In the world of personal finance, retirement is like Kim Kardashian’s butt, it’s the biggest thing out there.

That’s why I devote so much of my efforts to the topic. The other reason is because more than 40 percent of baby boomers are at risk of not being able to pay for basic expenses in retirement like housing and health care expenditures according to Employee Benefit Research Institute. Ouch.

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Conventional wisdom tells you to contribute ten to twenty percent of your income to retirement accounts starting when you get your first job.

If you are over 40 and don’t have a significant amount of money in a retirement account, then  isn’t going to work for you. You need to consider saving and spending alternatives.

The reason you want to consider alternatives to the traditional approach to saving for retirement is because conventional wisdom relies on time. Conventional retirement planning requires you to have decades upon decades to reach your financial goals. The problem with conventional wisdom is that late savers don’t have enough time to save and grow their assets in order to reach their retirement financial goals.

That’s why people over the age of 40 need to use alternative methods of saving and investing in order to have enough money to live off of in retirement.

First off late savers need to max out their retirement accounts every year up until the year they retire. The maximum contribution for people with 401(k)’s is $16,500 a year plus your employer match. Once you reach age 50 Uncle Sam allows you to play catch-up a bit by allowing late savers to contribute an additional $5,500 (for an annual total of $22,000 plus employer match).

The maximum contribution for those with an IRA is $5,000 a year. Once a person reaches age 50 that amount increases to $6,000 a year.

Earlier in this post I said conventional wisdom says to save somewhere between ten to twenty percent of your income for retirement. If you are starting late or have less than $100,000 saved by age 55 you need to be saving money on the higher end of that scale. Aim to save AT LEAST twenty percent of your income if you think you might not reach your retirement goals. If that is more than the maximum amount you can contribute to your retirement accounts, put the rest in a taxable brokerage account.

In addition to maximizing your retirement accounts late savers need to change their investment mix. Conventional wisdom tells younger investors to start out with an investment portfolio consisting of mainly stocks and mutual funds. Then as you get older you should move more and more of your money into safer investments like bonds and treasuries. Unfortunately, late savers don’t have the benefit of time so they cannot be as conservatives as their similarly aged counterparts might be. I subscribe to the belief that a late saver’s investment portfolio should have a percentage of stock market exposure equal to about 120 minus your age. So if you are 55, then at least 65 percent of your portfolio should be in stocks.

Late savers also should plan to work as long as possible. Retirement at age 60 or 65 may not be possible. The longer you can delay living off your assets, the more time you’ll give your investment portfolio to grow and compound. The benefits of waiting till age 70 to retire can boost your monthly social security payouts by as much as 80 percent.

There are all kinds of rules of thumb about how much of your current income you’ll need to replace in retirement. Some experts say as low as 60 percent, while others claim you’ll need about 80 percent. Social security is designed to replace approximately 40 percent of one’s salary if they wait till full retirement age. Every dollar that comes from social security is one less dollar you otherwise have to provide for. This is only true for people who are in their 50’s already. Given the federal deficit and shrinking workforce, younger workers should worry that they won’t receive as much social security as promised, but hopefully older works shouldn’t be nicked too much over the next 25 years.

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Keeping Money in Your Pocket,

Nancy Patterson