Your 40s mark a turning point for retirement security and wealth building. The five money moves you need before hitting 40 will determine whether you reach retirement comfortable or scrambling.
First, maximize your 401(k) contributions. If your employer offers matching funds, you must contribute enough to capture the full match. That's free money. For 2024, you can contribute up to $23,500 to a traditional or Roth 401(k). If you haven't been doing this, start now.
Second, open or boost a Roth IRA. You can contribute $7,000 annually (for those under 50). A Roth grows tax-free and offers tax-free withdrawals in retirement. This is especially valuable if you expect to earn more later in your career.
Third, eliminate high-interest debt. Credit card balances at 18-22% APR destroy wealth faster than most investments can build it. Attack these aggressively before age 40, or compound interest will eat your retirement years.
Fourth, build an emergency fund. You need three to six months of living expenses in a liquid savings account. A high-yield savings account like Marcus by Goldman Sachs or Ally Bank currently offers around 4.25-4.50% APY. This prevents you from raiding retirement accounts when emergencies hit.
Fifth, review and increase your life insurance. Term life insurance costs less at 40 than at 50. A 20-year term policy on a $1 million benefit runs roughly $50-70 monthly for a healthy 40-year-old. If you have dependents, this protects them if something happens to you.
Time compounds your advantage. A dollar invested at 35 grows significantly more than a dollar invested at 45. Missing these moves now means playing catch-up for the next 25