How to Plan for Retirement in Your 40s

Jeanne Tackett |

Once you have reached your 40s, retirement is in sight. Your 40s are often your peak income-earning years, giving you the ability to prioritize saving for retirement. No matter if you have been contributing to your retirement funds for decades or haven’t started yet, learn more about how to plan for retirement in your 40s.

Save Outside Of Your Employer-Sponsored Accounts

While your employer-sponsored retirement account is a great option for saving since you can fund it with pre-tax dollars and reduce your taxable income for the year, you should also consider saving in other accounts too. You could open an Individual Retirement Account to also take advantage of those tax benefits. Also consider other retirement saving vehicles such as annuities, life insurance, and mutual funds.

Contribute Any Extra Funds

Now that you are in the home stretch of your working years before retirement, you need to add any additional funds to your retirement savings that you can. When you receive a tax refund or a bonus, take advantage of that opportunity to boost your retirement savings.


Maximize Your Contributions

To help fund your retirement nest egg, take advantage of the retirement contribution limits.

In regard to employer-sponsored retirement accounts, the contribution limit for 2023 is $22,500 for 401(k)s, 403(b)s, and most 457 plans. There is also a catch-up contribution available of $7,500 for people age 50 and older.

As for Individual Retirement Accounts (IRAs), the annual contribution limit for both Traditional and Roth is $6,500 in 2023. IRAs also have a $1,000 catch-up contribution opportunity for individuals age 50 and up.

Don’t Miss Out On Employer Match

Many employers now offer contribution matching based on the employee’s contributions to the employer-sponsored retirement accounts. According to Vanguard, in 2021 the average value of the employer’s promised match was 4.5% of the employee’s pay. If you are not contributing enough to your employer-sponsored retirement accounts to take advantage of your employer’s match, you are essentially missing out on free money.

Diversify Your Retirement Savings

Diversification is key when it comes to investing. By diversifying your investments through asset classes and industries, you can mitigate risk in seeking to ensure your funds continue to grow. By connecting with a financial advisor, you can receive advice on how to balance your portfolio with the goal of continuing growth with a risk tolerance you are comfortable with.

Retirement planning and your finances during retirement can be difficult to navigate without the guidance of an experienced financial advisor. To help you navigate the financial side of retirement, have an advisor from Total Clarity Wealth Management on your side. It’s never too early to start planning for retirement, so schedule a consultation today.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value. Investing in mutual funds involves risk, including possible loss of principal. Fund value will fluctuate with market conditions and it may not achieve its investment objective.