Welcome back to Money Burst. My name is Chris and I'm here with your quick retirement readiness guide that I'm breaking down decade by decade.
Today we're diving into your 40s, a time when retirement planning becomes a little bit more real. So, let's get started. In your 40s, you're often reaching your peak earning years, so obviously there's going to be some temptation to, you know, let your lifestyle creep up a little bit as your income increases. And there's nothing at all wrong with enjoying your money, but keep in mind those goals that you set for yourself back in your 30s. If you can set aside a portion of any of those raises that you might receive, it can shave years off of your working career. And because even a small increase in your retirement contributions can make a huge difference over the coming decades.
As the big 5-0 approaches, you're going to gain the gift of catchup contributions. So, starting at the age of 50, the IRS will allow you to contribute an extra $6,500 into your 401k and an extra $1,000 into your IRA on top of the standard limits. So that's a total of $26,000 and $7,000 respectively in 2023. So, begin planning in your 40s how you can increase your contributions to take advantage of these higher limits.
And, lastly, consider seeking out a financial advisor if you haven't done so already. Advisors aren't just there to help you figure out how to invest. They offer personalized advice that's tailored to your financial situation and your retirement goals. They can help you navigate big decisions like when to take Social Security, tax strategies, and a whole lot of other things. If you're also unsure of how to go about finding a trustworthy adviser, start by checking out the Financial Planning Association website or the National Association of Personal Financial Advisors.
Your 40s are about striking a balance, managing the financial demands of today while still setting yourself up for a successful retirement.