4 signs you won't be ready for retirement that are obvious by age 40

  • Retirement planning is a process that takes years, but the signs that you're not going in the right direction are apparent even when you're young.
  • If you haven't saved at least three times your income by age 40, you may not be on track for retirement. 
  • And, if you've borrowed money from retirement accounts without replacing it or still have yet to reach saving 15% of your income, you may need to do some extra work to catch up.
  • Anyone who hasn't touched their portfolio in years or checked to see if their investments are properly balanced recently should consider doing so to get back on track for retirement.
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For anyone who has had a few years to save for retirement but is still decades from leaving work, you're probably starting to ask yourself some questions about how you're saving and if you're doing it right. 

Saving for retirement is essential — after all, you'll depend on that money to live on someday. But, retirement planning is also a long-term process that unfolds over a number of years. 

In a way, that's a good thing: The sooner you catch any potential problems, the sooner you can fix them. And luckily, the signs that something is off with your retirement planning will be pretty apparent when you check in on your savings. 

Here are four very apparent signs you'll notice if you're not on track for retirement, even in your younger years. 

1. You don't have at least three times your income saved by age 40

"The general rule of thumb is that you want to have an amount equal to your annual income saved for retirement by the time you're 30. You want to have two times [your income] by the time you're 35, and at age 40, you should have three times your annual salary saved," says Tara Fung, chief revenue officer at investing platform AltoIRA. 

In many cases, the math here is simple. "If you're making $100,000 a year, you should have $300,000 saved for retirement by the time you're 40," she says. If you're not quite there yet, it might be a sign that you're not on track. But, saving more to catch up in the coming years is a smart move. And the sooner you start, the easier saving will be. 

2. You've taken money from your retirement accounts and not replaced it

"In a lot of countries, they actually don't allow you to borrow money from your retirement account — the US is one of the few that does," says Fung. Besides the fact that your retirement funds are meant to be the cash you'll live on for decades, even simply borrowing money from your retirement accounts can impede the growth and compound interest that retirement accounts rely on. 

"If you're borrowing against retirement accounts now,  you're really putting yourself at a disadvantage to be able to be ready," Fung says. 

If you have taken money from a retirement account, have a plan to replace it if you haven't already.

3. You're still not saving at least 15% of your income for retirement

"You should be saving around 15% of your income to go towards retirement your entire working life," Fung says. She also suggests taking this amount directly out of your paycheck so you never miss it. 

Your office's 401(k) plan is the first place to start. "Set it up so that your money is going directly from your paycheck to your retirement account if you're lucky to have a retirement account accessible from your employer," she says. 

If you never see the 15%, it's far easier to save it. In a 401(k), not only will you be more inclined to save through the automatic savings, but you'll also have access to a match to double your savings up to a certain percentage of your contributions, if offered, and some tax benefits, too.

4. You haven't considered how your portfolio is invested

In retirement savings, having your portfolio invested appropriately is as important as saving itself. 

Former financial advisor and founder of Building Bread Kevin Matthews explains that having money saved for retirement and having that money invested properly are two different things. Not investing your retirement savings "is almost like putting food into the microwave, or putting food into the oven, and not actually turning it on," he previously told Business Insider. 

Fung says that it's not something that should be left alone forever, either. "Set it and forget it in terms of how much is coming out of your paycheck every month. But go back and check to make sure that it's the right mix [in your] portfolio on a quarterly basis," she says. "You want to do quarterly rebalancing, where you're going back and saying, 'Is this still diversified, or have the returns made is such that it's not the right mix anymore?'" 

If you haven't checked in on your retirement accounts in a while, it might be time to check and make sure you're invested appropriately.

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