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5 Tips for Retirement Planning in Your 40s

Saving for retirement is a decades-long endeavor, and the earlier you start, the better. By the time you reach your 40s, your contributions and habits will look different than they did 10 or 20 years ago.

5 Tips for Retirement Planning in Your 40s

Individuals in this age range can practice some smart habits and strategies to maximize their savings and plan for their future retirement. Here are some retirement preparation tips to follow in your 40s.

1. Set a clear retirement savings target.

At age 40, you’re about halfway through your overall career, which means you have two to three decades left to maximize your savings. Knowing how much you’ll need upon retirement depends on a multitude of factors, including your desired lifestyle during retirement, when you plan to stop working, and projected growth on investments.

However, if you don’t have a goal in mind, it could keep you from having a solid plan to reach your desired nest egg. Additionally, if you just make a guess about how big your nest egg should be, you may end up falling short of what you actually need.

A financial advisor can help you plot out the actual number and online retirement calculators are there to assist you when choosing the best amount for you and your family.

2. Create a plan for meeting your target.

Saving is key to meeting your desired retirement number. Making a plan to reach your desired goal looks like making wise investment decisions, such as choosing whether to buy something to fit your lifestyle or putting that money away for retirement. Creating a plan to meet your target will involve certain prioritizations and putting contributions toward your nest egg above other expenses that pull your money in another direction.

3. Work on paying off high-interest debt.

If you have high-interest credit cards or loans, the amount you owe in interest each month could keep you from retirement savings. While many believe they can allocate appropriate funds while saving towards retirement, if they have large balances on high interest cards, they’re paying more annually in debt interest than earning on investments.

However, you don’t want to throw all your money at debts. Put enough in your retirement that you can match your employer’s contribution and then some (if applicable), then use what’s left to chip away at high-interest balances.

4. Spread out your investment to minimize tax liability during retirement.

Rather than keeping all your retirement savings in one 401(k), it may be helpful to spread your savings among different tax-deferred accounts. Roth IRAs and taxable investment accounts will allow you to control the amount of taxes you’ll end up paying when you start withdrawing from your retirement savings.

5. Balance your investment risk.

Investing in higher-risk stocks can be a great way to position yourself for huge earnings, but there’s no guarantee on your return at the end of every year. While investing can be intimidating, it’s important to weigh the risks and rewards of your chosen assets. There are natural ups and downs in the investment market, especially in times of economic uncertainty. Therefore, investing is about taking just the right amount of risk while not playing it too safe to maintain a solid enough return to work with future investments.

Work with a CPA

A certified public accountant can help you sort through your current assets, liabilities and future projections. Contact Miller & Company today for a consultation.

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Miller & Company LLP
Paul Miller, CPA (Queens Certified Public Accountants)
141-07 20th Ave, Suite 101
Whitestone, NY 11357

(718) 767-0737

Manhattan CPA Firm
Miller & Company LLP
Paul Miller, CPA (NYC Certified Public Accountants)
274 Madison Avenue, Suite 402
New York, NY 10016

(646) 865-1444
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