You hurt. All. Over. New music is annoying, you can't tolerate a crowded establishment, and don't have a Tik Tok account. Congratulations - you must be 40. As someone who's four months from this milestone, I can relate to all these sentiments. Besides you're suddenly grumpy world outlook, what else does this fifth decade of life bring? Well, you may or may not have a family, a stable career, or even own a home. This pivotal ten year stretch is perhaps the most critical financially in your life. As we continue the series on retirement, let's get into the 40's.
Literally the first image I found for "40". I'll pass.
Time Value of Money?
So any loyal Dough-nutters are probably thinking I lost my vision. What about the time value of money? Wouldn't your 20's be the most important decade to build up your retirement and let the compounding interest do the work for you over time? From a strictly academic standpoint, that's absolutely true. Contributing $100 at 25 vs. 45 is a huge difference when you're looking at it in a vacuum. But, life is not a spreadsheet. Our income and expenses change over time - new jobs, starting a family, buying a home, unexpected medical expenses, etc. all throw your carefully-assigned budget numbers out the window over time. While you should be adjusting your budget and financial plans with these major life events, having a consistent retirement plan over time is not practical. Instead, you should contribute as much as you can, when you can, to ensure a solid nest egg that meets your retirement goals.
Dial It In
For this reason, your 40's is the decade to dial in your retirement. By the time you're 40, you are likely on the course for the rest of your life. Your career path is more or less established, you have decided whether you want a family, and your finances are lining up accordingly. In your 20's and 30's, quite frankly, you're still figuring it all out. This is not to say you're not (or can't be) financially dependable or even proficient in the first half of your life! But, does the 21-year-old you know your career, family, and living plans for the rest of your life? Probably not. Speaking from personal experience, my career path changed (albeit, somewhat slightly) at age 38. And, of course, things still change after 40. I'm merely proposing that this decade is when your life plans really starts to solidify... you know whether you're be taking a private jet to your Aspen ski lodge or not in retirement.
Your 40's are the time to take a step back and align your retirement goals with your retirement savings. If you are still on track, great! Keep on the path and perhaps kick more into the retirement account to meet those goals sooner. But what if you're behind... like, "I'll never be able to retire" behind? Don't panic. You still have plenty of years to salvage your retirement. But now it's go time. First, take a good assessment of your current financial circumstances - is it your income or spending that's preventing you from meeting your retirement goals? Can you squeeze another $100/week out of that budget to boost that 401(k)? Could you negotiate a raise at work or pick up a part-time job to supplement income? The key: don't give up on retirement goals at this point. You still have time (and the time value of money) to get you there, it's just going to take a little extra effort.
Seriously
The first half of your life is spent learning your identity. Did you spend your 20's partying, starting a family, or establishing your career? It's truly a decade of self-discovery as the first full decade as an adult. In your 30's, you probably started figuring it out. What you do with your life? Hopefully more stable than your 20's, your 30's are about taking those lessons learned to date and applying them to form your adulthood. Now you're 40... and you should get it together. It's not cute to be "finding yourself" at this point. Have a grasp on what you want the second half of your life to look like or you're doomed to life losing control of your destiny. Those that fail to plan and save for a sufficient retirement become subject to whatever they end up with, plus any Social Security (or whatever government retirement program your country has). Is that how you want to live? If you're comfortable with that, I'm not here to judge. But I will go out on a limb that my loyal readers are not about that life. If you haven't gotten your arms around a retirement plan and have the savings to match at 40, this is the time to figure it out. Get serious about your retirement and it will pay dividends when you finally get there.
We've turned the page on our retirement discussion. While you could skate a little in your 20's and 30's, you really need to get it together in your 40's. Next blog is all about your 50's, and oh boy do you need to have it figured out by that point! Until then, build that retirement portfolio and have a good one!
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