” retirement fund, but have also neglected to save for college, as a parent, the temptation is to take care your kids first. But, this is one time when (you’ll be glad to hear) your kids aren’t the priority. Financial advisors agree, saving for your retirement needs to be your focus. Put simply, no one awards scholarships for retiring.