The Investing Mistake Almost Everyone Makes in Their 40s
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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By the time you reach your 40s, plenty of people may feel they’re on solid financial footing. But financial planners say this decade is where one of the most damaging investing mistakes almost everyone makes shows up. Competing priorities create the illusion that saving can wait while poor habits can undermine financial futures.
Experts explained the biggest investing misstep people make in their 40s (and a few others) and how to course-correct before they cost you a comfortable retirement.
The Biggest Investing Mistake: Thinking Investing Can Wait
Many people in their 40s assume they’ll catch up later because their income will rise, life will calm down or that they can afford to delay serious investing, according to Christopher Stroup, a CFP and owner of Silicon Beach Financial. But he said this combination of under-saving and taking excessive risk is the most damaging mistake of all.
“This happens because the 40s often bring mortgage payments, children’s expenses and caring for aging parents, creating a false sense that saving can wait,” he said.
Sometimes the mistake is in making the wrong kinds of savings choices, such as portfolios heavily concentrated in employer stock, sporadic contributions or overly conservative allocations that won’t grow fast enough, he said.
Either way, the impact can be severe. “Under-saving in your 40s can mean having to dramatically increase contributions later or delay retirement. Compounded growth is lost, and risk exposure may be mismanaged.”
More Mistakes To Avoid
There are some other common mistakes that can happen a lot to people in their 40s. Here’s what to watch for.
Allowing Lifestyle Creep
Beyond investing mistakes, one of the most financially destructive habits in midlife is lifestyle creep, according to Julian B. Morris, a CFP and principal at Concierge Wealth Management. “This is the decade where people think maybe they’re entitled to something — the new car, the bigger house, the fancy clothes,” he said. Lifestyle creep replaces actual wealth building and can set you up for a stressful 50s or a too-lean retirement.
“You hear people say all the time, ‘I feel like I make great money, but I don’t know where it goes.'” Learning to track where it goes and prioritize savings is essential to positioning yourself for retirement.
Missing Out on the Compounding Power Decade
Your 40s are often your peak earning years, Morris pointed out, which he called the “compounding power decade,” often the last stretch “where time still works heavily in our favor.” Delaying investing, even with good intentions, can cost you far more than you realize. With kids’ activities, elder care, mortgages and career shifts happening simultaneously, many people tell themselves they’ll save “when things calm down.” But Morris said, “Waiting for the calm season is basically how people miss their window to build true wealth.”
Course-Correcting in Your 40s
The good news: Correcting mistakes in your 40s is absolutely possible. Stroup starts by helping clients create a realistic cash-flow plan so that they can prioritize essential contributions. Then they should automate savings, simplify accounts, eliminate lifestyle bloat and rebuild a diversified portfolio. Stroup advises clients to save roughly three times their salary by age 40 and as much as four to five times by age 45.
However, “The single most impactful habit is consistent, automated saving at a higher contribution rate,” he said.
Rethinking Risk and Building a Smarter Portfolio
While people in their 40s still need growth, they must balance it with proper diversification and risk management, Stroup urged. Overconcentration in employer stock, overly conservative portfolios and emotional reactions to market swings all hold investors back.
“Diversify across asset classes, avoid concentration in employer stock and maintain exposure to equities for long-term growth,” he said. And always rebalance and adjust your allocations.
Your 40s don’t have to deliver a financial setback. With a few intentional shifts, this can be the decade when you finally build the foundation for the retirement you want.
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