7 Ways to Save in Your 40s and Prepare for Retirement

Get Rid of Debt

Getting rid of debt is just as important as saving money. But, if you're like most Americans, you probably have a balance on your mortgage, some credit card debt, and maybe even a car loan or two.

As tempting as it may be to spend all of your hard-earned money on fun things like eating out and going on vacations, you’ll benefit much more in the long run by using that money to pay off your debt. You don't give up all of the fun things you do, but paying a little extra on your mortgage each year will go a long way.

Here’s a calculator that can help you figure out how to pay your debt off effectively.

Open a Roth IRA

While a 401(k) or a traditional IRA provides some upfront savings (by allowing you to set aside pretax money and reduce your taxable income), it doesn't offer the benefits that a Roth IRA or Roth 401(k) can.

With a Roth IRA or Roth 401(k) you don't receive the tax breaks that a traditional 401(k) or an IRA offers, but your earnings are tax-free. The money you've saved in in your Roth accounts can be accessed at any time and without penalty.

It is important to note that there are income limits when determining your eligibility for opening a Roth IRA. As of 2022, for most married couples, this amount is $214,000, and it is expected to adjust for inflation in the future. To learn more about the IRS limits for a contributing to a Roth IRA visit here.

Get in Shape

This may not be exactly what you were expecting to see on this article, but getting in shape could be a great way to save some money. By exercising and eating healthy, not only will your body thank you in the long run, but you could save money on your health and life insurance premiums each year.

Life insurance companies will always charge a lower rate to someone who is healthy versus someone who is considered to be unhealthy or overweight. Obesity has also been linked to other serious health issues like cancer, heart disease, and type II diabetes.

You don't have to live at the gym, but something as simple as exercising for 30 to 40 minutes a few times a week can make a huge difference to your overall health. If you can, grab a buddy to join you! It'll make the time go by faster, and not only will you both benefit, you'll also be more likely to establish a routine and continue going.

Balance Saving for College and Retirement

If you have children, the cost of their college tuition is something you probably put some thought into.

While most of us want to help our children as much as possible with the cost of their college tuition, it's important to remember that can always borrow money for schooling - you can’t necessarily do the same for retirement.

It’s kind of like the analogy they use on planes in case of a crash; put your own mask on before helping others. Your children have much more time to save for their future and pay off debt than you do. And if you save enough for retirement, you may have money later on to help them pay back that loan.

We’re not saying that you shouldn’t help your kids pay for their college tuition if you can, but don’t put your entire savings into it. Encourage them to start saving a little bit now, and see if they can qualify for any scholarships, or take out a small student loan.

You can also look into purchasing a term life insurance policy to cover their student loans if you decide to co-sign for them. Once their loans have been repaid, they can transfer the beneficiary to their spouse or significant other.

Don’t Give Up on Stocks

It may be wise to invest in the stock market if you haven’t already. Vanguard’s target-date retirement funds suggest that people in their 40s, who want to retire in about 25 years, should have 90% of their money invested in stock funds, and about 10% in bonds.

Stocks provide capital appreciation if a company's value increases overtime, and dividends, when a company shares their profits with the shareholders. If you're a beginner, you may want to consider index funds instead of a single stock. Index funds are made up of hundreds of companies which diversifies your risk.

In the last two years, the stock market has increased annually by 10%, while it's debatable if this growth is sustainable, investing in the right (and stable) companies could help you significantly increase your investment growth over the next two decades.

Buy Your Life Insurance Now

If you have any debt, or a family that depends on your income, you should consider buying life insurance while you are in your 40s. With most companies, the cost of life insurance doesn't increase very much until after the age of 50, when we're more likely to have health issues.

Securing a small term policy until your planned retirement age, or when you expect to pay off your mortgage, is a great way to safeguard your family from the unexpected. While buying life insurance on the family's primary breadwinner is a must, it's also a good idea to secure coverage on your non-income earning spouse.

Most of us wait until a major health issue scares us into buying life insurance, but by then our rates have doubled or tripled. Take a look at how affordable life insurance can be for someone who is in their forties versus someone in their fifties an in comparable health:

Sample 20-Year Term Insurance Rates For A Male

Secure Long Term Care Insurance

According to a recent Single Care article from 2022, about 70% of seniors over the age of 65, will require some form of long term care during their lifetime. As advancements in medical technology continue, and life expectancy increases, this number will likely grow in the future.

While most of us would rather spend a few hundred dollars a month on cable or eating out, locking in long term care insurance will likely save you tens of thousands of dollars in the future. Currently, the median national cost of a semi-private room in an assisted-living facility is an alarming $85,775!

Even if you have an ample amount of money set aside for your retirement, the cost of long-term care quickly drain your savings account. In fact, 15% of Americans are expected to spend more than $250,000 on long-term care coverage during their lifetime.

Too offset this risk, we recommend securing an affordable long term care policy while you are young and healthy. A handful of highly-rated life insurance companies offer inexpensive term insurance policies with long-term care. This coverage will protect your loved ones if you pass away, or need expensive care.

Why You Should Save

This is probably a no-brainer for most, but it really is crucial that you should start saving now, especially if you haven’t already. Even if you have a job that you enjoy, there comes a point in your life where you’re probably going to want to sign-off and spend your days doing something rather than working.

The longer you put off saving, the longer you’ll have to wait until you are able to retire comfortably. If you invest in yourself now, your future self will probably thank you, and you'll be giving your money more time to grow and earn interest.

About JRC Insurance Group

JRC is an independently-owned life insurance agency that represents 63 top-rated insurance providers.We're licensed nationwide and our agents are experts at saving our clients money.

By asking you a few questions about your health and coverage needs, we can match you with the best life insurance option available. Our shopping services are free, and there is no cost to apply for coverage.

To obtain a free instant life insurance quote online, or to learn more about your options for affordable term or permanent coverage, please give us a call today toll-free at 855-247-9555 or request a free instant quote online below.