No matter how hopeless you feel about building a retirement fund, there is still hope—as long as you take action now! Take a look at Jim and Betty, who are behind on retirement savings too. Learn how you can turn your retirement outlook around by following their example. Jim and Betty – Your Average Late Starter Jim and Betty are both 45 and have zero retirement savings. Together they make $63,000 a year and have $6,000 in debt and 10 years left on their mortgage. They also have two kids nearing college age.
Jim and Betty have a lot of challenges standing between them and a comfortable retirement. But all they need is a plan. Step 1: Rein in Spending There's no time to waste, so Jim and Betty should use $3,000 of their savings to knock out half of their debt. That will leave them with a $1,000 starter emergency fund. Then, by living on a budget and cutting back on their expenses, they can pay off their remaining debt in just three months.
Next, they need to pile up cash for a fully funded emergency fund of three to six months of expenses. If they remain gazelle intense, they'll be debt-free with money in the bank within 12 months. Step 2: Invest Wisely This is the foundation Jim and Betty need to begin investing 15% of their income for retirement. - Jim invests 6% in his 401(k) in order to receive his employer match.
- He also opens a Roth IRA so he can invest the entire 15% of his income.
- Betty doesn't have a 401(k), so she opens her own Roth IRA and invests 15% of her income.
Step 3: Put Off Retirement for Two Years and Get Intense Once the kids head to college, Jim and Betty will help pay toward the kids' education while continuing to invest 15% of their income toward retirement.
However, by the time they're 55, the mortgage is paid off and the kids are on their own. By funneling an extra $1,300 a month into their retirement accounts, they'll add between $250,000 and $300,000 to their balances through the growth of their increased contributions.
Jim and Betty should also consider working a couple years longer so they can save more and delay using their nest egg. The result: By the time they retire at age 67, they could have between $927,000 and $1.3 million! | 
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