Workers 45 and Older Have 4 Valuable Pieces of Advice for Younger Employees

Retirement seems far away when you first enter the workforce, but by the time you're in your mid-40s, it can feel uncomfortably close. Some people don't even begin to save or plan for retirement until then, and that makes the task much more challenging.

It's often in looking back that they realize what they could've done differently when they were younger to set themselves up for success. A recent Nationwide survey polled workers 45 and older on best practices workers 35 and under should take to prepare for retirement, and they came up with the following four answers.

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1. Pay off debts

Paying off debts frees up more cash that you can put toward retirement, but all debts aren't the same. It makes sense to prioritize high-interest debt before retirement savings. Credit cards, for example, can have APRs in excess of 20%, and some payday loans can have interest rates of nearly 400%. These can cost you much more than you'll probably earn on investments in a year.

There are several ways to tackle these debts. Balance transfer cards give you a 0% introductory APR for a limited time. During this period, your balance won't accrue interest, which makes it easier to pay down credit card debt. However, there are one-time fees associated with balance transfers. You could also try a personal loan. Interest rates on these are still high compared to mortgages or auto loans, but you get a fixed monthly payment.

You can pay off debts with lower interest rates, like mortgages or auto loans, while you save for retirement. If you'd like, you could pay extra here and there to help pay these loans off early. But it usually doesn't make sense to put off retirement savings until you've paid off these debts.

2. Build up an emergency fund

Emergency funds may seem unrelated to retirement savings, but consider what happens if you experience an insurance claim or a large medical bill and you don't have emergency savings. You'd probably have to stop funding your other goals, like retirement, for a while to pay down the debt. You might also have to charge more to your credit card than you can pay back, which could trap you in a debt cycle for years.

An emergency fund containing at least three months of living expenses can help you avoid this issue. You're free to decide which expenses to include and which to leave out. But just remember, if you leave out discretionary purchases, like streaming services, and then you lose your job, you may have to cancel these services while you're living off your emergency fund.

Don't forget to replenish your emergency savings after every use and reevaluate your emergency fund needs at least annually, or whenever you experience a major life change. Your expenses can increase or decrease over time, affecting how much emergency savings you need.

3. Contribute to an employer-sponsored retirement account

It's tough for many young workers to allocate money for retirement when they're also saving up for more immediate goals, like a home down payment, a new car, a wedding, or a vacation. Many are also struggling with student debt and low salaries compared to their older counterparts.

Contributing to a 401(k)or other employer-sponsored retirement plan may not be easy under these circumstances, but it's definitely worth it if you have a few dollars to spare. Your early retirement contributions often wind up being your most valuable, because they have the longest time to grow before you need them.

4. Use a company match

If your 401(k) offers a company match, claiming this should be your top financial priority each year after paying your bills and building your emergency fund. A company match is essentially a bonus. But you only get it if you set aside money for retirement yourself.

Talk with your company's HR department if you're unsure how its matching formula works. Generally, your employer pays either $1 or $0.50 for every dollar you contribute, up to a certain percentage of your income. Once you know this, you can figure out how much you must save to earn the full match. Divide this by the number of pay periods in the year to determine the per-paycheck contribution you must make to claim the whole thing.

I understand that some people won't be able to accomplish these goals before age 35, even if they want to. In fact, many of those surveyed reported that they didn't do these things early in their careers either. It's OK. All you can do is your best. Just keep these goals at the forefront of your mind when you have cash to spare.

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