Dreaming Of Retiring In Your 40’s? These 5 Tips Can Help

| November 5, 2019

Photo by Glenn Carstens-Peters on Unsplash

To retire at an early age of 40 something is a dream cherished by many. With a proper strategy, the financial planning hurdles can be tackled to create a substantial pool of retirement savings. Right from choosing the best retirement plans to cutting down on unnecessary expenses, saving for retirement requires knowledge and insight. If you too are working towards retiring in your 40’s, the 5 tips described below can prove helpful. 

1 – Lookout for Taxes

It’s important that your investments are tax-efficient. You can save as much as is possible for you in 401(k), IRAs and other such options. With these options you can save more and grow your savings faster so that your retirement fund gets a boost. You can even benefit from the employee-sponsored 401(k) where your employer matches your contribution in your retirement account. The traditional 401(k) allows you to make either pre or post-tax deductible contributions and earnings are tax deferred until withdrawals/distributions. On the other hand, the contributions you make in a traditional IRA account are generally tax deductible and withdrawals or distributions are taxed. IRA vs. 401(k) is a perennial question. The best retirement plans are those which suit your financial health and the type of retired life you wish to live.

2 – Save Half or More of Your Salary 

Generally, a majority of college graduates enjoy the peak salaries during their 40s. If they choose to retire at 40, they are curtailing savings by not contributing towards the retirement accounts during peak earning years. Besides, retiring at 40 also means you would have no access to Social Security or Medicare for at least 12 years into retirement. This would leave you with one less source of income and one more bill to foot during retirement. Also, the Social Security benefit will be reduced due to the lower average earnings when you actually attain full retirement age. Hence, if you want to retire early, you need to save 50% or more of your salary every year.

3 – Invest Smartly 

Compound long-term growth investments are what you need if you wish to retire early. Otherwise, you may never reach your retirement savings goal or can run out of money during your retired life. Choose to be as aggressive with your investments as is possible for you. You also need to start investing as early as possible. Remember, the longer your investments have time to grow, the more likely it is that they would match the stock market’s long-term average return.

4 – Avoid Unnecessary Expenses 

You can save money by cutting services which you pay for but do not use. Consider cancelling the subscription to that magazine which you never read, or the gym membership if you haven’t gone to the gym in months. The more such unnecessary services you cut off, the more money you save.

5 – Get Rid of High-interest Consumer Debt

It’s best to free yourself entirely of any high-interest consumer debt or at least maintain a low debt-to-income ratio. Few debt obligations for real assets such as a primary residence or rental properties are exceptions as long as their monthly debt payments are low. If you plan on retiring in your 40’s, a 20% or lower debt-to-income ratio is advisable.

Pro-tip: Your lifestyle expenses before retirement have a huge impact on your retirement savings. Minimalistic lifestyle can help you save more and faster for retirement. Besides, maintaining a simple lifestyle will attune you to a comfortable lifestyle post retirement even with fewer funds.

The risks associated with early retirement cannot be completely mitigated. However, you can be foolproof with you plan. You can also seek professional help to test your investment portfolio in order to ensure that you are on the correct path.

This informative post was contributed to Leisure Freak by Rick Pendykoski.

About the author:

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as MoneyForLunch, Biggerpocket, SocialMediaToday, WealthManagement, SeekingAplha, and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at [email protected] or visit www.sdretirementplans.com.


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Leisure Freak is a site dedicated to those who are truly passionate about reaching financial independence and early retirement. Not just the traditional definition of retirement, but a new passion-driven retirement.