How to Build Wealth in Your 40s

March 9, 2023

Estimated Reading Time: 8 Minutes

Turning 40 is a pivotal event in an investor’s life. By this point, many professionals are well-established in their companies and have reached the midpoint of their professional careers. While the 30s were all about earning more, the focus in your 40s should start to look toward retirement.

For many professionals in their 40s, there are several opportunities to intelligently grow their wealth through just a few small tweaks to their current strategies. We’ve put together seven tips for you to consider as your focus on growing your wealth in your 40s.

1. Maximize Your 401k Contributions

If you are an employee of a company, you might be able to participate in a 401k plan and make contributions to employer-sponsored retirement accounts. At this stage in your career, consider maximizing the contributions to your 401k accounts, which come with a variety of benefits.

Tax-Advantaged Growth

Contributions to a 401k plan are typically made on a pre-tax basis, reducing your taxable income for the year. This can lower your tax bill and increase your take-home pay.

Enhanced Retirement Savings

Maximizing your contributions can help you build a larger nest egg for retirement. The more you contribute, the more your money can grow over time with the power of compounding interest.

Employer Matching Benefits

Many employers offer matching contributions to their employees' 401k plans, up to a certain percentage of their salary. By maxing out your contributions, you can maximize the full employer match and get the most out of your retirement benefits.


Regularly contributing to your 401k can help you establish a strong savings habit and stay committed to your long-term financial goals.

Protection From Creditors

Assets held in a 401k plan are generally protected from creditors in the event of bankruptcy or other financial troubles.

2. Increase Your IRA Contributions

Investing in an IRA can be an effective way to save for retirement while enjoying tax advantages and investment flexibility. Like a 401k, IRAs are excellent accounts to help prepare for retirement. In 2023, the maximum contribution to an IRA is $6,500. Benefits can include:

More Tax Advantages

Depending on the type of IRA you choose, contributions may be tax-deductible or made pre-tax, reducing your taxable income for the year. In addition, any earnings in a traditional IRA grow tax-deferred, meaning you won't pay taxes on them until you withdraw them during retirement.

More Retirement Savings

An IRA is a retirement savings account that allows you to set aside money for your retirement. By making regular contributions to your IRA, you can further enhance a nest egg for your future.


IRAs offer a range of investment options, from stocks and bonds to mutual funds and exchange-traded funds (ETFs). You can choose the investments that best fit your risk tolerance and financial goals.

Additional Protection From Creditors

Like 401ks, often, IRA assets may be protected from creditors in case of bankruptcy or other financial troubles.

Estate Planning

IRAs can be passed on to your heirs after your death, providing a way to transfer wealth to the next generation.

3. Minimize Existing Debt

Reducing debt can provide several benefits. Firstly, it can help save money on interest payments. When you have less debt, you have less interest to pay, which can free up money for other expenses or allow you to save more for the future.

Reducing debt can also improve your credit score. High levels of debt can negatively impact your credit score, which can make it harder to obtain credit in the future or result in higher interest rates. By reducing your debt, you can improve your credit score and increase your financial options.

Reducing debt can decrease financial stress. Debt can cause stress and anxiety, especially if you're struggling to keep up with payments. By reducing your debt, you can feel more in control of your finances and experience greater peace of mind. Additionally, reducing debt can increase savings. When you have less debt, you can allocate more of your income toward savings or other financial goals, such as building an emergency fund or saving for a down payment on a home.

Lastly, reducing debt can improve your cash flow. By reducing the drag from debt, you can increase your cash flow, giving you more money to put toward other expenses or financial goals.

4. Refocus Your Portfolio

As you move closer to retirement, your financial goals and objectives may begin to shift. While a 20-something professional may be earning less, they may be able to take risks in the stock market with portfolios heavily weighted toward more risky investments like small-cap or micro-cap companies. In the event of a prolonged downturn, these younger individuals can continue to earn and invest without needing to tap into the capital in their portfolios.

Mid-career professionals typically have a shorter time horizon, which means risk needs to be more diligently managed. While investors in their 40s still have enough time to weather both a downturn and a market recovery, some may prefer to mitigate some of the volatility in the market. This can be accomplished by decreasing their portfolio’s allocation to stocks and increasing their portfolio’s exposure to relatively more stable investments like fixed income funds or bonds. Along with mitigating their portfolio’s risk, fixed income investments can also serve as a source of passive income, which can diversify how an individual is building their wealth.

Similarly, investors in their 40s may have accrued enough capital to begin looking at alternative investments like private equity or private credit. While the minimum initial capital requirements (sometimes called the “stated minimum”) may be out of reach for an investor in their 20s, an individual with more capital can take advantage of some of the unique characteristics of alternative investments like reduced correlation to the overall market and potentially higher returns. However, this capital may be less liquid than investments in the public markets, and some offer monthly or quarterly redemptions. If you are interested in learning more about alternative investment options available to you, you can reach out to our advisors for more information.

5. Build a Tax-Efficient Portfolio Strategy

As an investor progresses in their career, considering the tax implications of their investments becomes more important. Tax efficiency refers to how well a portfolio mitigates the amount of money lost to taxes, and there are several basic strategies for increasing your portfolio’s tax efficiency.

An investment strategy might be different between taxable and tax-deferred or tax-exempt accounts. For example, a fixed income investment in a taxable account has significantly different tax implications than a fixed income investment in a tax-exempt account (like a Roth IRA). The fixed income received in a taxable account is taxed, so an investor would lose a portion of all the fixed income generated in their taxable account to taxes. However, in a tax-exempt account, fixed income is not taxed, and an investor can keep the entire amount of their income.

Another example of tax inefficiency could be holding municipal bonds in a tax-exempt account. Because federal municipal bonds are not taxed, holding them in a tax-exempt account would be inefficient. Instead, investments in these bonds would be better off in a taxable account, freeing up space in a tax-advantaged account for protecting investments that would otherwise be taxed.

6. Create a Financial Plan

A Roadmap to Your Future

A financial plan can help you set and prioritize your financial goals. Whether it's saving for retirement, paying off debt, or buying a home, a financial plan can give you a sense of direction and help you stay on track.

Making Better Decisions

A financial plan can also help you make informed decisions about your finances. You'll have a better understanding of how each financial decision impacts your overall plan and can make adjustments accordingly.

Increasing Savings

By identifying areas where you can cut back on expenses and sticking to your plan, you can build an emergency fund, save for retirement, and achieve other financial goals. Additionally, having a financial plan can reduce financial stress by giving you a clear picture of your financial situation and helping you plan for the future. This can alleviate anxiety and improve your overall well-being.

Changing with the Times

A financial plan is not set in stone and can be adjusted as your financial situation changes. This can help you adapt to unexpected events or changes in your life circumstance. The most useful financial plan is one that is dynamic and grows with you as your life changes over time.

7. Hire a Financial Advisor

Your 40s represent one of the highest-earning periods of your life. With increased income, bigger investments, and heightened tax consequences, hiring a financial or wealth advisor is one option that can simplify your wealth, improve your financial situation, and give you peace of mind in knowing a financial professional is overseeing your wealth.

There are many types of financial advisors and many different fee structures financial advisors can offer. For example, as a fee-only fiduciary, we charge a fee on assets under management (AUM). Other financial advisors may charge hourly or include additional fees for financial planning. If you are interested in learning more about the different fee structures advisors might use, take a look at our guide to advisor fee structures.

Finally, if you’re interested in learning about how we help investors in their 40s optimize their wealth, you are welcome to reach out to us using our contact form.

Important Disclosure Information

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