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Financial Planning in Your 40s

February 02, 2022

Well, you’ve reached your 40s. And sure, you’ve gained some wisdom. But the truth is you’re still learning and growing. And unlike when you were younger, saving for the future in your 40s is different because you’re different. But remember, no matter how far off retirement may still seem, it’s important to make sure your financial planning is in order so you feel secure when the time is right to stop working.

The experts at Middlesex Savings Bank can help you save while still enjoying the next few decades. Here are a few tips for financial planning in your 40s:

What Does Retirement Look Like for You?
There’s no rule that says you must retire at 65 and in fact, many people can’t afford to. Everybody has a different path. Some are hoping to retire in their 50s while others hope to work as long as they can – it all depends on what you want. So, an important first step is to determine where you fall in this timeline to identify how much money you’ll need for retirement.

It’s also important to know what your retirement goals are. Will you be spending your retirement relaxing on a waterfront property? Traveling the world? Are you aiming to retire a millionaire in 25 years? Or do you just want enough to live a similar life to what you have now? No matter your goals, identifying them and developing a plan will help you reach them financially.

Typically, your retirement fund should be around 3 times your yearly income at this point.3 The average American in their 40s makes around $79,000. So, if you started to set aside money early and are around this income bracket, you should ideally have over $200,000 set aside by now. 

If you don’t have that much – or if you haven’t even begun yet – don’t fear. It’s still possible to prepare a comfortable retirement. The first step is to see if you have a retirement plan through your employer. If so, make sure to contribute enough to take advantage of any 401(k) or IRA match programs to ensure you maximize your retirement savings. And then consider these moves:

Focus on Your Emergency Fund
A sudden job loss or medical emergency can take a toll on your savings account. Make sure you’re prepared for the worst and financially stable enough to handle anything life may throw at you with an emergency fund.
An emergency fund is especially important in your 40s, when you’re likely to be responsible for others, perhaps children or parents. We recommend creating a separate savings account that is solely dedicated to emergencies and is easily accessible as a way to handle potential upheavals. 

Ideally, you should have around three to six months’ worth of living expenses tucked away in your emergency fund. That way your groceries, routine medical expenses, and even your mortgage can still be maintained in the event of an emergency. And since the average adult in Massachusetts spends over $2,000 a month on both essential and nonessential items, you should try to put between $6,000 to $12,000 into your emergency fund. It may be difficult, but it’s worth it. According to, about half of all Americans have less than three months’ worth of emergency expenses saved. Sure, it’s not strictly a retirement issue, but you can easily see how an unexpected major expense can throw your plans for the future off-track.

Use Automatic Saving Apps
Take advantage of recurring deposits to your Middlesex Savings Bank account. They make it much easier to save. A general rule of thumb is to set aside 20% of your income in savings each month4, and automatic transfers make it much easier to reach your goals because the money will be safely tucked away before you see it in your regular account – making it much less likely to be spent.

Be Smart about College Expenses
If you have kids and they are headed to college, it’s important to find a balance between helping fund their education and saving for retirement. Like retirement, the sooner you start saving for college, the better. So start a college fund as early as possible and calculate what you are able to afford and whether you might qualify for financial aid. But don’t forget there are many more options available to pay for tuition than to pay for retirement. Being realistic about your retirement needs as well as the cost of tuition may mean encouraging your student to seek out scholarships or grants to help defray the cost. 

Create an Estate Plan or Will
Nobody wants to think about what will happen to their family after they’re gone, but it’s important to have a plan in place. Accidents and illnesses happen, and proper documentation is the best way to ensure your money goes where you want it to. For this reason, it’s imperative to have an estate plan, which identifies who will inherit your money and possessions after you pass away. 

Think estate plans are only for the rich? Not quite. Your estate is everything you own. Maybe for some it includes a chateau in the South of France, but it’s much more likely to be your home, a car or two, your checking and savings accounts, your 401(k), and so on. Having an estate plan ready in case of an emergency is a great way to ensure your estate goes to those whom you’ve decided should receive it. 

You should also plan and create a living will and final will as a part of your estate plan. A living will is important because it includes your choices for end-of-life treatment when the time comes. Your final will, obviously, explains how you want your assets handled after death, and who should be the legal guardians of any minor-age children. 

It’s important to have your estate plan to ensure your financial assets and property are properly handled after you are gone, and to help set your family up for success without you. 

Pay Off Any Outstanding Debt
Are your paying off loans for your car or home? Is student loan debt still taking a cut of your paycheck? No surprise if it is. The average student loan debt for Massachusetts residents in their 40s is $44,7935. But the real question is how much of income goes to servicing your debt. According to this article, the amount of your combined monthly debt payments should be no higher than 36% of your monthly income. If they’re higher, paying more than the monthly payment can be helpful because the extra will go straight toward the principle and help you pay off your loans much sooner. Then you can put the extra toward retirement savings. 

Financial planning in your 40s is important to your future. Fortunately, one of our many experts at Middlesex Savings Bank can help guide you toward your goals. Contact us today or stop by one of our local branch locations to get started.



Middlesex Savings Bank:
1All accounts subject to approval. This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Individuals should consult with a tax or legal professional regarding their individual situation.

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This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult with a tax or legal professional regarding their individual situation.
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Middlesex Financial Group is not a registered broker-dealer or Registered Investment Adviser. Middlesex Financial Group and Commonwealth are separate and unaffiliated entities of one another. Fixed insurance products and services offered by Middlesex Financial Group are separate and unrelated to Commonwealth Financial Network.

3 Consumer Expenditure Survey, US Bureau of Labor Statistics.

4 Investopedia 

5 Education Data


by Middlesex Savings Bank