Your forties can feel like financial limbo: you’re too young for retirement, but it’s getting hard to ignore the prospect. Even if your finances look sorted on paper—great job, safe mortgage, stable family—thinking about retirement leaves you with unresolved questions:
- Are your earnings translating into real wealth?
- Are you making the most of your financial advantages?
- And most importantly, when will you be able to retire?
These questions can be scary to think about, but the simple fact that you are thinking about them means you’re ahead of the game. While most Americans won’t retire until their early-to-mid-sixties, planning for retirement in your forties can make things significantly easier.
Read on to learn:
- Why your forties are a great time to start retirement planning
- How to easily and quickly assess your current retirement prospects
- What you can do to start building a stronger retirement income immediately
Retirement Planning in Your 40s: Why You Should Prioritize Saving Early
Most financially literate people know that retirement savings are important. Polls find that Americans believe that the ideal age to start putting money away for retirement is 27, and younger generations are actually beginning to save earlier than their parents.
What does that mean in practice, though? While retirement might be a consideration for younger people, it is rarely a priority. Outside fringe movements like FIRE—where young people aim to retire before they turn forty—most people put relatively small sums into their retirement plan throughout their twenties and thirties.
These contributions are still important: they help you lay a foundation and benefit from compound interest. Plus limiting your contributions while you’re younger makes sense:
- Your income is likely to be lower, making each contribution a larger proportion of your total wages
- Saving involves reducing your disposable income and potentially missing out on opportunities
- Short-term financial goals like buying property, getting married, or saving enough to have children are likely to take priority over
But those arguments become less persuasive in your forties. Your income is likely to peak around forty-five; your obligations may have grown, but your ability to meet them has likely matched or exceeded that growth. And more importantly, your window for maximizing retirement savings is starting to close.
Saving for retirement more intentionally in your forties can help you:
- Gain More Control: Your retirement savings directly influence the kind of lifestyle you’re able to maintain after leaving work. The earlier you start preparing, the more time you have to adjust your plan to reflect the kind of future you want.
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- Make Your Money Work for You: Every cent you put away goes further the sooner you start saving. Compound interest means growing your savings faster and earlier in life will likely help maximize your total retirement fund.
- Avoid Regret Later: Your forties are a perfect opportunity to course-correct. If you reach your fifties and are still significantly short on your savings goals, there is less time and fewer options to increase how much you save. However, with early action, you can still take calm, measured steps to fill any gaps in your retirement plan.
All of this helps explain why 70% of American retirees say they would tell their younger selves to start saving earlier. However, it does raise a question: what exactly should you be doing to prepare for retirement in your forties?
3 Steps to Save for Retirement in Your 40s
Our advisors recommend three simple steps to change how you approach retirement saving in your forties:
1. Assess Your Current Saving Situation
You can’t meaningfully improve your retirement savings without a clear view of your current financial situation. How much can you afford to put away? What do you already have to build on? And what is your target number?
This isn’t just about clarity: an honest appraisal of your current situation can be highly motivating. You might have further to go than you thought; you might have more saved than you realized. But putting a concrete number on your situation can turn ambient doubt and anxiety into a sense of purpose.
2. Increase Retirement Plan Contributions
Plenty of people essentially “set and forget” their retirement plan contributions, without considering how they could be making long-term gains. A few simple changes can help significantly improve your retirement prospects:
- Take advantage of employer matching: If you get employer matching, this should be the first port-of-call. Simply increasing your contribution to qualify for a full match could potentially double the amount you save immediately.
- Maximize 401(k) contributions: The IRS recently increased the annual limit to $24,500. These are pre-tax contributions, meaning the real “cost” for you is much lower than the amount you put into savings. For example, if you’re in the 24% tax bracket, it will cost you $18,620 to put $24,500 into your 401(k).
- Contribute to an IRA (or Roth IRA): You can add up to $7,500 each year to these accounts. Those contributions grow tax-free and can be withdrawn tax-free during retirement. If you expect to sit in a high tax bracket during retirement, prioritizing these savings could pay off in the long run.
- Use an HSA as a stealth retirement account: If you have a high-deductible health plan, max out your HSA. It’s triple tax-advantaged, and funds roll over indefinitely for medical expenses in retirement.
3. Reduce Debt
The full impact of debt can be easy to overlook. If you’re covering the monthly repayments on a mortgage or loan, it feels manageable; you have more income to spend on other priorities. While in reality, the interest is eroding your wealth over the long term.
Clearing debt might mean having less to put into your 401(k) or other savings plans. However, there is a good chance the interest on larger debts is higher than the interest you accrue through savings. While it depends on the specific circumstances and terms, there are many instances where paying off debt is the best use of your money.
Do You Need a Retirement Advisor in Your 40s?
The three steps outlined above are basic steps any person in their forties can take to improve their retirement prospects. For many people, they still feel complex and add stress.
You might worry about missing opportunities or making mistakes; you might simply lack the knowledge required to confidently change your contributions or navigate complicated debt repayment rules.
Working with an experienced financial advisor can help you gain clarity and confidence. Not only can they provide advice based on their previous experience, but they can answer your questions and help make the process feel less overwhelming. In fact, 90% of retirees say the value of financial advice outweighs any cost.
However, it’s important to note that not every person in their forties needs an advisor. While many people need assistance to regain control over their savings plan, others are right on track to meet their retirement goals.
If you aren’t sure where you sit on that spectrum, our Retirement Readiness Assessment can help you evaluate your situation. It lets you compare your retirement savings progress to that of other people in their forties to identify ways to improve your plan.
