When You’re Playing Catch Up: Rules for Retirement Planning in Your 40s

So you’re now a forty-something. It kind of sneaks up on you, doesn’t it? Yesterday you were more concerned with what you’ll be doing on Saturday night and who you’d be doing it with, and today there’s the spouse, the kids, the bills, and all of the other stuff that being a grown-up entails. Yes, it sneaks up on you in a hurry and suddenly you’re worried about retirement planning in your 40s. Am I kidding?

If you're a 40-something and haven't saved much for retirement yet, it's time to focus. Retirement planning in your 40s isn't easy, but it can be done.

Believe it or not, the answer to that question is a resounding no, it’s no joke! That planning of your grown-up life after you stop working has to be done and focused on retirement now, if not even sooner than age forty. The sooner, the better!

Is Time Still on Your Side?

The Rolling Stones sang about it back in my time and yes, it is true. With a decade or two left in your “main career”, you have time to get your finances in order before moving on to the next stage of your life. But first you should ask yourself a very serious question: Am I really financially prepared to retire?

If the answer is no, you aren’t alone. Most forty-somethings are way behind on their preparation for retirement as well as their savings and finances. In fact, most haven’t a clue as to how, what, and when retirement will be like other that some dreamlike picture they may have created in their heads.

The Nest Egg

You probably know that saving for for the important goals in life is the way to afford it. You usually do that to buy a house or when you are planning to have children. It’s the thing most of us want and have to do.

Well, retirement planning requires it, too. Financial advisors suggest having a nest egg saved up, usually contributed from your weekly paycheck in some kind of automatic contribution over a period of years to be totally prepared for it.

The problem is that the typical forty-something has only saved $6,200 or even less by that age for retirement, according to the Economic Policy Institute. That won’t get most people through three months of living, let alone a potential thirty years! If you’re ready to start catching up or want to boost your retirement savings plan, there are some necessary realistic things you can do to get on that track. Study these and you’ll make a good start.

Rules for Retirement Planning in Your 40s

1. Start automating your retirement savings now

It’s easy to put a little extra money away when you get some, like a tax refund or even a big government stimulus check. But if want to really build your funds, you’ll have to get serious and make them consistent and systematic. The way to do that is to put your savings in a program and have it taken from your pay before you get your hands on it! The good news is that your employer can help!

Set up an automatic withdrawal from your paycheck that will deposit that money in your retirement account right where you work if it is offered. You can also do it on your own if one isn’t available at work.

The amount you can save and fully advantage your federal income tax by was increased in 2019 and is now maxed at $6,000* in an individual IRA. That limit applies now to the current 2021 tax year.

*Singles with a modified adjusted gross income of less than $137,000 and married couples earning less than $203,000, can contribute a total annual IRA contribution limit for 2021 of $6,000 for any taxpayer younger than age 50, according to the IRS.

If you’re not fortunate enough to have a 401(k) or another workplace retirement plan, then consider opening a Roth IRA or a SEP IRA and start putting away money on your own with a bank.

A SEP IRA is a traditional IRA, or individual retirement account, for self-employed individuals, small business owners, and freelancers while a Roth IRA is a special retirement account that you fund with your post-tax income.

2. Make your budget work for your retirement

I harp on budgeting for a reason. It is “the law” when it comes to making your money work for you. Unfortunately, most Americans don’t follow a budget, and that leads to overspending, under-saving, debt, and no retirement funds.

The purpose of a budget is to learn to recognize your spending patterns to identify where you get your money and where it goes. Once you understand it, you will be able to control it, cut out the waste, and save more. It’s that simple. It’s the first step to developing a clear plan about your money to help you reach your savings goals.

3. Control the expenses of your children

Many parents neglect their retirement savings in order to fund their children’s college education. It doesn’t have to be that way.

If you have children preparing for college and their crazy expenses, begin your budgeting when your children begin high school, if not earlier.

Try to figure out what you can actually afford and discuss this with your kids. You may have to have a serious talk about things like affordable schools such as state universities or even beginning at a community college because of finances. You’ll want to encourage them to look for grants and scholarships wherever possible.

You can instill responsibility and actually start budgeting with your kids. They can help by earning their own money even at an early age and saving some of it for their future education expenses too.

4. Pay off your own student loan debt

There are that about seven million Americans in their 40s that still owe money on their student loans. Once you hit your 40s, those payments come with a higher cost because at that age they start to interfere with your retirement savings goals.

If you’re still repaying your college loans, eliminate them as quickly as possible. You can at the least try to refinance them at much lower interest rates which are lower than ever and that means paying less interest on the loans. Paying off your college loans will definitely put you on the right track to better financial health and reaching your retirement savings goal.

5. Re-examine your retirement dream

You may think you have an idea about what your retirement will look like, but will it turn out to be the dream you have? How much thought have you really put into it?

When you’re in your 40s, you may even dream of retiring early, perhaps in your mid-or late 50s. But for financial reasons, you may have to continue to work in some way into your 60s or older. Regardless of what you dream, however, right now is the time to start making that dream real and figure out what retirement means for you.

In many ways, your 40s are a transition in your life: a time to resolve the money issues of your youth and prepare for life after your current career is completed.

Final Thoughts

In case you were wondering, my advice comes from my experience and I am here to tell you that the right time to do any of this is while you’re still in your highest-earning years of your professional life, your forty-somethings!

Retirement planning in your 40s may not be easy. But if you wait any longer to start, the financial pressures will build and build and you will damage your chances of that “great retirement” that you dream about. Don’t let those years be anything but exactly that!

Have you started on your retirement planning already? If you haven’t, today is always the best day to begin and even a small start is better than no start. Your retirement is a family project and if your kids don’t get that, ask them if they are prepared to support you in their adult years. That may wake them up from their lack of understanding about retirement and even help them understand about their own future years too.

Are you motivated to make your retirement work?


  1. Just finished the classic: The Richest Man in Babylon. One of the first chapters states the importance of automatically putting away 10% when you get paid and you won’t even miss it. The rest of the parables are just as important and a must read as it goes over, smart investing, inflation, etc. Great to help anyone with retirement planning in their 40’s or any at age.

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