Retirement planning in 40s: Here’s how to save for old age even if you start late

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Aditi Kaul, a 44-year-old chartered accountant, has no retirement savings. In her 20s and 30s, she focused on building her career and business, leaving little for retirement. A divorce and financial setbacks further complicated her finances when she became an independent, single mom. After paying off her major debts, she has been saving for her daughter. While her practice is stable, she is unsure whether it’s too late to start saving for retirement and questions the merit of doing so now.

Aditi Kaul must understand that it’s never too late to start planning for retirement. She should begin by assessing her current living expenses and calculating the amount that she will need after retirement. This will give her a clear goal value. As a single parent, it’s crucial for her to prioritise retirement savings over other financial goals, including her daughter’s education fund.

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The next step for Kaul is to implement her savings plan. As she is well-settled in her career, she has the opportunity to rapidly build her retirement savings. To make up for the lost time, she needs to adopt an aggressive approach, setting aside as much as possible from her monthly earnings.

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This may involve cutting back on non-essential expenses to free up funds for saving. Fortunately, she has no outstanding liabilities. She should aim to increase her savings incrementally each year and consider making ‘catch-up contributions’ by allocating annual bonuses or any unexpected cash inflows.

Regardless of her age, Kaul must not let a late start discourage her from initiating the saving process. Starting at 44 means that she will need to be more passionate and determined than someone who began earlier. To make her retirement plan work, she must save aggressively reduce the unnecessary expenses and debt, and maximise her earnings.Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

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