If you are in your 40s, the good news is that you are into your peak earning years, and the bad news is that your time horizon is shrinking. By now, you should have a plan for your future. If you haven’t yet made a plan, it’s not too late to get started; you still got plenty of time to make up for lost ground. Here’s how.
1. Consolidate all your retirement accounts
While you are in your 40s, you may have worked with various employers and participated in
different employer-sponsored retirement plans. Now, you can think of consolidating all these
retirement plans. Consider rolling them over into an individual retirement account. Other than the benefit of having your employment history into one account, rolling over your multiple 401(k)s into an IRA :
Protects you from taxes and penalties
Offers more investment choices
Provides control over fees
Gives a clear picture of your investment mix and identifies opportunities to rebalance your portfolio.
2. Eliminate bad debt
Credit card debt is considered as bad debt because it carries a very high-interest rate, and it can cripple your long-term financial health. Try to pay off this debt as fast as possible. Consider these options to get rid of credit card debt faster:
Pay it off entirely and if that’s not possible then pay more than minimum.
Consolidate debt with a low-interest loan.
Use promotional zero-interest balance transfer credit card.
3. Maximize your savings
After your debt situation is in control, look for ways to maximize your savings. If you are invested in various tax-friendly retirement accounts, such as Roth IRA, Traditional IRA, or 401(k)s, then make maximum contributions to enjoy tax elimination or deferral benefits that these accounts offer.
If you are not able to contribute the maximum, be sure to increase your contributions as your income increases.
Retirement accounts do not allow you to withdraw money until you turn 59 ½. If you do withdraw, you attract a penalty and forfeit the benefit altogether. So, make sure that you save money outside of these retirement plans. This will help you to have access to money when you need it in an emergency.
4. Don’t fear the stock market
While in your 40s, you may develop a conservative mindset towards investing in stocks. The reason could be that you don’t want to take any risk as you are too close to retirement. In reality, you are 15 to 20 years away from your retirement, and your life expectancy says that you could live for another 40 years. This means you can use your time now to make good investment decisions.
Don’t fear to invest in stocks. When there are downturns in the market, don’t sell your investments. Rather buying-low and selling-high is the best strategy you can adopt during market downturns.
6. Maintain a diversified portfolio
A good mix of bonds, stocks, and other investments is essential to reduce the risk of the volatile market. Invest in companies of varying geographies and sizes to diversify your investments within stocks and bonds even further. Ensure that you work with a trusted advisor who can help you figure out a balanced investment mix that is aligned with your financial goals.
7. Consult a financial advisor
While you are in your 40s, consulting a financial advisor about your finances is a wise idea. A
professional will look at your financial profile that includes retirement plans, investments, and other financial goals to develop a holistic financial plan that will help you retire rich.
Your 40s is a perfect opportunity to build wealth for retirement while you are into your peak earning years. Follow the strategies mentioned above to build an aggressive investment strategy that can help you accumulate enough wealth to live through your retirement years comfortably.
This is a MySmallBank.com guest article that was written by Rick Pendykoski:
Rick the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at firstname.lastname@example.org.