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What You Should Do in Your 40s to Prepare for Retirement

What You Should Do in Your 40s to Prepare for Retirement

Your 40s can be a wake up call, whether it’s the girth that’s suddenly around your waist, or your children who are no longer babies, time marches on, and it’s no time like your 40s to get serious about planning for retirement. With every year that passes, you’re one more closer to leaving behind the daily grind.

"You are entering both your peak earning and spending years. Staying disciplined in saving for retirement is critical and it can be easily sidetracked by temporary wants," says Reginald A.T. Armstrong, president of Armstrong Wealth Management Group.

Maybe you’ve been meaning to join the 401(k) at work, or to start an IRA, "do not pretend you are still young and have plenty of time," warns Bijan Golkar, vice president and senior advisor at FPC Investment Advisory.

Here’s a must-do list for that all-important decade for retirement planning -- the 40s.


"Define your retirement. Think about what it looks like, where you’ll spend it, what you want to do. Now that you’re in your 40s, you’ll have a better idea of what you want it to look like and can therefore better plan for it," says Chris Hogan, a financial advisor.

Set goals

Acknowledge what it will take to get there and what you’re willing to sacrifice to get there, says Hogan. Realize that knowing and doing are two different things. Activate a plan of action to start to make progress toward your goals.

Ramp up savings

Bite the bullet and find a way to max out your 401(k). "If you’re in your 40s and not doing everything you can to maximize contributions to a 401(k), especially if your employer offers a match, then you haven’t create a financial plan and are not off to an adequate start in preparing for retirement,’ says Dennis Brier, president of Fairwater Wealth Management.

Attempt to bump up your 401(k) contributions 1% every three to six months advises Katie Brewer, a certified financial planner with Your Richest Life.

Reduce debt

Work on getting rid of all your consumer debt. Begin to accelerate extra payments on your mortgage. "Despite the fact that you might think you could do better investment wise, eradicating debt by your mid 50s should be a big target for those in their 50s," says Ted Jenkin, founder of oXYGen Financial.

Being debt-free in retirement is about as good as it gets. It’s a goal worth pursuing given the payoff – financial freedom.

Talk with your parents

With your parents now aging, you’ll need a few heart-to-heart conversations about their finances. Will they need your financial support? Will other siblings be able to pitch in? If you could potentially be a caregiver, the sooner you plan the better it will be not only for them, but you, financially and emotionally.

Protect your assets

If you don’t already have life and disability insurance, you can ill afford not to at this life stage. Furthermore, while you’re thinking about end of life issues for your parents, consider long term care insurance for yourself. It’s far less expensive to purchase in your 40s compared to a decade later.

Take care of yourself

Your biggest asset in retirement will be good health. Get serious about taking care of yourself. Exercise and eating right will go a long way toward helping to ward of disease that can not only be a financial burden, but impact your quality of life. Get a physical. Says Jenkin, "Your health is in part, what helps you drive your income."

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Anonymous   |     |   Comment #1
There is very little reason to buy a long-term care policy in your 40s. Although premiums are lower, you will spend more over time. Plus, there is no guarantee the premiums won't rise. People should start thinking about purchasing a long-term care policy at around age 50, says Jeffrey Condit, Senior Vice President and AARP Relationship Leader for Genworth Financial.
Anonymous   |     |   Comment #3
Most successful retirement plans begin in the 20's and early 30's. Attitudes developed early often last a lifetime.
Anonymous   |     |   Comment #5
Couldn't agree more.  I started saving 20% of my salary when I got my first job out of college at 23, in a mixture of retirement and non-retirement accounts.  I'm now 43 and while I made mistakes along the way, I am well ahead of my peers and still save 20%.  The bonus is, I don't miss it like I would if I was just getting started today.
Anonymous   |     |   Comment #6
What do u think would be a good starting contribution rate when starting a 401 k with my employer
Anonymous   |     |   Comment #7
As much as you can and more!  Remember, "you" have to contribute more now b/c interest rates are lower than "we" did in the past, i.e. your pot is based primarily on your contributions rather than return thereon.  And, select the 401k option that is the most conservative so that the principal stays intact!
Anonymous   |     |   Comment #8
You should minimally invest what your company matches. Your money is pre-tax; the company money is FREE...to you and is an instant 100% gain. Of course, any company match is an earned benefit based on your labor. As such, you've earned it. However, if you do not exercise your right to the "match" money by making your own contribution, you lose. I'm amazed how many people deliberately choose to lose 401K matching money. I have a friend who did the following starting at age 24. Starting salary: a little over 10K. Final salary approximately: 75K. Time: 35 years. Employee contribution starting on day one: Max allowed by law. Corporate match: 6%. Retired at age 56 with no debt and more than $1,500,000 in equities, bonds and cash. Colleagues who started with him and contributed far less have 100-250K in their 401 accounts and are depressed they can neither retire or enjoy the comfort of a solid retirement nest egg.