How Should People In Their 40’s Invest?

how should 40 year old's invest
I still move pretty good for 40!

If all goes according to plan, as of this afternoon, we will be the proud owners of a new rental property. It’s been a crazy half decade here in the Eyes on the Dollar household. We’ve gone from huge amounts of consumer debt,  to selling a business, to becoming landlords. In all honestly, if 2015 could be the same as 2014, I’d be happy with that, but I never assume things will go the same. It seems the only constant you can count on is change!

As 2014 comes to a close, I thought I’d look at the next  year and the next few years and seek out some opinions on where we should go from here. When in doubt, ask someone else!

How Should People In Their 40’s Invest?

If we were 23 years old,  just starting out with few assets, it would be a no brainer to say max out the 401k, invest in a Roth, or save up for a down payment on a house. As you get older, there are many more  variables. Here is a breakdown of what we’re doing now.

Remember we’re old! We are both in our 40’s and hope to retire in 10 years.

Things we will make a priority every year

  • Add at least the full employee contribution to my solo 401k plan, $18,000 next year.
  • Max out our HSA.
  • Add $200 a month to our daughter’s 529 plan.

Things we did last year

  • Add about $500 a month extra toward our primary residence, which is at a low 3.25% interest rate.
  • Invest a decent amount in Betterment, which is not tax deferred.
  • Put money in savings each month to use toward rental property down payments.
  • Invest in Jim’s 401k. He doesn’t max his 401k out because the options for investments are not great and he gets no match. His job is also pension eligible.
  • Invest in Roth IRA’s. We have always maxed these out in year’s past but last year decided to only max out one and put the rest in my solo 401k to help with our taxes.
  • Did not put any extra toward rental property mortgages.

Things that are different this year

  • I sold my business last year and received a decent size down payment that put us into a higher tax situation. We won’t have that this year.
  • We are done buying rental properties for at least a few years, maybe forever. The ones we have now will cover our income in retirement, so should we be greedy and go for more or say enough is enough?

What should we do?

So with all that earth shattering information, I’d appreciate some advice on how to proceed this year.

Emergency Fund

Obvioiusly, we don’t need to add to liquid savings because we have no need for a purchase that requires cash. We will keep an amount that would cover our health insurance deductible or cover a major repair on our house or one of the rentals. If that gets depleted, we would work on replenishing it.

OR should we keep very little in savings and invest the rest in something with a greater return? If we need emergency cash, we could use our HELOC or one of our credit cards until we could access cash from our investments, or we would go bare bones on spending and not invest for a few months to pay off the loan. I realize this is outside of what many finance gurus would advise, but I’m curious about your advice on large emergency funds for people with no consumer debt and fairly stable incomes.


If you were us, would you contribute more to tax advantaged accounts or put more into stock investments? Again, we plan to use rental income to support our expenses when we retire, so maybe investing in stocks is not the best plan? Would you continue to invest in Roth’s or put more into 401k’s? Because I have a solo plan, I am able to add 25% of my income as an employer contribution on top of the $18,000.

Rental Property

Would it be better to use the extra money we are paying on our house toward rental property mortgages? The interest rate on those are 4.25%. On paper it makes more sense, but something about having a paid off home appeals to me more than I can explain. We did watch family members lose a house later in life, so maybe that’s a motivation to make sure no one can ever take away our home. Sometimes emotion is greater than percentages and rates of return.

OR should we not put any extra toward mortgage debts and pour everything into other investments?


I appreciate your reading through situations that may or may not apply to your lives at all. If you’ve been in a similar place or are facing dilemmas of your own, I’d appreciate your ideas. I realize these are all good problems to have, and I’m thankful to have choices with our money other than paying off credit card balances.

What would you invest in if you were my age? Do you always invest based on highest rate of return or does emotion guide your choices?


Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of


  1. Sounds like you are doing great! I like the idea of maxing out tax deferred accounts. Uncle Sam takes enough, I’d prefer to reduce that by as much as possible. When it comes to investing, I try to avoid letting emotions play into the decisions. Obviously emotions are part of everything, but I lean towards letting logic win out when it comes to the technical side of our investments.

  2. I think it make sense to continue pouring as much money as you can into tax-advantaged accounts. Once you hit the limit on that I would move towards stock investments. I’m biased towards investing in ‘motifs’ on Motif Investing, but if you have some companies you think are good long-term investments I would go with those. With that being said, this is very high-level guidance and I’m only in my 20s so take my input for what it’s worth haha. I do think at this point you are splitting hairs a bit and as long as you keep pouring money into investment accounts you are going to be just fine.

  3. I always think that I have to stay away from debt. Honestly, aside from bills which I consider debt, I have no debt. This has been a practice of mine since 2009. My advice is let yourself have a financial adviser when you feel like it’s the right thing to do.

  4. My personal planning is based on a mixture of emotion and return.
    If I was in a similar situation, I would continue to pay extra on the personal mortgage to have it paid off before retirement (emotional decision). I would also continue to invest in tax advantaged accounts and pay into the HSA and 529 plans. Any extra money would be divided between the rentals and taxable accounts. My division would be paying enough extra on the rentals to own them rentals free and clear by retirement or soon thereafter side you plan to live on rental income in retirement. The rest would be spent building up taxable accounts as another income stream during retirement (or use a 50/50 split between rentals and taxable account). I would also keep a cash fund to cover a few months of expenses plus insurance deductibles. I am not a fan on having a LOC only as a buffer (emotional decision again).

  5. I am not near 40’s but I have it in mind that time is flying so fast. Its high time to save for paying off mortgages and the rents, just to make sure I eill have enough left for investment for my later days.

  6. I guess the answer depends on how liquid you need your money to be right now. If you and your husband are doing fine with the income you’re receiving, then keep on maxing out the tax-advantaged options and deferring taxes. But if there’s even a small chance you might want to access the money for emergencies or another rental property, then I’d invest in some relatively stable large-cap stocks; particularity ones with decent dividend yields. If you do end up cashing them in at least you’ll be paying a lower than normal tax rate (15% instead of 25%).

  7. I’m always of the mind to get out of debt, no matter if it’s personal property or business property (rental income). We have our properties paid for and it’s a great feeling knowing that if a rent check is missed here or there it won’t pressure our finances. If I’m in debt in my 40s I’d want to get out of that by the time I turned 50. Isn’t the decade of the 50s supposed to be where people earn the most money? Thought I heard that along the way somewhere. It would be nice to live that decade with no debt where all earned money could go toward saving and investing.

  8. It is definitely a good problem to have, I can relate. 🙂 That said, it does sound like you’re making some wise decisions. I really can’t speak much to the real estate as I’m not that well versed in it but love you’re adding more and more to that aspect of your portfolio. That said, I would continue to invest in your solo/Roths as it only gives you further diversification and if you continue with both then it can give you some tax diversification when time comes to withdraw.

  9. We pay a little bit extra towards the mortgages on our rental properties BUT it is just our profit that we put back into them. I am trying to get everything paid off around the same time- 12ish years from now.

    It sounds like you are making wise decisions to me!

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