In a perfect world, we would all start saving for retirement in our early 20s to give us the most time for our savings to grow. And while starting in your 30s or 40s can make it a bit more challenging, you still have plenty of time to reach your retirement goals. Saving for retirement from ages 35 to 44 requires a few special considerations, including investing a bit extra each month, balancing your retirement savings with family obligations, and making room in your budget to save and invest for other goals.

1. Max Out Your 401(k), If You Can

One of the most impactful things you can do to maximize your retirement savings is to max out your 401(k) contributions, or at least contribute as much as your budget allows. This way, you can get the most tax advantages along with any matching contributions that your employer may offer.

“At this life stage, you still have a significant time horizon for compound interest to work its magic on your investments,” , a certified financial planner (CFP) and founder of The Ways to Wealth, told Investopedia. “Although you’re not as early in your financial journey as someone in their 20s, this time period is critical to solidifying your financial future, as catching up becomes increasingly difficult after 50.”

In 2024, the Internal Revenue Service (IRS) allows you to contribute up to $23,000 to your workplace retirement plan. Maxing out your account could look like contributing $1,916.67 per monthly payment, $958.33 per bimonthly paycheck, or $884.62 per biweekly paycheck.

Suppose you invested $1,916.67 per month—the maximum allowed by the IRS—to your 401(k) each month from age 35 until you retire at 65. If your 401(k) gets an 8% return, you would retire with more than $2.7 million. If you cut those contributions to just $500 per month (or $6,000 per year), you would retire with about $704,000.

Weiss notes that in your 30s and 40s, it can be challenging to balance family expenses with retirement savings. But prioritizing retirement is key to protecting your own financial future and, if you have children, your children’s financial future.

2. Open an Additional Savings Account

Your 401(k) and other investment accounts can help you potentially earn a higher return on your savings, but you may need an account where you can easily access your money. Consider setting aside some money in a savings account for liquidity, to help you pay for emergency expenses.

An emergency fund is a key part of a healthy financial plan. It’s the savings you can rely on if you have a major unplanned expense or lose your job. “A more liquid savings buffer can help you navigate unexpected financial hurdles without compromising your long-term goals,” Weiss says.

Without money set aside in savings, for example, you may be forced to take money from your retirement account to cover a financial emergency. Or, you may have to go into debt and pay interest, which can make it more difficult to save for retirement.

Everyone’s financial situation is different, with different lifestyles, goals, and budgets. So there is no specific amount that everyone should have in savings. However, financial experts generally recommend an emergency fund with at least three to six months’ worth of expenses.

3. Diversify Your Assets

Diversification is important no matter what your age, but it will look different at different times in your life. Diversification simply means dividing the money in your retirement account across many different investments.

There are two different ways that you can diversify your portfolio:

• Between asset classes: Rather than holding just one type of asset in your portfolio, diversifying among asset classes means holding multiple types of assets, including stocks, bonds, cash, and more.
• Within asset classes: When you diversify within an asset class, you hold many different assets within that class rather than just one. It’s like the difference between investing all of your money in Apple vs. investing in an S&P 500 index fund.

Each person must decide for themselves what asset allocation they’re comfortable with. Someone who has a higher risk tolerance may prefer to put most or all of their portfolio in stocks in their 30s, while someone who is more risk-averse might feel more comfortable with more balance.

One common rule that investors and advisors use to determine the best asset allocation is the Rule of 110. To use this rule, subtract your age from 110. The result is the percentage of your portfolio that you’ll keep in stocks. For example, if you’re 40 years old and you subtract your age from 110, you get a result of 70%. In other words, the rule would dictate that you allocate 70% of your portfolio to stocks and the remaining 30% in bonds or cash.

You don’t have to follow this rule exactly. Instead, you can use it as a starting point and either increase or decrease your stock allocation based on your comfort level with risk.

4. Invest for the Future

Saving for retirement should be a higher financial priority in your 30s and 40s than in your younger years, but you will likely have other priorities as well. During this time, you may be going through major life changes or have other big financial goals to achieve. For that reason, you may also want to invest outside of your retirement account.

“Non-retirement accounts offer opportunities to save for other financial targets, such as college tuition for your children or a down payment for a house,” Weiss says.

After maxing out tax-advantaged retirement accounts, many people choose to invest in taxable brokerage accounts. While the money you earn in this type of account will be taxable, you’ll also have more flexibility. You can withdraw money at any time and for any purpose without the penalties associated with early withdrawals from a retirement account.

You might use a taxable brokerage account to save for a specific goal like a new house. You may also use this type of account if you hope to retire early, since there are no age restrictions for withdrawals.

In addition to saving for your own financial goals, you may also want to invest for your children’s goals. A 529 savings plan is a popular investment account that families use to save for college. This tax-advantaged account allows you to avoid taxes on your investment growth and use the money for education expenses without paying taxes on withdrawals.

If you want a more general investment account for your child, then a Uniform Transfers to Minors (UTMA) or Uniform Gifts to Minors (UGMA) account is an option. These accounts, known as custodial accounts, allow you to invest in your child’s name instead of your own. This not only gives your child ownership over the assets, but also offers some small tax benefits.

5. Invest in Insurance

Insurance may not be something you’ve thought of as a part of your retirement plan, but it can be a key part. Having the right insurance policies in place can protect both you and your loved ones, as well as the retirement nest egg that you’ve built up.

“Insurance planning in your 30s and 40s should include foundational policies like term life insurance,” says Weiss.

In your 30s and 40s, it’s likely that other people are financially dependent on you. If you have a partner or children, the income you contribute to the household would disappear if you were to pass away. Even if you do unpaid work in the home, the cost of replacing what you do for the household could put a great financial strain on those you leave behind.

While term life insurance protects your loved ones if you pass away, there are also several types of insurance you may want to protect yourself and your financial future. Examples include:

• Umbrella insurance
• Disability insurance
• Property and casualty insurance
• Health insurance

Disability insurance will replace your income if you become disabled, while the other types of policies will cover large expenses. Without these policies, you could find yourself draining your savings—including your retirement accounts—or even going into debt to cover unplanned expenses.

While long-term care insurance may also one day become a part of your retirement plan, Weiss notes that it’s not necessary in your 30s and 40s.

“Long-term care insurance shouldn’t be a priority at this stage, as your focus should be on building a solid financial base that can compound over time, reducing the necessity for such coverage in the future,” Weiss says.

Finally, some people choose to invest in a permanent life insurance policy. While these policies can be controversial, they do offer certain tax and longevity benefits. Like term life insurance, permanent life insurance provides a death benefit to protect your loved ones. But it also provides a tax-deferred savings component that you can use during retirement to borrow against, cover your life insurance premiums, or cash out entirely.

The Bottom Line

Saving for retirement for 35- to 44-year-olds often means aiming to max out your employer’s matching contributions, diversifying your portfolio, and ensuring you have a substantial emergency savings account. Consider consulting with a financial advisor to ensure you are on track with investing toward retirement in a way that aligns with your risk tolerance and goals.