You’re in your 40s, which means you’re probably busier than ever. You might be thriving, earning more money and moving up the professional ladder. But you are also working hard, maybe raising a family and likely have a lot of competing interests for your time and money. Your expenses may also be higher. At this stage, it’s important to balance the needs you have now with saving for your future.

If you have children getting closer to college age and you want to help pay for it, make sure you're ready. Your parents, on the other hand, may be getting older. If their health deteriorates, they may need you to take care of them or pay for some of their caregiving needs, which can impact your finances and retirement readiness. And you likely have your own goals, such as homeownership or home renovations, paying off debt or finally taking a memorable vacation.

Covering all the bases can be daunting, but we’ve put together some suggestions to help. While we’ve organized the Financial Strategies section of this site by age, keep in mind that everyone moves through life stages at a different pace. Depending on where you are, you may want to check out some of the suggestions for other age groups.

Taking care of your financial needs

When planning for retirement, think about your ideal retirement lifestyle and then be realistic about what it might cost. Once you have a financial goal in mind, you can work with your financial advisor to develop a strategy to help get there.

Evaluate income and expenses

Use a budget to know where your money comes from and control where it’s going. This will help ensure you can afford your lifestyle and are on track to meet your savings goals. Understanding how much you're spending today can also help you better estimate your spending needs in retirement.

Once you’ve completed or updated your budget, be intentional about what you do with any money that remains after covering your expenses. If you already have a rainy-day fund, make sure it’s large enough to cover three to six months of total expenses, which are probably quite a bit higher in your 40s than when you were younger. You'll also want to save enough to meet your financial goals such as retirement, paying for your children’s education or helping provide health care for aging parents. 

Prepare for the unexpected

Make sure your strategy includes contingency plans that prepare you for the unexpected. This should include an emergency fund to help protect against unexpected expenses and potential dips in income that could throw you off track. You may also want to consider what would happen if you were suddenly unable to provide for yourself or your family. Life and disability insurance can help protect against this. Your financial advisor can discuss strategies and options with you so you can protect yourself and your family.

Max out your retirement contributions

Retirement may still seem like a lifetime away — but it’s closer than you think. While you may have a good 20 to 25 years of work left, the cost of living can double during that time, assuming a 3% inflation rate. During periods of high inflation, such as the U.S. faced in the 1970s and again in 2021–2023, costs can increase even more sharply.

So, now that your income is likely higher, make sure you’re taking full advantage of it. While everyone's needs are different, a good general rule of thumb is to save 10% to 15% of your income for retirement. If you're not on track for retirement, you may even want to consider maxing out annual contributions to your employer plan. You can also contribute to an IRA for you or your spouse as long as you have taxable compensation, subject to annual limits.

If you have a plan through your employer, you can generally contribute to both your employer plan as well as an IRA, but the portion of your IRA contribution that’s deductible from your income taxes may be affected. There may also be other products and strategies that will allow you to contribute additional amounts on a tax-deferred basis.

Develop a smart investment strategy

Investing is a pivotal piece of your financial strategy. When developing your investment strategy, you'll want to consider your goals, when you'll need to access your money and your comfort with risk. 

For short-term goals, such as saving for your dream vacation, you'll generally want to favor cash and short-term fixed-income investments. For long-term goals, such as retirement, you have leeway to invest more in high-growth potential securities — which often carry a higher risk of loss but can also offer higher returns. 

As time goes by, you’ll want to begin adjusting the balance between higher-growth and lower-growth assets since there will be progressively less time to rebuild any losses. An Edward Jones financial advisor can help you decide on the balance between risk and growth that’s right for you.

Taking care of your kids

Between childcare, food, clothing and shelter, it takes a lot to raise a child to age 18. And, after that, you may want your child to attend college, which can be expensive.

If you plan to pay for some or all of your kids’ college education, you’ll need to be prepared for the costs. Your options include:

1. Pursuing scholarships, or grants, which can be competitive and needs-based
2. Taking out loans, which charge interest
3. Using current income and money you've saved

Scholarships and grants aren’t guaranteed, loans charge interest, and most people don’t have enough income to cover the total cost of college. Saving now likely means you (or your child) will need to borrow less later.

A 529 savings plan is a good option for setting aside cash for education, since many state plans offer state income tax deductions for contributions, earnings grow tax free, and distributions are federally tax-free when used for qualified education expenses.¹ These plans can take contributions from anyone and are under the control of the account owner, not the beneficiary. So if the intended beneficiary opts not to go to college, the account owner can usually choose another person. If you have young children, one popular approach is to invest a portion of the money that was previously dedicated to day care expenses into a college savings plan. Since you’re accustomed to not having that money, it’s less likely to be missed.

Talk to your Edward Jones financial advisor about what works best for you and your family.

Planning for your children's educational needs offers an excellent opportunity to teach them good financial habits. What they learn now can help them understand the value of saving and investing early. It can also help prevent costly mistakes later, such as taking out large loans for a degree that may not provide enough income to pay the debt back.

Taking care of your parents

As your parents get older, you may need to care for them. If your parents are healthy and active, now is a great time to sit down with them and have some important conversations about this. For example, if you were suddenly put in charge of making decisions for them, would you know who to contact? Their doctors, lawyers, financial advisors — these are all good names to keep handy. 

What about their insurance policies, bills and other important papers, such as a will or health care directive? If your parents need your help someday, you’ll want to have this information on file.

If there is a possibility you or your spouse will have to leave the workforce to care for an aging parent, make sure you factor that into your retirement planning. You’ll also want to plan for any financial assistance they may need.

The bottom line

You can make your money count for today and work toward tomorrow. Your financial advisor can help you create a strategy that helps you get where you want to be. Contact your Edward Jones financial advisor today.