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What Should My Financial Goals Be In My 40s?

What Should My Financial Goals Be In My 40s?
Do more with what you’ve earned.

Financial advisors for successful professionals, executives, and business owners.

Planning for retirement in your 60s and even 50s is a cakewalk. Retirement itself is in sight, and your strategy likely only needs a bit of fine-tuning to stay on your current glide path. Your 40s, however, is a different story. 

Your income is likely approaching its highest level as you continue your career trajectory, but your expenses are also increasing. Mortgages at today’s high rates, children, and more often ramp up household expenditure rapidly in your 40s, making it challenging to keep your eye on the prize.

Your 40s are chaotic enough already without stressing over retirement plans and financial nitpicking – but these are prime years to dedicate to maximizing your retirement potential, no matter how exhausting it may be. Don’t let your 40s be a lost decade. Instead, ensure you’re (at a minimum) reaching these three key financial milestones we recommend to clients in their 40s. 

1. Know Your Savings Rate (And Stick to It!)

Perhaps the best way to set yourself up in your 40s is to calculate your ideal savings rate – and stick to it. As the name implies, your savings rate is how much of your income goes toward savings in one form or another. You calculate your personal savings rate by dividing gross annual earnings by the amount you save:

We generally recommend targeting 20% of your gross pay as the ideal savings rate for your 40s; assuming an annual income of $450,000, you should be socking away about $90,000 yearly or $7,500 monthly. The savings rate also applies to one-time bonuses, stock-based compensation sales and gains, and any other cash coming into your household. 

This may seem extreme, especially considering how much insurance and taxes can affect your take-home pay. But that’s the secret to maximizing your savings rate and hitting 20% quickly – it’s calculated from gross income rather than net income (take-home pay). And, since we’re looking at savings as a holistic category, we include pre-tax retirement accounts like 401(k)s, HSAs, and similar accounts. 

When taken directly from your paycheck, retirement account contributions stack up quickly, and you generally won’t even notice they’re gone! So, using the previous example and a 5% automated 401(k) contribution, you’re stashing away $22,500 easily without noticing the difference. To hit a 20% overall savings rate, you’ll need to put 15% of your after-tax income (a hair over $5,600 monthly) into a high-yield savings account, taxable brokerage, or self-directed IRA – much more manageable! 

Note that, in this example, our 401(k) contributions fall just shy of the annual limit – keeping this in mind is essential to stay on good terms with the IRS, and employer match programs may complicate it further. You’ll need to do some math to maximize your pre-tax savings, so working with a trusted financial advisor to run the numbers is usually a good course of action (or at least serve as a sanity check).

Tips to Hit Your Target Savings Rate

Still, socking away 15% or whatever proportion of your take-home pay might be tricky to manage, but there are some tried-and-true techniques to ease the burden further:

Automate Away 

Just as we automated 401(k) deposits from our salary, we can automate monthly deposits into savings accounts or taxable brokerages through most banking providers. This plan is best for those with steady, reliable, and predictable monthly income. 

Avoid Lifestyle Creep

 Your 40s are close to your highest-earnings years as you climb your career ladder, and, too often, our lifestyle spending matches our earnings as they grow. Work with your family and a financial advisor to determine your bottom-line annual expenses, then work hard to stay true to the figure while stashing away any additional income into savings. Managing budget bloat is one of the fastest ways to accelerate savings. 

Make More Money

Easier said than done, right? But to hit our target savings rate when we fall short, we have one of two options: spend less or make more. While economic conditions may be tight, and you might not have the horizontal mobility to easily switch jobs, consider moonlighting or picking up a side gig to increase income. 

You likely have a deep wellspring of industry-specific knowledge and skills in your 40s. Consulting work tends to be an easy way to earn a bit more on the side. Self-employment income also opens additional pre-tax account opportunities like SEP-IRAs to improve your retirement positioning.

Financial planning that matches your ambition.

Financial advisors for successful professionals, executives, and business owners.

2. Have A Ten-Year Total Term

Let’s look at another quick math problem to improve your financial positioning as a 40-something: your total term. The total term describes how long you could continue your current lifestyle and expenditures with existing assets and no additional income or investment growth. It’s much the same as calculating a company’s cash runway, and the formula is just as simple:

We generally recommend a ten-year total term in your 40s; in other words, if your net worth is $1 million, you can spend as much as $100,000 annually and hit a ten-year total term. While it may sound impractical, remember we’re looking at net worth, which can include home equity, taxable brokerage accounts, real estate investments, and retirement portfolios – liquidity isn’t necessarily a concern in this case. 

That may not sound like a lot, considering the average American’s lifespan is steadily increasing (around 76 years today). Assuming a standard retirement at 65 or earlier, a ten-year total term may not be enough to sustain your lifestyle while accounting for emergencies and ordinary costs of aging. 

But that’s fine – you’re still in your 40s, and a ten-year total term is right on target. Your final year pre-retirement is generally your highest-earning year, so, depending on your exact age, you have 20 or more years to keep increasing your income and expanding your total term. Likewise, “time in the market” is in your favor as your substantial stake in retirement and taxable brokerage accounts is likely approaching the figure where compounding generates hefty gains. 

Think about it – in your 20s, a 7% annual market gain against a $100,000 account didn’t mean much in absolute dollar figures. But with $1 million at stake, you’re rapidly approaching the period where a 7% gain represents a respectable middle-class income (and there’s still time to grow!). 

3. Have a Real Investment Strategy

On paper, this is the simplest financial milestone for 40-somethings to hit, but it’s also the most psychologically challenging. Accessible trading platforms and a range of speculative asset bubbles mean we’re constantly tempted to tweak, adjust, trade, and even gamble with our invested savings. Don’t.

Your 40s are the time to stick to a tried-and-true, data-tested method of wealth accumulation. That includes intelligent real estate allocations, index fund investing, ETFs, fixed-income assets, and similarly well-trod ground. It doesn’t mean betting on FDA approval for a niche biotech stock, buying a boatload of NFTs, or gambling on meme cryptocurrencies. 

Just as our net worth in our 20s didn’t grow appreciably in dollar terms, betting the farm on moonshot stocks in that age range didn’t impact your bottom line much. You may have lost a few thousand or so seeing a high-flying tech stock enter penny stock territory, but even betting 2% of your total worth on a single trade (standard advice for active traders) could be $20,000 or more – cash that better serves you by growing through intelligent investment strategies. 

Of course, it’s easier said than done, and it’s tough to see crypto millionaires or short-squeeze enthusiasts stacking cash while you sit on the relatively dull sidelines. But we often only see the extreme edge cases and rarely zoom out to see the millions or more lost on frivolous trades. Still, this is another area where a competent financial advisor can take the reins and help guide your portfolio objectively using tried-and-true investment techniques with the long game in mind. 


While none of our financial milestones are complex or even revolutionary in and of themselves, putting them into practice together is a trickier balancing act than many think when we account for the time and energy spent managing your financial position. Validating that you’re following these steps in your 40s, or adjusting your lifestyle to do so, is only a first step toward achieving long-term goals in your 40s. 

To fully optimize your retirement potential, working with a comprehensive financial advisor can help turbocharge these basic steps and maximize your wealth accumulation to ensure a quality, happy, and restful retirement. 

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