Why Investors Get Serious at Age 40

Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

In my experience, folks tend to get “serious” about financial planning when they near age 40. The earlier you start the better, but when you near the age of 40, you may have a variety of financial issues (sometimes disguised as challenges) you are dealing with.   For the 40+ crowd retirement is no longer simply an event that is way out in the distance.  It’s time to put pencil to paper, take stock of where you are financially today, and make real plans for ultimate financial independence.

4 Steps to Getting Started at 40

During a recent consultation a new client simply needed some guidance on where to prioritize savings.  Fortunately, they had both the desire and cash flow to start feeding the retirement nest egg. Even with the ability to save, the options available can be somewhat overwhelming.  If you find yourself in a similar situation – here are 4 ideas that might help:

  1. Make maximum contributions to employer sponsored retirement plans such as 401k or 403b plans.  Under current law, you are able to contribute up to $18,000 per year to said plans.  For those over the age of 50, an additional $6,000 may be contributed.  The idea is that most people are in a higher marginal tax bracket during their working years than in retirement and these plans can provide tax leverage in addition to tax deferred growth of any earnings.
  2. Make use of ROTH IRAs if eligible.  Higher income earners (singles earning over $116,000 and married/filing jointly over $183,000) may not be able to make an annual contribution to a ROTH IRA. However, we have assisted some people in making “Back Door Roth IRA” contributions.  Not only is the name cool – it can add a real punch to tax free income. We’d enjoy discussing if this is a potential strategy for you.
  3. Consider Taxable Brokerage Accounts. While the contributions or deposits are not tax favored, having after tax investments can provide great flexibility, especially if you are considering retirement before age 59.5.
  4. Look at tax deferred annuities and life insurance.  For some higher earners using either of these tax-favored vehicles may provide additional savings opportunities.  Generally, the first three vehicles mentioned above should be utilized first.

We are here to help you prioritize and make the best use of each and every dollar. Give us a call today.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a contributor to national media and publications such as Forbes and The Wall Street Journal and has appeared on Good Morning America Weekend Edition and WDIV Channel 4. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), mentored many CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.


This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or a loss. Investments mentioned may not be suitable for all investors. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.