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5 Financial Milestones to Strive for by 40

by Ashley Feinstein, Contributing Writer

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3) Catch up on retirement saving.

Saving for retirement will be another important financial priority in your 40s. You can contribute up to $18,000 in a company sponsored 401(k) plan and $5,500 in an individual retirement account (IRA) each year. Once you are in your 50s you can contribute $24,000 to a company sponsored 401(k) plan and $6,500 to an IRA, which is called a ‘catch-up contribution’. To see where you stand you will want to do estimate your ‘magic number’ or how much money you will need to retire. While there are many variables involved and things will change as you get closer to retirement, you can do some quick calculations by taking your desired annual income in retirement and multiplying it by 25-28 times. For example, you might decide that you’d like to earn $50,000 each year in retirement: $50,000 multiplied by 25 is $1.25 million and $50,000 multiplied by 28 is $1.4 million.


How do you figure out your desired income in retirement? There are some that recommend 85 percent of your current income, which assumes you will have paid off your mortgage by the time you retire. The most accurate way to predict your desired income in retirement is to actually estimate it out. Will anything change from how you are spending now to how you plan to spend in retirement? Don’t forget to include additional insurance and medical costs. To help, there are many great online calculators. Some help you hone the nest egg you will need to retire, several help you calculate your expected retirement income and others tell you the contributions you should be making now to reach your retirement goal.


Saving up your nest egg is no small feat and often when we have a very large savings goal it can feel so overwhelming that we put off starting. Just like with saving for the emergency fund, getting started is the most important part. You can start as small as contributing 1 percent of your income. Will you even notice a 1 percent change? Every six weeks, increase your contribution by another 1 percent so that you hardly notice the increase. Continue with a 1 percent increase every six weeks or two months and you’ll be contributing significantly in no time.

4) Reassess your insurance needs.

Every time you experience a big life change, it’s time to reassess your insurance needs. If you have dependents, it’s important to look into life insurance, which will provide them with financial support should something happen to you. If you bought a home, look into homeowners insurance. Another important insurance to look into is disability insurance. Disability insurance is essentially income insurance that protects you in the case that you become disabled and are no longer able to work. This may be surprising, but our risk of disability is twice as high as our risk of early death. According to the Social Security Administration, 1 in 4 of today’s 20-year olds will become disabled for a period of time in their life before reaching age 67. Disability isn’t necessarily permanent or catastrophic, but a health condition that makes it so you are unable to work for an extended period of time.


Take a look at the various areas in your life where you are not covered or would like more coverage and protect yourself with the right types of insurance.

5) Start saving for your family.

If you have children, you will want to start saving. While there are many other costs associated with raising children, you will want to prepare for rising college tuition costs. Open a 529 plan for a tax-advantaged way to save for your children’s tuition. It’s never too early to start saving for a big expense like a college degree. The earlier you begin saving, the less you’ll have to contribute each month to reach your saving goals.


In your 40s you will also want to make a plan with your parents. With aging parents, it’s important to have a plan in place for their retirement and long-term care. Having this conversation is hugely important so that you can assess their goals and their long-term care insurance coverage to make sure that they are adequately protected. If they are not protected by insurance or don’t have the assets to support their care, this financial responsibility may fall on you. This additional unexpected responsibility can throw a wrench in your long-term priorities if you haven’t planned for it.


While there are many financial goals that pull your hard-earned money in many directions during your 40s, if you prioritize and plan for these five milestones, you will create peace of mind and stability while saving yourself stress and heartache later in life. Every year, check in with your financial goals to assess your progress, the goal itself, how and when you plan achieve it. This will keep you on track to hit your financial milestones.


Ashley Feinstein is a certified money coach and founder of Knowing Your Worth, where she empowers her clients to redefine success on their own terms by knowing their value and fearlessly going for it. Find out more, check out her blog at KnowingYourWorth.com and connect with her on Facebook and Twitter at The Fiscal Femme.

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