Retirement Planning in Your 40s: Strategies for Maximizing Your Savings in Mid-Career

Modern fortysomethings often find themselves in very different circumstances than their parents. Previous generations typically started their careers and families much younger, so traditional financial advice for people in their forties assumed you'd be well-established professionally and preparing to send kids off to college.

While that might be true for you, today it's equally common for parents in their forties to be attending a kindergarten graduation rather than a high school graduation, or to be experiencing significant career momentum for the first time. When your life is still full of new job opportunities, exciting family adventures, and fresh beginnings, retirement might feel like a distant goal rather than an immediate priority.

Here are some strategies to accelerate your retirement savings planning during this unique and bustling stage of life.

For those who've hit their stride

If you're well into your career, you might feel like your professional life is flourishing like never before. Maybe you've transitioned into a leadership role, or have been promoted into a higher-earning position. This is one of the reasons why many people often feel more at ease in their forties — life no longer feels like you're hustling to hit the next milestone, but more like you've established a solid foundation that's still full of possibility.

If you're in this position, you likely already have retirement savings established. Now is the time to start thinking about increasing your contributions to your 401(k) and Roth IRA accounts. It's also a good time to increase contributions to your Health Savings Account (HSA). This helps you plan for the future in two ways. First, it offers a financial umbrella should you find yourself experiencing a medical situation. Second, an HSA can act as a retirement account, as you can withdraw funds after the age of 65 for any reason. (However, be advised that you will pay income tax on these withdrawals.)

We understand that not everyone will be able to maximize their contributions to retirement, especially if they still have children in their home. However, any increase will really help your savings to go farther for your family’s future.

For those who are getting a later start

If you're in your forties and haven't made significant progress with saving for your retirement yet, you're not alone. Your generation experienced a significant amount of economic turmoil, in addition to student loan debts far greater than those of previous generations. The important thing is not to spiral and feel like you've fallen behind. There are many exciting and opportune years ahead of you in your career, and that means there is still time to build your retirement savings, even if you've gotten a later start than others.

First, familiarize yourself with your company's 401(k) matching plan so that you know how to make the most of it. It is common for employer matches to include a full and partial match on first few percentage points of your annual salary. For example: 100% on the first 3%-7% of your salary and 50% on the remaining percentage up to 9% for a total maximum employer match of 8% of your total annual salary. To receive the maximum total employer match of 8%, you would need to contribute 9% in this scenario.

Sometimes it can feel tempting to skip 401(k) contributions to free up cash for immediate needs. Don't think of a 401(k) as simply money for when you're retired — rather, think of it as one of the most powerful wealth-building tools in your financial arsenal. In the decades ahead, your contributions alongside your employer's matching contributions will generate a powerful return, ensuring that you get the most out of the money you've earned.

Once you know how to maximize your benefits, it's time to make investing a part of your monthly budget. If you have trouble finding the space in your budget, assess any areas of your life where you might be spending more than you need. While you don't need to completely cut out all of life's luxuries for the sake of saving, making small changes to your spending habits can add up significantly over time.

Eliminate expenses that drain your budget without adding value to your life, like a forgotten subscription or service you hardly use. Freeing up this extra cash can help you tackle any credit card debt you're carrying, which takes you one step closer to investing more money into your 401(k). Think of those monthly interest payments as money that could be working for your future instead. Every dollar you save from unnecessary expenses and interest payments is a dollar you can redirect toward building your retirement security.

When life has tossed you a curveball

Sometimes life throws you a curveball. This unexpected shift can come in the form of divorce, job loss, or the loss of a parent. While these challenging situations can feel like the end of the world, it is possible to navigate them while continuing to make progress financially, even when the road feels rocky.

In the event of a divorce, you might find yourself in a subpar financial situation. Whether you've lost assets or simply aren't living in a two-income household anymore, you might need to temporarily reduce your retirement contributions. While the goal should always be to maximize your contributions, what's important is that you don't let retirement planning fall by the wayside completely. Instead of pausing it altogether, reduce your contributions where you must, but still actively contribute something until your financial situation improves.

In the event of a job loss, you may understandably have to pause your contributions. However, you should avoid withdrawing from your retirement funds early unless it's absolutely necessary. There are penalties and tax implications if you do, and you could end up losing a significant portion of the money that you worked so hard to save. While you might need to pause your contributions, do whatever you can to avoid touching your retirement savings while you seek a new position.

In the event of the loss of a parent, you may find yourself receiving inheritance money. While it can be tempting to treat yourself to a major purchase, this money could be invested in your family's future. Depending on your situation, you might consider using your inheritance money to pay off debts as a first order of business, and then you could consider maximizing your retirement contributions.

Finding your financial stride

Your forties are a crucial time for financial planning, and having the right tools and guidance makes all the difference. Folio in Fruition gives you a clear, comprehensive view of your entire financial picture, making it easier to track your progress and adjust your strategy as life evolves. Additionally, you can book one-on-one sessions with a Mentor to help navigate complex decisions—whether you're maximizing your employer benefits or planning for life's changes.