Doug Carey Blog | Preparing For Retirement While In Your 40s | Talkmarkets
President at WealthTrace
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I am the owner and founder of WealthTrace, which provides web-based financial planning software to both financial advisors and consumers.. I have over 20 years of experience in the financial markets and I am a Chartered Financial Analyst (CFA). I hold a masters degree in Economics from Miami ... more

Preparing For Retirement While In Your 40s

Date: Monday, August 22, 2016 4:53 PM EDT

We have written before about strategies for retiring early, such as our How To Retire At 50 post. Retiring early can look like a herculean task for many people, though, requiring big cuts in current spending, or boosting saving and investing to levels that seem out of the question. 

So let's consider a more typical scenario: A person or a couple, doing all (or most) of the right things financially, who gets to their 40s and wants to make sure they're on track for retiring around the usual time, in their mid-60s. Are there things that the retirement-conscious investor in her 40s should be thinking about that weren't very important a few years earlier? 

The short answer is, probably not all that much. Keep on keeping on: The rules for planning for retirement are largely still the same rules once you get to your 40s. If you have been diligently saving and investing in 401(k)s and IRAs thus far, don't stop now. 

That said, here are a few things to consider.

Check in on your risk tolerance 

How did you handle the market's gyrations circa 2008? Would you handle them the same way now, several years on? 

Panic selling in your 30s or earlier, while not ideal, is probably not a retirement-delaying event. After all, you're still decades away from retiring, and time is your friend in such a case. 

But the closer you get to retirement (which you are, every day), the more serious the repercussions of veering off course can be. Self-knowledge is critical here: If you know a 10% market correction would keep you up at night, and a 15% (or worse) correction would cause you to abandon your plan, sell all of your investments, and go to cash, it could be time to have a fresh look at how your retirement assets are allocated.

A more conservative approach will almost surely mean slower growth. But if the markets head south, your investments should not drop in value as much. And if such an approach would keep you from bailing on the markets entirely in case of a correction, it might be worth considering. 

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