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  • October 26, 2023
  • Team Andrews

Financial Planning in Your 40's

Unlike your 20s and 30s, saving for your future in your 40s is different because you’re different now too.
You’ve reached your 40s and while you’ve gained some wisdom in your years, you’re still learning and growing. Unlike your 20s and 30s, saving for your future in your 40s is different because you’re different now too. No matter how far off retirement may still seem, it’s important to make sure your financial planning is in order so that you feel financially secure when the time is right to finish your professional career.

The financial advisors at Andrews Federal Credit Union in DC, MD, VA, NJ can help you save as much as possible while still enjoying the next few decades. Here are a few tips to guide your financial planning:

What Does Retirement Look Like for You?

There’s no textbook rule that states you must retire at 65 and in fact, many people can’t afford to. Every professional has a different path and needs. Some are hoping to retire early in their 50s and others hope to work as long as they can—it all depends on the person. And important first step is to determine where you ideally fall in this timeline to identify how much money you should set aside for retirement.

Typically, your retirement fund should be around 3 times your yearly income. The average American in their 40’s makes around $77,000. So, if you started to set aside money early and are around this income bracket, you should ideally have around $132,000 at this point. If you have not begun to set aside money yet, have no fear – if you’re diligent, it’s still possible to prepare yourself for a comfortable retirement with Traditional and Roth IRAs and other avenues of saving.

Do you have a retirement plan through your employer? Take advantage of employer-provided 401(k) or IRA match programs so you can make the most of your retirement savings. Companies will match up to 6% of your retirement contributions, depending on the program.

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 20 years? Or do you just want enough to live a similar life to what you have and watch your grandchildren grow up? No matter your goals, identifying them early on will help you reach them financially. 

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.

An emergency fund is especially important in your 40s, when many of you are financially responsible for other people in your life like children or even your parents. If you are raising a family, be sure you have enough money saved to support your children as well. By creating an emergency fund, you can safely stow away savings for a potential emergency. We recommend creating a separate savings account that is solely dedicated to emergencies that is easily accessible. Avoid relying on stocks or bonds as a form of emergency money since it is not an immediate way of withdrawing funds if necessary.

According to, about one in three people in 2023 have some emergency savings, but not enough to cover three months of expenses. 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. 

The average adult in Maryland spends about $2,350 a month on both essential and nonessential items. Therefore, the average American in their 40’s should have around $7,000 to $14,000 stowed away in an emergency fund. 

Use Automatic Saving Apps

Take advantage of setting up recurring deposits to your Andrews Federal Credit Union savings account. Automatic transfers like these can make it easier to save. Consider saving a healthy portion of your monthly paycheck to set yourself up for future success. A general rule of thumb is to set aside 20% of your income to your savings each month. 

Be Smart About College Expenses

If your kids are headed to college, it’s important to find a balance between helping fund your child’s education and saving for retirement. Like retirement, the sooner you start saving for college, the better. Start a college fund as early as possible and use our college savings calculator to determine what you should plan to save each month. It’s important to be realistic about the cost of tuition, so encourage your child to seek out scholarships or grants to help defray the cost. 

Create an Estate Plan or Will

No one wants to think about what will happen to our families after we’re gone, but it’s important to have a plan in place. Proper documentation can ensure your family is taken care of. For this reason, it’s imperative to have an estate plan at hand, which identifies who will inherit your money and possessions after you pass away. A simple will can be drawn up online, but your trusted attorney can prepare one as well.

Your estate is comprised of everything that you own, whether that is a car, home, checking and savings accounts and so on. Having an estate plan ready in case of an emergency is a great way to ensure your estate is delegated to those whom you’ve decided are fit to acquire. 

You should also plan and create a living will as a part of your estate plan. A living will is an important legal document that includes your personal choices of end-of-life treatment when the time comes. Your living will is quite different than your last will, which explains how your want your assets handled after death, such as naming the legal guardians of your children. 

It’s important to have your estate planning in order to ensure that your financial assets and property are well taken care of after you are gone, to set help set your family up for success. 

Pay Off Any Outstanding Debt

Are your paying off monthly loans for your car or mortgage? Is student loan debt still looming over your head? The Federal Reserve notes that the average student loan debt for people in their 40s is over $44,000. According to this study, the amount of your monthly debt payments should be no higher than 36% of your monthly income. Set aside monthly payments and work hard to minimize your debt so you can put as much as possible toward your retirement savings. 

Financial planning in your 40s is important to your future and the future of your family. At Andrews Federal Credit Union, our financial advisors can help guide you toward your goals. Contact us today or stop by one of our DC, MD, VA or NJ branch locations to get started.