5 Money Moves to Make Before You Turn 40

# 5 Money Moves to Make Before You Turn 40

Your 40th birthday presents a practical deadline to strengthen your financial foundation. The years before 40 offer a window where compound interest still works powerfully in your favor, and you have time to correct course if retirement savings lag.

Here are the essential moves to prioritize now.

**Max out retirement contributions.** If you have access to a 401(k), increase contributions to at least the employer match threshold. For 2024, the limit sits at $23,500 annually. If your employer offers a match and you're not capturing it, you're leaving free money on the table. Consider maxing out a Roth IRA as well, which allows $7,000 in contributions this year. The catch-up contributions available at 50 won't help if you haven't built a base.

**Review and optimize insurance coverage.** Term life insurance becomes more expensive with age. If you don't have a 20-year or 30-year term policy locked in, shop rates now while premiums remain affordable. Check your health insurance deductibles and disability coverage too. A single medical event or job loss can derail decades of savings.

**Attack high-interest debt aggressively.** Credit card balances above 18% APR demand immediate attention. Personal loans and car loans at 8% or higher should fall next. Every dollar freed from interest payments becomes available for retirement savings.

**Build your emergency fund to six months of expenses.** If unexpected job loss or medical crisis hits, depleting retirement accounts early triggers taxes and penalties. A separate cash reserve prevents desperate decisions. Park this money in a high-yield savings account earning 4.5% to 5.2% APY at banks like Marcus, Ally, or Capital One 360.

**Diversify income sources.**