Dear Carrie,

I am 39 years old and have saved no money. How can I retire at 65?

—A Reader

Dear Reader,

You have a challenge ahead of you, no doubt about it. And according to a new survey on retirement by the Employee Benefit Research Institute, so do a lot of other folks: More than 25 percent of respondents said they have less than $1,000 saved. Those numbers are certainly concerning. But on the positive side, your question means you're ready to take action—and that's what you need to do, starting right now.

To retire at any age, you have to save, save, save. Starting from scratch at 39, you should ideally save 20-25 percent of your yearly salary. Chances are you can't just sock this much away all at once, so you need to break things down into a strategy that maximizes your ability to save. Then you have to commit to actually following it. Here are some ideas.

Get a handle on your spending
If you don't know what you’re spending, you can't save effectively. Try this to get a clearer picture:

• Track your spending for 30 days.
• Divide your expenses into two categories, nondiscretionary (the must haves) and discretionary (the extras). Put savings at the top of your nondiscretionary expense list.
• Compare your projected expenses to your actual cash outlay. If you spend less than projected in one area, put that extra money toward your savings.

If you need to cut back in order to save, focus on the extras such as dining out or entertainment. Even small changes in your spending and saving habits can make a big difference. Think about it. Spend just $2 a day less on lunches or coffee and you could save over $700 a year.

Put money in a 401(k) or IRA
You say you haven't saved anything. Does this mean your employer doesn't offer a 401(k) or that you just haven't contributed to it? If you can take advantage of an employer-sponsored retirement plan like a 401(k), don't waste another minute. Contribute as much as you can—at least up to any company match. This is one of the best, automatic ways to save. And because your contribution is pre-tax, it won't even affect your take-home pay that much.

If a 401(k)-type plan isn't an option, open an IRA (or a Roth IRA if you're within the income limits). Currently, you can contribute a maximum of $5,000 a year. That's only about $13.70 a day. Can you carve this much out of your daily budget by, for instance, bringing your lunch to work or taking public transportation?

Retirement accounts like these are effective because your earnings grow tax-deferred (tax-free in a Roth). This can make a significant difference in the potential for growth over time as your savings and earnings compound together. At your age, you still have time ahead of you. The sooner you get going the better.

Pay down your debt
It's hard to save if you're loaded down with debt. Make paying down any non-deductible consumer debt such as credit card balances a priority. If you have multiple credit cards, pay off the card with the highest interest first. Once you're no longer paying high interest rates, you can put that money into your savings.
 
Think differently
So often, as soon as we get some extra cash we think about how we want to spend it. Now's the time to change that thinking. Instead of spending:

• Try saving all or at least a portion of any annual salary increase.
• If you get an annual bonus, earmark part of it for retirement.
• Invest any tax refunds in your IRA.

By putting this extra money aside, you're not really depriving yourself. You're setting yourself up for something better in the future. It's all in the way you think about it.

Be realistic about retirement
You say you want to retire at 65, but people today are retiring later both for economic and personal reasons. Some postpone retirement to build up a bigger retirement nest egg. Others decide to keep working part time to supplement their savings and because it keeps them active and engaged.

There's no magic number or formula for a perfect retirement. There's only one common denominator—the need to save. So start now and stick with it. It won't necessarily be easy, but whatever amount you can save today will only ease the burden of having to save much more down the road. Ultimately, this will only help you at whatever age you choose to retire. Good luck!

Important Disclosures
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction and investment strategy for his or her own particular situation. Data contained here is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.