Your 40s

Your 40s are prime time to maximize retirement savings. With higher income, you can likely afford to max out your 401(k) and IRA contributions. Every dollar saved now has 20+ years to compound.

For 2026, you can contribute up to $24,500 to your 401(k) and $7,500 to an IRA. If you're 50 or older, you can add catch-up contributions of $8,000 to your 401(k) and $1,100 to your IRA.

With higher income comes a higher tax bracket. Strategic tax planning can save thousands each year. Consider the backdoor Roth IRA if your income exceeds direct contribution limits, HSA contributions if eligible, and tax-loss harvesting in taxable accounts.

Backdoor Roth IRA: If you earn too much to contribute directly to a Roth IRA, you can contribute to a Traditional IRA and convert it. For 2026, Roth IRA income limits phase out between $153,000-$168,000 for singles and $242,000-$252,000 for married couples.

If you have children, college costs are likely on your mind. A 529 plan offers tax-free growth for education expenses. But remember: your retirement comes first. Kids can borrow for college; you cannot borrow for retirement.

The Rule: Only contribute to a 529 after you're on track with retirement savings. A good benchmark: if you're saving 15-20% of income for retirement, then consider 529 contributions.

With more assets comes more to protect. Your 40s are the time to ensure your insurance coverage and estate documents are in order.

Term Life Insurance: If you have dependents, ensure you have 10-12x your annual income in coverage. Term insurance is affordable and straightforward.

Umbrella Policy: For a few hundred dollars a year, an umbrella policy provides $1-2 million in additional liability coverage beyond your home and auto policies.

Estate Documents: At minimum, you need a will, healthcare directive, and power of attorney. Consider a revocable living trust if you have significant assets.

The "pay off mortgage vs. invest" debate has no universal answer. It depends on your interest rate, tax situation, risk tolerance, and peace of mind.

General guidance: If your mortgage rate is below 4-5%, investing extra cash typically wins mathematically. If your rate is higher, paying down the mortgage offers a guaranteed return. But psychology matters too. Being mortgage-free provides flexibility and peace of mind that's hard to quantify.

Your 40s are the ideal time to get serious about retirement projections. You have enough assets to make projections meaningful, and enough time to course-correct if needed.

Use a retirement calculator to model different scenarios: What if you save more? Retire earlier? Work part-time? Understanding these trade-offs empowers better decisions.