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Ask Our Retirement Expert

Have a question? Ask our Retirement expert.

Have questions? Email Send your question to jbarnash@smartasset.com

how to invest for retirement at age 40

If you’re at or near your 40th birthday, retirement is probably still a couple decades away for you. That said, if you haven’t started saving for retirement yet, it can seem too close for comfort. Don’t panic though. There is still plenty of time to get ready for retirement, provided you take the time now to plan and commit to saving. With that in mind, here is a guide for how to invest for retirement at age 40.

How Much You Should Have Saved at 40

There is no one-size-fits-all answer for how much you should have saved by age 40. The question of how much you should have saved depends largely on what your goals for retirement are. If you plan to do a lot of travel and stay in the single-family home you raised your kids in, you might need more than if you’re planning to downsize to an apartment and mostly be a homebody.

Once you’ve thought about what your life in retirement is going to look like – and you know at what age you think you might want to retire – you can start figuring out what’s a good savings goal for you to aim for and whether or not you’re on track.

If you have a 401(k) plan through your employer, you can use this 401(k) calculator to estimate how much your savings will be worth.

What to Do If You Have No Savings

how to invest for retirement at age 40

If you’re 40 and have no savings, count yourself lucky – you could be 50 and have no savings. Yes, it would have been nice to start earlier, but you’ve got plenty of time to catch up and make sure you get back on track to retire at a reasonable age and enjoy your golden years.

Think about what options you have. If you have access to an employer-sponsored retirement plan like a 401(k) or a 403(b) make sure to take advantage of them. Your company may even match some of your contributions to these plans. If so, check out how much your match is and at what percentage. This is free money, so if you’re behind in your savings, you should make sure that contributing enough to your plan to take advantage of it.

Save beyond your 401(k) plan if you can. After you’ve reached the yearly maximum for your 401(k), think about other investing options like a Roth IRA or even a money market account with a high interest rate. Once you’ve figured out how much money you can afford to save, make sure you invest all of it in vehicles that are going to make your money work for you. Saving money is great, but if you’re going catch up with your retirement goals you need to boost your savings. Keeping the money you’re saving in a checking account won’t do that, so invest as much as you can in products that will make money for you.

Investment Strategies for 40-Year-Olds

First off, if you have enough investable assets, think about getting a financial advisor. A financial advisor will work with you to make sure you’re able to meet your retirement goals, and they will direct you to the investments most likely to pay off in the end. Make sure your advisor is a fiduciary, meaning they have to keep your best interests in mind when making investment decisions. SmartAsset’s financial advisor tool can match you with an advisor in your area who is a fiduciary for free. You will be prompted to answer a series of questions and then you’ll be matched with an advisor who fits your needs and who can help you get ready for retirement.

If you’ve decided against using a financial advisor, you can also learn to invest on your own. Consider reading one of the top investing books for guidance. Many experts recommend having a diverse mix of investments. At age 40, some experts will say that you can probably afford to take some risk, but also look for more stable investments like index funds and bonds. The thinking behind this is while these likely won’t have the explosive returns investing in individual stocks can have, they’re also less likely to have catastrophic losses. This should make sure you’re safe for your retirement.

The Bottom Line

how to invest for retirement at age 40
If you’re turning 40 and you’re just starting to think about retirement, don’t panic. You’re a little bit behind the curve but there is still plenty times to catch up. First off, make sure you’re investing as much of your income as you can. Make sure your money is working for you in some sort of investment vehicle, not just sitting in the bank. Second, think about investment strategy. Consider finding a financial advisor who will help you get on track. And remember many financial experts recommend balancing riskier investments with more stable ones like index funds. Retirement is still a couple of decades away for you, but you can see it on the horizon. Now’s the time to get ready.

Retirement Tips

  • Don’t forget about taxes. The state you retire in will have a big impact on what your retirement future looks like, as some states are much more friendly to retirees when it comes to taxes than others. SmartAsset has created a guide to retirement taxes that allows you to see how your state rates for retirement tax friendliness, or look for other states you might settle in.
  • Social Security. Keep in mind you’ll also be getting a check each month for Social Security. SmartAsset’s free Social Security calculator shows you how much you can expect to receive in Social Security once you reach retirement age.
  • Consider working with a financial advisor. Planning for retirement can be stressful and confusing. It’s also incredibly important that you make the right decisions in order to set yourself up for a secure financial future. A financial advisor can help you to do just that. When looking for a financial advisor, you should make sure that you’re only considering working with fiduciaries. A fiduciary is legally bound to act in your best interest at all times. The SmartAdvisor tool can help you find a financial advisor. After you answer a short series of questions, the tool will match you with a financial advisor in your area who is a fiduciary.

Photo credit: ©iStock.com/adamkaz, ©iStock.com/shapecharge

Ben Geier Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society of American Business Editors and Writers. When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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