Smart Financial Moves to Make in Your 40s

As you approach middle age, the major life changes you experienced in your 30s should be leveling out. You’ve likely become used to managing the financial impact of starting a family, buying a house and taking on more adult responsibilities. And according to the U.S. Bureau of Labor Statistics, these are your peak earning years,¹ making it prime time to ramp up your financial goals for your 40s.

7 money moves to make in your 40s

This is the time to keep the momentum going and set yourself up for success in your 50s and into retirement. Even if you’ve gone through a few financial setbacks, you can still turn things around and make up for lost time (and money). These smart money moves can help you learn how to build wealth in your 40s:

• Maximize your retirement contributions. By this point, you should already be actively contributing to your employer’s 401(k) plan, Individual Retirement Account (IRA) or other retirement savings. If so, now is a good time to consider upping your contributions to the maximum amount allowed, especially if your income has increased since you first opened your accounts. If you haven’t begun saving for retirement, it’s not too late, but you do have a bit of catching up to do. Talk to a financial advisor about how to save for retirement in your 40s—because although retirement is still about two decades away, it will be here sooner than you think.

• Pay off outstanding debt. Reducing or eliminating high-rate debts should be a priority at this point in life. If you’re juggling multiple balances, debt consolidation could help you combine those bills into one fixed payment. It could also help lower your monthly expenses, leaving more money in your budget for saving or investing in your 40s.

• Revisit your investment portfolio. From annual checkups to major life milestones, there could be many reasons to revisit your portfolio. Turning 40 is one of those reasons. Take time to re-evaluate your investments to be sure you’re comfortable with their performance and diversification, and are confident they will help provide the lifestyle you want in retirement.

• Discuss plans for aging parents. Americans in their 40s are sandwiched between their children and an aging parent. More than half in this age group (54%) have a living parent age 65 or older and are either raising a child younger than 18 or have an adult child they helped financially in the past year.² That’s why if one or both of your parents are still living, it’s important to begin discussions about their potential financial needs. This could include finding long-term care insurance, more affordable living arrangements or room in your home for them should they need it. For many 40-somethings, caring for their young children at the same time they’re caring for an aging parent has a significant impact on their financial health. Make sure you’re prepared.

• Get proper insurance. Insurance plays a critical role in your financial success. Proper life insurance can ensure that your family is financially secure in the event of your death. Good health insurance can relieve the financial burden of medical emergencies. That’s why it’s important that your insurance policies are providing the coverage you need at this stage of life and will continue to keep you properly covered in the future. Go over all of your current policies and look into adding disability insurance and long-term care insurance, if you don’t already have those policies in place.

• Keep strengthening your emergency fund. As you grow, the cost of your emergencies grows as well. Costly expenses like replacing your roof can happen at any time. You must be prepared to weather these surprise storms with an emergency fund of three to six months of living expenses.

• Make an estate plan. A recent study revealed that more than 50% of Americans think that estate planning is at least somewhat important, but only 33% have a will or living trust.³ If you don’t already have an estate plan, don’t put it off any longer. If you pass away without a will, the state, not your relatives, will have control of your assets. An estate lawyer can help you and your family put a plan in place that prevents that from happening and gives everyone peace of mind.

Keep building financial strength

Want to know how to build wealth in your 40s? Take advantage of every opportunity to save, invest and grow. No procrastinating. No matter what stumbles you may have made in the past, it’s never too late to get on track and enter your 50s financially strong.

1. U.S. Bureau of Labor Statistics. https://www.bls.gov/news.release/wkyeng.t03.htm
2. Pew Research Center. https://www.pewresearch.org/fact-tank/2022/04/08/more-than-half-of-americans-in-their-40s-are-sandwiched-between-an-aging-parent-and-their-own-children/
3. Caring.com. https://www.caring.com/caregivers/estate-planning/wills-survey/