Personal Finance

5 Milestones You Should Hit by Age 40 If You Want to Retire Wealthy

David Beren

Published: September 29, 2024 9:45 am

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• • It would help to have a set financial plan before you turn 40.
  • At the very least, you should have retirement accounts established. 
  • Make sure you always have an emergency fund available.
  • Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

When you’re getting closer to your 40s, I can speak from experience and say that you start reevaluating every financial decision you have ever made. You’ll ask yourself whether you should have taken this trip, bought this car, or lived in this home. The reason why you start to second-guess is that right around turning 40, people start to think about how likely they are to retire comfortably. 

If you’re under 40, there’s good news: You have time to start planning to build enough wealth for those lofty retirement years. It cannot be overemphasized just how important it is to nail down a plan, whether it’s on your own or with a financial planner, to start planning early so you can make sure you’re hitting the right milestones before turning 40. 

Milestone 1: Maxing Out Retirement Accounts

One of the best things you can do to set yourself up for success before 40 is to max out the contributions you can make toward a 401K or IRA. The good news is that many employers offer matching contributions up to a certain percentage to help you earn even more toward retirement. By maximizing a percentage of your paycheck, you’ll be in good shape to set yourself up for financial independence for retirement by age 40. 

Milestone 2: Paying Off High-Interest Debt

Another major milestone before turning 40 that you should check off is paying off any outstanding high-interest debt you have accrued. This could be any loan you may have taken to help pay for school or purchase a vehicle. 

Because many of these loans come with high interest rates, the faster you pay them off, the more you can put toward earning interest for retirement. You’ll also reduce your financial stress, which will help you better plan for the days you stop working. 

Milestone 3: Having a Sizable Emergency Fund

There is no question that regardless of your age, having an emergency fund is necessary. An emergency fund is a definite milestone, whether for a job loss, car repair, home repair, or anything else. Traditional thinking says that you should have between 6-12 months of savings to cover your bills, groceries, and payments needed to get by. This fund isn’t there to be used for a vacation. It’s solely there for an emergency, hence the name. 

Milestone 4: Diversify Your Portfolio 

As much as we all want to believe we can get rich by investing in Apple and Google stock, this isn’t the reality. Instead, working with a financial advisor or doing plenty of research to diversify your portfolio would be best. Whether this means investing in a high-yield savings plan, ETF, or some stocks, you want to ensure you’re prepared to weather some downturns in the market. Rest assured, any investment has ups and downs, but before you turn 40, you should have an established investment strategy. 

Milestone 5: Multiple Income Streams

For the very reason I’m writing this article, having multiple income streams is super important. I’d love it if writing were my sole income, but having multiple income streams affords me a better chance to retire wealthy. You should adopt this mentality and set up a side hustle, maybe going to garage sales and reselling products on eBay to create a separate income stream. 

Not only will you find something you might enjoy doing, but you will also allow yourself to put away even more money, which can be used as part of an investment to grow into a stronger retirement fund for later years. 

Evaluate Your Financial Goals

Whether you are turning 20, 30, 40, or even 50, it’s incredibly important to evaluate and adjust your financial goals. If you have a partner, talk with them about where you want to be financially and at what age. If you want to retire at 55, you need to know exactly what a net worth would look like to make that happen. The same goes for 60, 65, and so on. Adjust these goals regularly, especially if you get a new job or earn more (or less) money.