Many Americans reach middle age without ever having begun serious retirement planning, and it’s more common than people think. For those in unpredictable work situations, like freelance or gig-economy jobs, the path to saving can seem impossible. However, even starting late doesn’t mean retirement is out of reach. Here’s how to approach it, according to a certified financial planner.
The Reality for Many Workers
The situation is simple: most Americans are not prepared to retire. Millions of people, particularly those in creative fields or irregular employment, have never had access to employer-sponsored plans like 401(k)s. They lack the education and tools necessary to manage money effectively, and often live paycheck to paycheck. For many, the idea of retirement feels distant or even unrealistic.
This isn’t a failure of personal discipline, but a systemic issue. The gig economy and unstable work conditions make long-term financial planning difficult. Without a safety net of employer benefits or consistent income, saving becomes a luxury.
First Steps: A CFP’s Guidance
Financial planner Andrew Latham suggests the following steps for someone starting late, even if they’re already 40:
- Don’t Panic: The first step is simply to acknowledge the situation without self-blame. Many people reach this point through no fault of their own.
- Take Stock: Get a clear picture of your finances. List assets (savings, investments), debts (student loans, credit cards), and monthly income.
- Emergency Fund First: Allocate a portion of your savings to cover 3-6 months of expenses. This provides a financial cushion for emergencies. If you already have enough saved for this purpose, great — move on to the next step.
- Open an IRA: Since employer plans aren’t available, open an Individual Retirement Account (IRA) or a Roth IRA and contribute whatever you can afford. Even small amounts ($50-100/month) matter over time.
- Debt Reduction: Prioritize high-interest debt like credit cards, as they effectively carry a guaranteed 20% “return” if paid off. For student loans, explore refinancing or accelerated payments if possible.
The Long View: Consistency is Key
The most important thing is building the habit of saving, even if it’s modest at first. Compounding over time will make a difference. Starting in your 40s doesn’t mean you’re too late. Many people build comfortable retirements by starting later in life.
The key is consistency, smart decision-making, and momentum. It’s not about perfection, but about making incremental progress with the money you have.
