It feels like life is moving faster than ever, doesn't it? You're likely juggling more responsibility at work, your family life is getting richer (and more expensive), and retirement is starting to feel like a reality rather than a distant dream. We know it can feel overwhelming to manage these competing priorities, but we want you to know that you're exactly where you need to be to take control of your journey.
Two simple truths about your 40s
If you're in this decade, there are two things you really need to embrace. First, time is still on your side, but that window is closing. Second, your financial health must become a priority now.
You are at a crucial tipping point. You still have the ability to save more right now, whereas waiting until your 50s often means you'll need to spend less to catch up. In your 40s, we can still let the power of compounding investment returns do the heavy lifting for you.
The cost of waiting
Let's look at the math to see why starting now matters so much. Let's say your goal is to save $1,000,000 by age 65. We'll assume a 7% hypothetical return for this example (though there are no guarantees, of course), and we won't include taxes or advisory fees in this calculation. This is for illustrative purposes only; actual market returns will fluctuate and your actual results will vary.
- Start on your 40th birthday: You'll need to save about $15,000 each year from 40 to 65.
- Wait until 50: You'll have to save more than twice as much, totaling almost $37,500 per year.
There will always be reasons not to save. But as flight attendants always tell us, you have to put your oxygen mask on first. Even when you have conflicting priorities, like paying for college versus saving for retirement, you need to prioritize your own security. Your financial health today gives your children peace of mind down the road.
Our relationships with life and money start to mature
This is a time of major evolution. Your career is advancing, your personal relationships are deepening, and if you have kids, they're growing up fast. As everything around you matures, it's important to make time to maintain healthy relationships with your money, too.
Many of us use this time to think about the next chapter. Make space to reflect on what matters most to you and how your financial decisions can support those values. Remember that this is a journey, not a destination, so give yourself grace as you navigate life's twists and turns.
If you're in a relationship, it's vital to include your partner in these decisions. Checking in periodically about money keeps both your personal and financial bonds healthy.
The 'sandwich years': greater demands and planning needs
Welcome to the "sandwich years." This is the period when you might be responsible for both growing kids and aging parents. It's a season filled with trade-offs.
The rising cost of family life
First, let's look at the kids. The "toys" are becoming much more expensive. We're talking about cell phones, laptops, and cars. College might be on the horizon or you might be paying tuition right now. When you add in vacations, car loans, and the mortgage, it all adds up fast.
You need to manage your budget and prepare for the unexpected so you can invest for your children's education without sacrificing your future.
Caring for aging parents
On the other side of the sandwich, you might be thinking about your parents' physical and financial health. Planning for your parents doesn't just help them live well in retirement; it protects your family from the potential costs of their care. Now is the time to start having those honest conversations.
Your career, future, and financial health
Your 40s are often your peak earning years. Unfortunately, that usually means peak expenses, peak taxes, and peak stress. Smart planning creates clarity around these decisions so you can focus on family, health, and personal enjoyment.
Tax planning is essential
As your career evolves, your tax strategy needs to evolve so you keep more of what you make. You might be dealing with stock compensation, lost tax credits as your kids get older, tax-smart investment decisions, buying a new home, or even charitable giving. You need to look at all these facets to minimize taxes today while planning for tax-efficient income in retirement.
Three smart moves to make now
No matter where you are with your savings, prioritize your financial independence today. Here are three things to consider:
- Bank the raises. As you make more money, save your newfound income first and then spend what is left. This is paying your future self first. It's the best way to avoid runaway lifestyle expenses.
- Diversify your accounts. Start investing in different types of accounts that are taxed differently. Your 401(k) should be the foundation, but you should look at a Roth IRA and a taxable investment account as well.
- Consider an HSA. Now may be a great time to switch to a health plan that allows you to contribute to a health savings account (HSA). It's a tax-free account you can carry over into retirement for healthcare-related expenses.
The Facet difference
At Facet, we know that your 40s are busy. You don't have time for outdated, stuffy financial meetings or sales pitches. We built a different kind of financial planning model that puts you first.
We don't charge a percentage of your assets. Instead, we offer a flat membership fee for comprehensive, human-led advice. Our CFP® professionals work with you to build a roadmap that covers everything from your career and equity compensation to your family's protection and retirement goals. We're here to help you navigate this complex decade with calm confidence, ensuring your money reflects your values.
