40 years old with no savings? Here's your path to $1 million in retirement with ASX shares

It's never too late to invest for your future.

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Key points

  • If you're 40 with no retirement savings, don't fret
  • Building a portfolio of ASX shares valued at more than $1 million is still entirely possible
  • Though, it probably won't be easy

As sad as it is, the average Australian doesn't have enough cash in their superannuation account to fund a comfortable retirement. That means many might need to rely on their savings or investments (like a portfolio of ASX shares) to afford their lifestyle through their golden years.

But what if you're approaching your last few decades in the workforce without either? If that's the case, it's likely you're not alone.

Plenty of Australians have faced tough financial times in their lives for any number of reasons.

Some might have struggled to realise an above-average wage, which can make saving difficult and consistently investing even harder.

Fortunately, if you're in your 40s, it isn't too late to kick-start your retirement fund. I'd personally turn to ASX shares to do so. Though, building a $1 million portfolio probably won't be easy.

Kick-starting a retirement fund at age 40

Building a $1 million portfolio of ASX shares from scratch in just a few decades will likely require consistency, resilience, and patience.

It might also demand you break a number of habits and form new ones. Particularly, if you're prone to spending large amounts on discretionary items.

The first step is to create a budget – and I think a good place to start is your current spending. By charting where your money is going now, you can begin adjusting your habits to keep more in your pocket.

The second step I would take is to build an emergency fund. That should be large enough to cover a few months of expenses if your income stream were to dry up suddenly.

Only then is it worthwhile to begin investing in ASX shares.

Building a $1m portfolio of ASX shares from scratch

According to Australian Bureau of Statistics (ABS) data, the median Australian worker puts in 38 hours each week and brings home $805.

Let's assume a few lifestyle changes might see a person set aside a third of that. That means they could have around $265 a week to invest in ASX shares.

That would see them sinking a total of $344,500 into the stock market over the coming 25 years – a far cry from our $1 million goal.

But what would happen if our figurative investor realised the same average return offered by the S&P/ASX 200 Index (ASX: XJO) over the previous 10 years ­– 8.12% per annum in total, according to S&P Dow Jones Indices data?

Well, that would see them amassing slightly more than $1 million in retirement savings by 2050, if they started today.

It's never too late

Hopefully, the above sums help to clear any anxiety felt by Aussies looking to retire in the coming decades.

Building a $1 million portfolio of ASX shares isn't an easy feat, but it's far from impossible.

And while it might be daunting to begin your stock market investing journey after your fortieth birthday, it's no excuse not to give it a go.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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