Saving For Retirement In Your 40s


Once you’re in your 40s, you have reached your peak years of earning, and you should be on the way toward reaching your goals for long-term savings. Unfortunately, life can get in the way. Many financial planners will tell you that even though people in their 40s want to save, many have not taken the right steps to prepare for their retirement. Luckily, there are a few ways to boost your savings efforts.

Reach Your Savings Maximum by Eliminating Debt

Once you reach your 40s, your credit card balances might seem to skyrocket. This can hinder you from saving for your retirement years. If you want to save, look for options such as balance transfer credit cards.

But if you have been saving 10 percent or more of the paycheck over the past decade or two, you might just need to adjust your habits a bit to meet your goals. You may need to make a push to reach the finish line if you have neglected your retirement savings. 

Use IRAs to Save

If you do can’t access a retirement plan sponsored by your employer, or even if you do have one, consider using a Roth IRA or a traditional one. If you don’t have this, you might miss out on chances to maximize your savings levels with tax advantages with IRAs. For instance, if you have a Roth, you will not need to pay taxes on future earnings on the account contents. But remember that there are some limits on incomes to determine if you are eligible for a Roth.

Create a Retirement Plan

Saving money while young is great, but if you don’t know how much you need to save, it could lead to disaster later. That’s why it is so important to create a retirement plan. Many people do this themselves these days with do-it-yourself retirement planning software such as WealthTrace. Others go the old fashioned route and have a financial planner create the plan for them. Either way, it is so valuable to have an accurate retirement plan so you know how much you need to save to retire when you want.

Reduce Your Risk with the Right Investments

Diversify and allocate your assets to try to reduce any risks. Since you are still a little way from retiring, you should weight your portfolio toward stocks heavily. Stocks are very volatile, but they often have good returns over time. 

Some of your portfolio might shift toward bonds, which are more conservative, but don’t take too much away from stocks. 

Consider having around 80 percent of your portfolio made of stocks. Put the remaining 20 percent toward bonds. This might reduce your total returns, but it can also reduce your overall risk. 

Consider Education Expenses

In an ideal case, you would have been saving for college expenses since your kids were young. If this is the case, you might be able to avoid taking large amounts of cash from your retirement. But if you did not save for college expenses, you might find that it is hard to save for both. While you want to care for your kids, your priority should be saving for your retirement years. Your kids can get scholarships, but you can’t get ones for retirement. 

But too many parents choose to sacrifice their retirement savings so they can help their kids. This is true even for those who have already gotten a college degree. If parents have to make a choice, many will choose to put their kids first while putting themselves last. They just decide to work longer or decide that they will have a lower quality of life during retirement. 

If you do feel like you want to help your kids and know that this will make money tight, see if you can make any compromises. For instance, you might decide to send your child to a public in-state school instead of a private out-of-state school. Or you might recommend online education.

Have Good Insurance

It seems as though the cost of good health care gets higher with each passing year. Plus, people are living longer. There are a few reasons that many consumers prefer to have long-term care insurance. 

About half of all Americans who are age 65 or older will need paid long-term care. On average, the cost for this type of care, out of pocket, is around $140,000 per year. You might be able to take a gamble that you will not need this, but if you do, it can easily chew through your savings. 

A long-term insurance policy might cost around $2,700 each year. This is definitely not inexpensive, but it can be cheaper to get a policy now instead of waiting. If you wait until you are closer to retiring, you might not be able to get an affordable policy. Or you might not find something that meets your needs.

Work Longer

You might not want to delay your retirement, but this might be what it takes to allow you to live comfortably. There are a few advantages to working longer, and they might let you have better retirement years. 

For example, working longer will let you bring in more income. You can save and then invest this extra money to ensure a secure financial future. But you might decide to work reduced hours, so you will not have as many demands as your full-time job. 

Or you could match the working hours toward your expenses. Then, you will allow the assets to accumulate instead of living off of them right away. Working longer will give you more time for your portfolio to grow. 

Closing Thoughts 

Whether or not you feel prepared to retire, there are several things you can do to ensure that your retirement years are comfortable and that you live in financial security. 

About Author

LaDonna Dennis

LaDonna Dennis is the founder and creator of Mom Blog Society. She wears many hats. She is a Homemaker*Blogger*Crafter*Reader*Pinner*Friend*Animal Lover* Former writer of Frost Illustrated and, Cancer...SURVIVOR! LaDonna is happily married to the love of her life, the mother of 3 grown children and "Grams" to 3 grandchildren. She adores animals and has four furbabies: Makia ( a German Shepherd, whose mission in life is to be her attached to her hip) and Hachie, (an OCD Alaskan Malamute, and Akia (An Alaskan Malamute) who is just sweet as can be. And Sassy, a four-month-old German Shepherd who has quickly stolen her heart and become the most precious fur baby of all times. Aside from the humans in her life, LaDonna's fur babies are her world.

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Ella Wilson
1 year ago

Hey LaDonna, thank you for sharing this valuable information. Indeed, parents sacrifice their retirement plan for their kids’ education. I was also confused about this but now I got a way to manage such situations. Keep up the wonderful work.