NEW YORK (CNN/Money) -
My husband, a painting contractor, and I are 40 years old. Is it too late to start a retirement plan?
-- Jean Dolan, Mission Viejo, Calif.
Too late at 40? Are you kidding?
As I point out in my new book, "We're Not In Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World", the earlier you start saving and planning for retirement, the better off you are.
But we all know that the business of life often sidetracks us from focusing on long-term goals like retirement. So we don't always get as early a start as we'd like.
But compared with lots of other Americans, 40 really isn't that late to begin some serious retirement planning. And, in truth, if you start now, you've still got a good 20 to 30 years ahead of you during which you can save and invest your way to what can still be a comfortable retirement.
The get-going plan
The important thing, though, is that you actually get started now. Here's my "Three-step Instant Retirement Plan" to get you going.
1. Create a roadmap: You wouldn't begin a cross-country trip in your car without planning out a route to your destination, would you? Of course not.
Well, the same applies for planning your retirement. You've got to have a destination, in this case a financial goal. While most people think of that goal as a pot of money -- the "I'd like to retire with a million bucks" sort of thing -- the better way to think is in terms of how much inflation-adjusted annual income you will need to live on after you call it a career. You can't ascertain that figure with pinpoint accuracy, of course. But it's important that you have a reasonable basis for planning, and you can fine tune your income target as you go along.
Once you've got an income target, you can tote up whatever assets, if any, you've already set aside for retirement and then figure out on the basis of some reasonable return assumptions, how much you will need to augment those assets with additional savings between now and the time you retire.
You can do all this with a pencil and paper, but you'll get a much more accurate picture and have more flexibility for making changes if you use one of the many web-based tools or services designed to handle this sort of thing. You can certainly begin with our very own Retirement Planner.
2. Save, save, save: No amount of planning you do, however, is going to amount to "a hill of beans," to borrow Bogey's words from "Casablanca," if you don't start doing some diligent saving.
Most people think investing is the key to successful retirement planning. But while investing is certainly important, you've got to have some money to invest. And that's where saving comes in.
You'll get a good sense of just how much you ought to save if go through the process I outlined in Step 1. As for getting the biggest bang for your savings buck, you certainly want to take full advantage of any tax-advantaged retirement savings plans, such as 401(k)s, IRAs and the like.
If your husband is an independent contractor, he may also be able to take advantage of tax-advantaged savings plans such as Keoghs and SEP-IRAs, which are designed for the self-employed. I describe such plans in detail in my book, but you can also get information about them by clicking here.
And now we come back to investing -- that is, once you've saved some money, you want to be sure you're investing it wisely so it will grow into a nice tidy nest egg.
Basically, you want to create a retirement portfolio that takes prudent risks, which is to say, invests in stocks or stock mutual funds for long-term growth, but also contains bonds or bond funds so your portfolio isn't decimated every time the stock market heads south. For advice on how to steer such an investing course, I recommend you check out our Money 101 lessons on investing and on retirement planning.
3. Stay the course: After you've created a plan and are saving diligently and investing wisely, you want to do some periodic monitoring to make sure you're not slipping behind or veering wildly off course -- and to factor any significant changes into your strategy. (You know, how to invest the million bucks one of your rich relatives will undoubtedly leave you.)
I stress here that I'm talking about periodic monitoring. You don't want to be one of these people who's buying and selling investments in his retirement portfolio every time he sees some pundit talk about a stock or mutual fund on CNBC. You want to stick to your plan, but you also want to allow for occasional fine tuning in response to changing conditions.
One of the nice things about creating your plan in electronic form is that it's much easier to revise than if you work everything out with paper, pencil and a calculator.
So there you are. I've given you all you need to get started. The only thing you've got to provide is the time, the effort -- and the money.
Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Mondays.