If you have no savings at 40, you can’t afford to waste time. The sooner you start saving for retirement, the better your chances of enjoying yourself when you get there.
The good news is that at 40, you still have more than 25 years to build up your pension fund. That is plenty of time to benefit from the compounding returns you can generate by investing in top FTSE 100 shares.
You can still get rich and possibly even retire early. That is a much more attractive option than working until your 70s.
No savings at 40 isn’t the end of the world
If you haven’t seriously started saving for the future, your attitude has to change. You might actually enjoy investing, once you get started. If starting from scratch, every year counts, so you need to take action today.
This means you should not wait until current stock market volatility recedes. In fact, you can turn it to your advantage.
Now is a great time to buy cheap FTSE 100 shares. The market is still down by a quarter due to coronavirus. In 25 or 30 years, today’s problems will seem like a blip. Yet the shares you buy today will still be generating income and growth for years into the future.
Having no savings at 40 is something you need to put right now. Say you start investing £500 a month at age 40. By age 66, you will have £440,903, assuming average growth of 7% a year. This is the long-term total return on the FTSE 100, with dividends reinvested for growth.
If you delay for another two years, and do not start investing £500 a month until age 42, you will have dramatically less. Your money will have grown to £373,494 by age 66, assuming the same 7% growth. That is £67,409 less.
Your early contributions are the most valuable, as they have longer to compound and grow. And of course if you keep putting off investing, you will never generate a decent nest egg.
No savings at 40 does not have to be the end of the world. However, if you keep delaying, it might as well be. If have no savings at 45, or 50, your task gets that much harder.
I’d buy cheap FTSE 100 shares today
You won’t generate 7% a year by leaving your money in a Cash ISA. A balanced portfolio of FTSE 100 shares could get you there though. Stock markets can be bumpy, as we have seen in recent months, but over the longer run, they are still the best way to build your long-term wealth.
This is a good opportunity to buy a spread of bargain shares, when prices are depressed by the economic uncertainty. If you wait until the market recovers, you will have lost valuable time, and share prices may be higher too.
It may seem daunting at first, but you will find plenty of advice on the Motley Fool website, and some top share tips too. You can still retire rich, if you act now.