As you enter your 40s, you may experience some big milestones and lifestyle changes—especially if you have kids heading to college. Achieving financial stability for yourself and your family during these times is what you've worked for.
8 Financial To-Dos in your 40s
At this point, you've hopefully paid off your credit card debt and student loans. With some of that money freed up, it's time to keep a close eye on your retirement funds. If you can, bump up your savings while continuing to pay down your mortgage if you have one. See the checklist below for your age group's top financial priorities.
1. Enlist the help of a financial advisor.
At any point in your life, finances can feel overwhelming, even intimidating, but working with an experienced professional can help guide you. If you haven’t met with a financial advisor by the time you reach 40, now is the time. A financial advisor can help you realistically assess the health of your finances and create an action plan for how to best move forward based on your current responsibilities and long-term goals.
2. Draw up or revisit a will and/or a trust.
A will can ensure that your assets are appropriately distributed based on your wishes. Whether you’re donating all of your money to a charity or if you’re married with children, you’ll earn peace of mind that your wishes will be filled and loved ones will be well cared for. Beyond drafting your will, consider whether your situation merits a trust.
3. Take advantage of retirement catch-up rules.
Funnel some of the money you're saving by being debt-free toward your retirement savings. If you can, maximize your 401(k) or IRAcontributions. If you’re not able to invest as much as you’d like during your 40s, you can save even more each year once you turn 50 thanks to higher maximums designed to help people catch up on their retirement savings goals.
4. Invest wisely.
If you're able to use extra income to invest in stocks, take a look at your savings goals and their related timelines. These years are a prime time to grow your money, allowing for higher risk in your late 40s especially. Just make sure that you begin to reassess and deescalate your risk levels as you move closer to certain milestones.
5. Recheck your emergency fund.
Consider whether you should add extra padding. If your regular expenses have gone up, then so should your emergency savings.
6. Enjoy life but avoid lifestyle creep.
You may have more money at this point but keep your eye on the prize. For instance, don't compromise your long-term financial priorities by continually upgrading your home and car. After you've met your money goals each month, consider what you can stash away for a fun purchase—something you can mindfully splurge on, like a one-time experience or vacation rather than expensive ongoing spending habits.
7. Consider long-term care and long-term disability insurance.
At this point you don't want to derail your finances. So, be prepared. Learn how much long-term care can cost and consider how that would impact your financial plan. If insurance is the best way to cover any potential needs, then look into options provided by your employer—many companies offer supplemental plans as part of their benefits packages—or shop as an individual. Plus, enrolling now could save you money down the road. It might feel a little early for this step, but typically, the younger you are when you enroll, the lower your premium will be.
8. Check in with your parents.
Could they use your help now or in the future? Talk with them to make sure that their needs are met; they may need help managing finances, covering costs, or navigating health changes. The conversations may be challenging but preparing now will make it easier on both you and them whenever you do need to step into a caregiver role.
Once again, as you move closer to retirement, consider working with a financial advisor. Ask for their professional guidance to help you plan and reevaluate your priorities as you near each milestone. Your 40s are primetime to envision and plan for your future.
FAQs
8 Financial To-Dos in your 40s
- Enlist the help of a financial advisor. ...
- Draw up or revisit a will and/or a trust. ...
- Take advantage of retirement catch-up rules. ...
- Invest wisely. ...
- Recheck your emergency fund. ...
- Enjoy life but avoid lifestyle creep. ...
- Consider long-term care and long-term disability insurance.
Let's explore how to build wealth in your 40s and create financial empowerment.
- Meet with a Financial Planner. ...
- Start Saving for Retirement. ...
- Get the Match. ...
- Consider Investing in Equities. ...
- Consider an Emergency Fund. ...
- Consider Life Insurance. ...
- Create a Budget or Spending Plan. ...
- Remember…
As you reach your 40s and 50s, saving for retirement will become one of your most important goals. As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary.
Where to invest in your 40s? ›
Consider opening an individual retirement account (IRA) or a health savings account (HSA). Both can provide an added boost to the quality of your life in retirement — with added tax advantages, too. Don't skip retirement savings to pay for college. This could be a costly mistake.
How do I build my life in my 40s? ›
Things To Consider As You're Reinventing Yourself At 40
- Forgive And Forget To Move Forward Without Baggage. ...
- Write Down Your Thoughts As They Come. ...
- Give Yourself A Mini “Improvement” List. ...
- Set Goals But Don't Obsess. ...
- Focus On Your Physical Wellbeing. ...
- Give Yourself Permission To Take A Break. ...
- Learn The Power Of No.
Rowe Price addressed retirement adequacy in a 2024 study that suggested a typical person should have 2.5 times to 4 times their salary saved by age 45. The assumptions used in this analysis were typical of conventional financial planning benchmarks, including: Retiring at age 65.
How rich should I be at 40? ›
By age 40, your savings goals should be somewhere in the neighborhood of three times that amount. According to 2023 data from the U.S. Bureau of Labor Statistics, the average annual income hovers around $62,000. This means retirement savings goals for 40-somethings should tip the scales at around $200,000.
How much money do most 40 year olds have saved? ›
The above chart shows that U.S. residents 35 and under have an average of $49,130 in retirement savings; those 35 to 44 have an average $141,520; those 45 to 54 have an average $254,720 $313,220; those 55 to 64 have an average $537,560; those 65 to 74 have an average $609,230; and those 75 or older have an average ...
Is 45 too late to save for retirement? ›
The good news is many people have much more time than they think. Even starting at age 45 means you can have more than 20 years to save, and you can still benefit from the compounding effects of investing in tax-sheltered retirement vehicles.
Can I retire at 45 with $1 million dollars? ›
For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years.
The average net worth of someone younger than 35 years old is $183,500, as of 2022. From there, average net worth steadily rises within each age bracket. Between 35 to 44, the average net worth is $549,600, while between 45 and 54, that number increases to $975,800.
What should my 401k be at 40? ›
Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40.
How can I catch up financially in my 40s? ›
Here are nine common steps to take at 40:
- Assess current financial dituation: ...
- Define retirement goals: ...
- Understand retirement savings vehicles: ...
- Create a savings strategy: ...
- Investment planning: ...
- Take advantage of employer benefits: ...
- Consider additional savings vehicles: ...
- Stay informed and seek professional advice:
You're never too old to fund a Roth IRA. The earlier you start a Roth IRA, the longer you have to save and take advantage of compound interest. Even when you're close to retirement or already in retirement, opening this special retirement savings vehicle can still make sense under some circ*mstances.
How to be financially free by 40? ›
To reach your financial goals by 40, you need to save enough money to sustain any financial emergencies or unforeseen expenses. You should also save for other goals like buying a home or car, investing and ultimately, retirement. For each of your savings goals, you should have a separate account.
How much money should a 40 year old have? ›
Generally speaking, most financial professionals will tell you that by age 40 you should have at least three times your annual salary saved. Keep in mind that for married couples you should have three times your combined household income.
How to become financially free by 40? ›
Answer: Becoming financially independent by 40 requires disciplined saving, investing, and pre-defined financial planning. You can start by setting clear financial goals and creating a detailed plan to achieve them.
Is 40 too late to start saving? ›
Key Takeaways
It's never too late to start saving money for your retirement. 401(k)s and traditional individual retirement accounts (IRAs) are among the most popular choices. Roth IRAs, tax-advantaged products, and real estate can be other good retirement investment options.
What age do people peak financially? ›
According to the U.S. Bureau of Labor Statistics, the median income of American workers is highest between the ages of 45 and 54. These peak earning years are a critical time to take control of your finances and hone your money management strategies.
