As you reach your forties, you may begin thinking more about saving for retirement and whether you’re on the right track. It’s recommended that you have three times your annual salary saved by the time you reach 40. However, the average American between the ages of 40 and 49 had $105,500 in their 401(k)s in 2023. Whether you fall above or below this average, don’t stress. Building wealth in your forties is possible, and there are a number of savvy strategies you can implement to start investing more in your future right now. In this article, we’ll share six practical ways to begin building wealth in your forties to help you maximize your retirement savings and plan for the future you desire.
Building Wealth in Your Forties Tip 1: Make the Most of Your Employer-Sponsored Plan
If your employer offers a retirement plan, such as a 401(k), 403(b), or 457(b), work to take full advantage. Contribute the full amount if you can, and if your employer offers a match to your contributions, then your retirement savings will grow that much faster. Consider matching amounts from your employer as free money that can make a significant impact in reaching your retirement financial goals.
Building Wealth in Your Forties Tip 2: Be Knowledgeable and Strategic About Your Investments
With your retirement accounts in place, educate yourself about the investments in your portfolio so you can be strategic about your investments. What you choose to invest in is a personal choice, but being knowledgeable about the investments that are in your portfolio is an important part of investing.
Think about the type of investor you want to be. Do you want to take on risk for the potential of higher returns? Do you prefer to invest more conservatively to minimize potential losses? There’s no right or wrong answer, as long as you are taking into account your personal goals and risk profile. You have many types of investments to choose from, too, including individual stocks, mutual funds, bonds, and much more. To determine what may be best for your needs, consider working with a financial advisor you trust.
Building Wealth in Your Forties Tip 3: Get Out of Debt
When you’ve worked to get a college degree, build a family, buy a home, and more, you may have taken on debt. While not all debt is bad, having too much can hold you back from building wealth. Creating a debt management plan can be especially useful in helping you get out from under unnecessary debt, freeing up the money you’re paying in principal and interest so you can use it to grow your wealth instead.
There are numerous ways to tackle debt, but here are two to consider that may help you get started:
- The snowball method involves paying off your smallest debt in full and then using the money from those payments toward the next smallest debt until it is paid off, and so on. When using this method, it’s important to continue making at least the minimum payments on all of your other accounts.
- The avalanche approach is when you focus on paying off debts with the highest interest rates first while continuing to make the minimum payments on all your other debts.
Both of these strategies can be short- or long-term. Creating a budget and reviewing your debt can help you decide on a plan that you feel comfortable with and that is realistic for you to commit to.
Building Wealth in Your Forties Tip 4: Keep an Eye on Your Spending
Creating a budget that helps you to understand your spending is a smart approach toward building wealth in your forties. You may find yourself surprised by how the little things can add up and having a negative effect on your ability to save. If you’re struggling to maximize your retirement contributions or find yourself with less in your retirement accounts than you’d like, take a close look at your budget and consider where you can find savings.
To help you gain a better understanding of your expenses, review your credit card and bank accounts to target unnecessary spending. By taking a hard look at what your spending trends are, you can identify where you may need to cut back.
Building Wealth in Your Forties Tip 5: Expand Your Income Sources
Expanding your income sources can help you build greater wealth during this decade of life. While your main source of income may meet your present financial needs, additional earnings can be used to invest toward your long-term financial goals, like a comfortable retirement. Here are a few suggestions you might consider:
- Add a side hustle that’s in your field
- Pick up some part-time hours at a local business that you enjoy
- Rent out extra space in your house or garage
- Craft a product to sell at local marketplaces
Not sure where to start? Think about your skills, talents, and passions and consider what you are confident doing, too.
Building Wealth in Your Forties Tip 6: Buy a Smaller House
While many people still have children at home throughout this decade of life, many others have children leaving home and setting out on their own. If you find yourself in the latter group, you may find yourself with a bigger house than you need. If you have considerable equity and interest rates are low, it may be a good time to consider selling and downsizing. Moving to a smaller home could bring you a healthy profit from the sale of your larger house, along with a smaller mortgage payment and even lower maintenance and utility costs.
A Final Note About Building Wealth in Your 40s (and Beyond)
Life evolves differently for everyone, so don’t feel anxious if you feel you haven’t saved enough money by the time you reach your 40s. It’s never too late to start saving more and gaining momentum toward the financial future you envision. Make a plan and create a budget, take manageable steps towards reducing or eliminating your debt, consider investing, and work to maximize your retirement plan. Consider the tips that we’ve offered to get you started towards your goals but remember that your individual needs are unique to you, so your financial plans should be, too.
If you would like professional guidance from an experienced financial advisor to help guide your wealth-building strategy, consider working with a member of our TriCapital Wealth Management team. Contact us today to learn more about our services. We look forward to hearing from you!
