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Retirement Planning in your 40s

Retirement Planning in your 40s

March 27, 2018
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Planning and saving for retirement is important at any age. However, your 40s bring about new challenges that can derail your plans. At this point in your life, you are probably married with some kids. Those kids are probably getting close to or are already in college.

Similar to the last two posts, this one will cover ways to improve your retirement planning along with ways to stay consistent regarding your additional obligations that this decade brings.

Increase your savings

You've been working for about two decades, and hopefully, your earnings have increased during that time. Now, I know your 40s bring new expenses like kids, a house, and other things you've acquired over the years, but hopefully, you've budgeted correctly and now have extra money every month.

Time to put that extra money to work. The first thing you should do is ramp up your emergency fund if it needs it. You have newer and increased expenses, which translates to more set aside to cover those expenses in case of an emergency.

Next, you need to increase your retirement savings. Increase your contributions to your employer-sponsored retirement plan, and increase the amount you contribute to your Roth IRA. A percentage point increase is a good place to get started. Every little bit helps, but try to contribute as much as possible.

Open a Roth

I've mentioned this in the last two posts about your 20s and 30s, so if you haven't done it at this point, shame! Just kidding. I know sometimes life gets in the way and prevents us from doing what we need to. You should open a Roth IRA if you don't have one.

Contribute as much as you can. The current maximum annual contribution is $5,500 for an IRA, but hold on, because next decade you get a bump up. This is called a catch-up contribution and increases the max to $6,500. Do what you can to max this out and carry that over to your 50s.

Pay down debt

Also mentioned in the last two decades, please pay down your debt. You probably have a mortgage at this point, so yes, pay that down in an efficient manner, but your mortgage is kind-of excluded here.

I am referring to student loans and credit card debt. You've had two decades to pay down student loans, so increase your monthly payments and get rid of it! There's also an article I wrote about student loan refinancing if you need some help.

Regarding your credit card debt, why do you still have it?! You should have nipped that in the bud in your 30s. You don't have time for credit card debt anymore! Refer to my post about the 20s for credit card pay off methods.

Minimize fees

Again, I referenced this in the last two posts, but I will stress it once more. Do what you can to minimize fees.

It pays to have a financial advisor in your corner for help, but make sure you do your homework when selecting one. I mention this because this should be the only fee you should pay.

Minimize fees be selecting funds with low expense ratios. Make sure they are at least below 1%, ideally, they should be under .5%.

Prioritize your retirement

During this stage of life, you probably have kids that are getting close to college age, and I know, as parents, it's in our nature to do what's best for our children, but I need you to be selfish here.

Your kids can obtain funding for school with alternative methods like scholarships or student loans. There are no loans for funding your retirement, so cut down or cut out college savings and funnel it into your retirement. Your children will understand and you will be better off.

What will retirement look like?

Think about your retirement and what it looks like. After you've thought about it, talk to your spouse about what they think retirement will be like. What will you do to occupy your time? When will you retire? Where will you retire? Abroad? Another state? These questions need some answers. After you do that, you can efficiently and effectively plan for your retirement.


Planning and saving for retirement is always important. Your 40s bring new and exciting changes to your life. Some of these, however, can derail your retirement savings. Use some, or all, of these tips to improve your retirement savings during your 40s.