11 Signs You're Doing Well Financially in Your 40s

Understanding your finances at this age can reveal where you stand on the journey to financial independence.
Updated April 6, 2023
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Your 40s are a pivotal time to measure your financial health and make sure you're in shape for the long haul ahead.

At this point, you’re likely halfway between beginning your career and retirement. Perhaps you're even planning to retire early. This is the time to assess your finances and make sure you’re on the right path to meet long-term goals.

Following are some signs that you are doing well in your 40s.

Do you dream of retiring early? Take this quiz to see if it's possible.

You have 3x your annual income saved for retirement

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Many financial experts agree you should have approximately three times your annual income saved for retirement by the time you reach your 40s. The number is not set in stone, but it’s a good yardstick for where you want to be.

Include all assets — such as your 401(k) and cash savings earmarked for retirement — when determining this figure.

If you don’t have much saved for retirement, it’s time to start boosting your bank account. And even if you're on track with your retirement savings, don’t stop now. You likely still have a way to go before your retirement will be secure.

Your emergency fund is robust

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Having an emergency fund equivalent to between three and six months of living expenses remains a priority in your 40s. If you’ve dipped into emergency savings, work on building the fund back up.

During this time in your life, you might also consider growing your emergency fund to cover an entire year of living costs.

You're out of debt or have a plan to get there

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While you don’t necessarily need to be debt-free in your 40s, having a solid plan to get out of debt (including credit card debt and student loans) is essential as you get nearer to retirement.

You probably still have a mortgage if you are in your 40s. Some people at this age start paying down the loan aggressively with a goal of being mortgage-free by retirement.

You have an estate plan and a will

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Even by age 40, many people don't have an estate plan or will. But that can be foolish. After all, you never know what tomorrow will bring.

Crafting a will and estate plan will help protect your assets and ensure loved ones have access to them. The last thing you want is for them to worry about money after you’re gone.

If you have young children, creating an estate plan and will is especially important. You want to make sure they have an appointed guardian and are financially secure.

You have life insurance

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Generally speaking, the earlier in life you purchase life insurance, the less you will pay for it.

Life insurance does more than provide money for end-of-life expenses. It can cover the debts you leave behind (such as your mortgage) and provide much-needed funds to children for college or living expenses.

You have disability insurance

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You might already have disability insurance through your employer. If you don’t, you should consider signing up for it since it can help provide income if you're unable to work.

Self-employed individuals will need to secure disability insurance on their own. Some employees also choose to purchase additional protection beyond what’s included in their employer’s benefits package.

You have a financial advisor

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Some people shy away from financial advisors due to the cost. But the expertise an advisor provides is often worth the expense.

The decade of your 40s is an important time to make sure your finances are on track to meet long-term financial goals. Financial advisors can help with your current investment mix or simply provide tips on getting started with investing.

You've made sure your career is on track

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Your 40s are the perfect time to evaluate your career. If you don’t love your job — or aren’t earning a salary you’re happy with — consider making a change. Many people obtain higher salaries when they switch jobs or careers.

If you love your job and don’t want to work for another employer, consider asking your boss for a raise or trying to land a promotion. You might also decide to start a profitable side hustle you are passionate about or look for another way to earn additional cash.

You've invested in learning to further your career

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One way to further your career is to advance your education. A higher degree or specific certification might result in a significant salary increase.

However, you should always weigh any potential earning increase against the cost of higher learning. It's important to determine if the additional education makes sense financially.

You have a plan to finance your kids' college

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If you choose to pay for your children’s college education — or to help them with the cost — you need a plan to save money for that purpose.

There are many ways to save for your children’s education. They include opening accounts that are specifically designed for this purpose, such as a Coverdell Education Savings Account (ESA) or 529 plan.

Make sure you understand how these plans work, including any fees and restrictions that come with them. Then choose the option that works best for you.

You have a plan to become financially independent

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Financial independence occurs when you no longer need to work for a paycheck. At that point, your investments and savings can pay for your lifestyle, and you're free to spend time doing other things.

Knowing how much money you will need for financial independence and setting a date to reach that goal can help you stay on track.

You might find it helpful to set short-term goals — such as saving a specific amount each month — on the way to the longer-term goal of achieving financial independence.

Bottom line

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If you haven’t achieved the milestones on this list, now is the time to buckle down and make a solid plan to build up your savings.

Even if you've already accomplished these goals, that doesn’t mean you should stop growing your wealth.

Planning for retirement is a decades-long process. Even if you plan to delay retirement, things can happen that could force you to retire early. Health problems can arise, and life circumstances can change.

Meeting these goals in your 40s can better prepare you for the future regardless of what life throws your way.

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Author Details

Katelyn Washington Katelyn Washington is a writer with a passion for finance and business. She put herself through business school as a single mother of three and has had pieces commissioned by national magazines. When she’s not writing, she enjoys spending time with her family and editing manuscripts for indie authors.

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