Planning for retirement can feel like solving a complex puzzle, with each piece representing a decision that could affect your future. But here’s the good news: It’s never too late to take control. In this series, we aim to simplify the process, providing actionable insights to help you confidently manage your financial future.
When you’re young, retirement can feel like it’s a lifetime away and something only Future You needs to worry about. Then, suddenly you’re in your 40s and you only have a couple of decades or so to set yourself up for your golden years.
Whether you’ve been saving and investing dutifully since you collected your first grown-up paycheque or you’re only just starting to plan for your financial future, being aware of potential pitfalls will help you achieve your goals.
Here are five mistakes to avoid in your 40s if you want to have the retirement of your dreams.
1. Trying to time the market
Many people first start investing in stocks around this age and seeing returns can make anyone giddy enough to try to make playing the market their side hustle.
“Theoretically, in your 40s, you might be at the point where you have some extra money to invest,” says Kelley Keehn, a Toronto-based personal-finance educator and bestselling author of 11 books. “Yes, there are trends that we see, but not even the professionals can time the market, so how is the average person going to do it?”
She explains that there are strategies to try instead, like the Warren Buffett approach of being safe with 80 to 90 per cent of your money and taking bigger risks with the remaining 10 per cent – so if the risks don’t pay off, you aren’t losing a significant chunk of your assets – or dollar cost averaging, where you commit to putting the same amount into stocks at regular increments over time rather than investing a lump sum all at once.
2. Letting lifestyle creep take over
By this stage of life, most of us are better off financially than we’ve ever been, and the temptation to splash out on a statement bag (a bright-orange Loewe Puzzle bag goes with everything, no?) or an all-frills ski vacation in the French Alps can have a way of winning out over prudence.
“Maybe you’ve had a couple of promotions and you’re starting to earn more, but instead of saving, your lifestyle just creeps up,” says Keehn. “Rather than being oblivious to it and then 20 years later being like, ‘Wow, a lot of money flowed through my hands and I didn’t hold on to as much of it as I could have,’ be mindful. Are you actually saving more or is it just going out the door?”
3. Not sitting down with a financial planner
Paying for expert advice might sound like something only the wealthy can afford, but it’s really a smart move for everyone, says Jessica Moorhouse, a Toronto-based financial counsellor and the author of Everything But Money.
“Hire a fee-only financial planner – who can’t sell you anything besides their advice – so you can figure out what’s going on with your current financial situation and start redefining some of your financial goals.”
For many of us, our late 20s and our 30s are focused on, say, paying off student loans and saving for a downpayment, so planning for retirement can fall to the wayside. Once you’re in your 40s, it’s time to consider the next life stages and how to prepare for them. “A financial planner can help you prioritize things and put dollar amounts to your goals in a way that still leaves you room to put money into your retirement plan.”
4. Putting too much money into real estate
The expression “safe as houses” rings true after generations of use for good reason – property is nearly always a sound investment. But maxing out on that lovely house with a chef’s kitchen and big back deck is a dicey move.
“People feel pressure to buy real estate – it’s the advice they got from parents and grandparents because it worked out for them,” says Moorhouse. “But you don’t want to put everything into one asset, especially an asset that you live in, because you can only access those funds if you sell, and you’re likely not going to want to sell a home you spent time and energy renovating and loving.”
She says a wiser move might be to rent while aggressively investing in the stock market or compromising on the dream house and instead opting for a condo or a property in a less desirable location.
5. Stretching yourself too thin caring for both children and aging parents
In an era when there’s an expectation that parents do anything and everything to set their kids up in life, expenses can make a dent in assets that would have otherwise been earmarked for retirement.
“I just had an Uber driver telling me today that he pays $9,000 a month for his kids to go to private school,” says Keehn. “I was like, ‘What?! Do you have 15 other jobs?’ And he said, ‘I don’t even eat. I just pay for everything for my kids.’”
Such choices highlight the challenges many parents face in balancing sacrifices for their children with the need to secure their own financial stability and prepare for future care needs. In your 40s, you might also be facing situations where your own parents need support.
“You’re in that sandwich part of the life cycle, which is difficult because it can feel like you’re being pulled in all directions and might mean you’re putting your financial future on the back burner,” says Moorhouse. “There’s that saying about putting your own oxygen mask on first, and I think people need to be reminded of that because if we don’t take care of ourselves, we’re not going to be in a position to continue to help the people in our lives.”