Boost Your Retirement Savings: Tips for Your 40s and Beyond

We all want to know if we’re behind or on track for retirement. As we reach our 40s, retirement feels much closer than it did in our 20s and 30s. So how can you tell if you have your ducks in a row —  or if you’re falling behind — on this wily goal? 

By now, you’ve likely advanced in your career and are earning more than ever. If you’ve had children, you might finally be past the costly daycare years. With these changes, you may be wondering: How much is lifestyle inflation reasonable, and how much should go toward retirement savings?

First, take stock of where you are today:

• Review your net worth: Add up your assets — such as checking and savings accounts, retirement and other investment accounts, and any real estate you own — then subtract your liabilities, including mortgages, car loans, credit cards, student loans, and/or family loans.
• Review your cash flow: Look at your income using your year-end pay statement or W-2. Then, analyze your spending using end-of-year credit card statements to estimate how much you spent over the past year.

Then, consider these 10 questions:

1. Are you maximizing your retirement contributions? Each year, the IRS sets contribution limits for 401(k) plans. If you’re able, aim to contribute up to the annual limit. If you’re 50 or older, you may also qualify for additional catch-up contributions. Check the current limits to ensure you’re taking full advantage. 
2. If your spending has increased in recent years, have you reassessed your emergency fund? Is it still sufficient to cover three to six months’ worth of essential expenses? 
3. With your recent income increases, do you have sufficient long-term disability insurance to protect your income? Group policies usually have a monthly benefit cap and are taxable.
4. As your assets have hopefully grown in recent years, have you reviewed the liability limits on your insurance policies for your home and vehicle? If your coverage is lower than your non-retirement assets, consider increasing your limits or adding an umbrella liability policy for extra protection.
5. Does your 401(k) allow after-tax contributions? If so, are you taking advantage of them and do they align with your financial strategy?
6. Are your investments appropriately allocated between stocks and bonds? Your risk tolerance and capacity may have shifted since you last reviewed them.
7. Do you have non-retirement investments to support your medium-term goals? While savings for retirement is important, it’s also important to set aside money to help with milestones along the way.
8. Have you gathered your old workplace retirement accounts? Consolidating them into your current workplace retirement plan or an IRA can simplify management and reduce the number of accounts you need to track.
9. If you’re considering buying a new home, does it make sense to sell your current home or rent it out? Assess the property’s potential cash flow and compare it to the benefits of using the sale proceeds to make a larger down payment on a new home.
10. When did you last review the beneficiaries on your retirement accounts? Have you gotten married and/or divorced, had children, or lost loved ones since?

Working with a CERTIFIED FINANCIAL PLANNER® professional can help you review your trajectory to determine if you’re on track for retirement and make any necessary adjustments based on your financial situation. Find your CFP® professional today at www.LetsMakeAPlan.org.