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6 Pre-Retirement Tips for Your 40s

6 Pre-Retirement Tips for Your 40sEstimated reading time: 3 minutes 10 seconds

We're wrapping up our series with some great tips for potential investors in their 40s who are interested in planning for their financial future.

From the enthusiastic startup owner to the established “C-suite” manager, it is important to keep your future secure and well-planned. As you journey through life, consider these retirement goals to keep you on track.

Life in your 40s

By the time you reach your 40s, you'll most likely have a better understanding of where you lie with your financial planning for retirement. By now, you know that the paycheck-to-paycheck lifestyle from your younger years isn’t a viable option.

You are now thinking more seriously about planning your retirement, as well as setting aside funds for your children's college education. You may even fall in the category of middle-aged adults who contribute to the support of their parents, also known as the “sandwich” generation.

Now that you're in your 40s, consider the following:

1. Take a much closer look at your retirement plan

Consulting a financial advisor and tailoring your plan to your unique situation can be advantageous to your strategy. An advisor can strategize with you on the best ways to obtain your goals, as well as provide you with relevant information and resources that are outside of your breadth of knowledge. Be sure to do your due diligence on any expert in the industry.

2. Calculate your net worth 

This is vital to determine how much you will need to retire comfortably. There are multiple retirement calculators online that you can use to help you determine what you could potentially need in later years.

3. Calculate your Social Security earnings

The Social Security website provides a Retirement Estimator that provides a partial picture of the funds that you may receive in retirement. Be aware, the amount calculated is based on current laws and may change in the future. The Social Security website estimates that by 2033 the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.

With that in mind, it may be ideal to budget your other retirement savings more conservatively. Some estimates indicate that Social Security will only replace about 20 to 30 percent of your pre-retirement income.

4. Do you have a Health Savings Account? 

According to the Employee Benefit Research Institute, Medicare covered 62 percent of the cost of health care services for Medicare beneficiaries age 65 and older, while out-of-pocket spending accounted for 12 percent, and private insurance covered 13 percent.

The average individual should anticipate paying out-of-pocket in order to cover medical costs. An Health Savings Account provides tax-advantaged savings that roll over annually, unlike a flexible spending account. Thinking of your long-term health requirements in terms of the financial elements will keep you prepared for possible future medical expenses. For more information, visit our Health Savings Account page.

5. Review your investments

If you already own a self-directed IRA, review your investments and allocation of assets. Make sure that your investments are working to get you to your end goal of a comfortable retirement. Another strategy to consider is to group similar assets in separate IRAs. That way, if one fails, it does not affect the others.

6. Build an emergency fund

Not only do you need to consider your retirement plans and savings, but work on building an emergency fund in order to avoid an unexpected emergency which can cause financial stresses. Otherwise, you may find yourself tapping into your retirement fund, or growing your credit card debt exponentially. One way to build an emergency fund is to set a monetary goal and make regular payments to “yourself.” Tax refunds make excellent emergency funds when set aside.

Retirement considerations and savings are crucial at each stage in your life. Continue educating yourself by reading about retirement planning through a Self-Directed IRA



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Self-Directed IRAs:
The Basics Guide

Learn about your investment options, Self-Directed IRA rules, and much more!

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