How To Be Wealthy By Age (2026 Edition)

What Does It Mean to Be Wealthy at Every Age? (0:00)

Brian: Do you want to be wealthy? Well, the truth is being wealthy is going to look different based on your age.

Bo: Brian, I am so excited because today we’re going to show you what it really looks like to be wealthy at every stage of life. We’re also going to show you how to overcome the challenges and take advantage of the opportunities in each stage of life so that you can truly be wealthy.

Brian: If you’re not aware, I’m Brian, he’s Bo, and we’re the Money Guy Show where two financial advisors walk you through your wealth building journey. With that, let’s dive right in.

Bo: So Brian, as we were talking about how to lay this out, we thought there would be an interesting format to walk through each stage and age. We want to look at a financial snapshot. We then want to look at what are the challenges in that decade. What are the opportunities? What does an actual wealthy person look like? And what are the net worth targets that you ought to be hitting if you’re truly a Financial Mutant at each of these ages?

Brian: And this is going to be fun because I think for a lot of us, we aspire or we think we should look like a 50 or 60-year-old when we’re in our 20s. And that’s just not the case. I mean, when we pull back the layers and you see that the typical person who buys a Corvette is 63 years old, you realize I don’t need to be buying those types of cars when I’m in my 20s. So, I love that we’re going to shed light on this.

Your 20s: Start Early and Use Time to Your Advantage (1:19)

Bo: And with that, let’s jump right into what does it look like to be wealthy in your 20s. Yeah, I think this is great. Despite what Instagram says, despite what the highlight reel would suggest, the actual makeup of a 20-year-old is a little bit different. We know that the median household income across 20-year-olds right now in this country is a little over $60,000 a year. Their total debt load, not including their mortgage, so this would be student loans, credit cards, auto loans, about $24,500. Their median retirement savings just a touch under $12,000, and their total net worth on average on the median for those in the 20s is right under about $21,000.

Brian: I think it’s important this decade especially, there’s going to be a huge difference from the way you enter this decade and the way you leave this decade. You think about your 40s or 50s, yes, there’s going to be differences, but it’s not going to be the night and day difference for a 41-year-old versus a 49. I think in your 20s, you’re likely broke as a joke when you’re in your early 20s, and then as you leave your 20s, hopefully you’ve started catching some traction. So, don’t let those numbers throw you off. If you look at this and you’re in your 20s and you’re broke as a joke, everybody in their 20s is a winner. But before we talk about all the good stuff, let’s talk about what the challenges are in your 20s.

Bo: Yeah. I think a lot of people, especially in today’s day and age, coming into their working career, recognize that student loans are a big issue. But I mean, you’ve talked all the time about even when you were coming through school, the cost of higher education is very different than what the cost of higher education is today. So, a lot of 20-year-olds are facing a thing or a reality that their parents did not face.

Brian: Yeah. If you look at the stats, the average balance of student loan debt for Gen Z is a little under $22,000. Look, the promise of education, guys, now you need to be much more of an active participant to make sure you’re actually going to get the return on investment of that education. So, go into this experience with your eyes wide open.

Bo: Another challenge that we see for folks in their 20s is that expenses are high, but frankly, starting out at the very beginning of our careers, we’re often in a low-income position. Entry-level pay makes it difficult to pay for rent, pay bills, pay utilities, and be able to save for the future. So, if you’re someone who’s just starting out and you don’t have a ton of discretionary cash flow, it’s okay. A lot of people in your position are in that same place.

Brian: Well, and that leads to, remember I started off saying when you’re in your 20s you start off broke as a joke. Well, that means you also likely don’t have a big emergency fund because you know this is what’s going to keep you from making desperate decisions when weird things show up in your life like your car breaks down or you have a period where you’re unemployed. So, don’t fall asleep on this. And that’s why if you look at the stats, the median emergency reserves for a Gen Z is only around $400. If you remember in the Financial Order of Operations, emergency reserves are so important. We want you to have it as steps one and four. So, at a minimum in your 20s, start trying to have that highest insurance deductible covered. What I think is so heartbreaking is that $400, I bet for most Gen Z’s, that doesn’t even cover their highest deductible. I bet that doesn’t even cover their health insurance deductible. It’s not going to keep you protected from an emergency.

Bo: I think a lot of young people feel this pressure. And so, what they begin trying to do is say, “Okay, I’m behind. Life is hard, things are expensive. I’ve got to figure out the hack. I’ve got to figure out the cheat code.” So, they start looking at these get-rich-quick schemes, whether it be something like sports betting or maybe some sort of more aggressive type investment like crypto. And they begin thinking, well, the only way I’m going to be wealthy is if I figure something out that the rest of the world hasn’t figured out.

Brian: Look at this stat: 80% of Gen Z feels they’re financially behind and they’re turning to exactly what you said, crypto and sports betting. Can I just hit the pause button? Anybody and everybody, if you’re in your 20s, you’re not behind anything. We’re going to show you in a minute with the opportunities of what 20-somethings have. You guys, you literally are all ahead of the curve. So, don’t let anybody fool you. The typical American doesn’t even start saving and investing until they’re beyond 30 years of age. So, if you’re watching this and you’re in your 20s, don’t feel behind. Don’t go out there and do something like jumping into sports betting thinking that’s the way to go. There is a much more proven and easier path to create your wealth.

Your 20s: Compounding, Investing, and Building Wealthy Habits (5:55)

Bo: I think so many young people right now, Brian, are hopeless. They figure, okay, the world is stacked against me. There is no hope. And one of the best things you can do is actually build hope into your financial plan because when you are in your 20s, there are a number of opportunities that you should be so excited about. And Brian, you just alluded to the very first one. This is literally where you have the most valuable tool, the most valuable ingredient in wealth creation on your side. You have time to let your money work.

Brian: I mean, the Wealth Multiplier, this is something we’ve tried to put out there so you guys get excited about it. We talk about how $1 for a 20-year-old has the potential to become $88 at retirement. For a 30-year-old, it’s 23 times. Still an incredible opportunity, but it’s not as good as 88 times over. So guys, I’m literally here to tell you in your 20s, you are a billionaire of time. So get very serious about, yes, you might be broke, but you can trade some of your time and your wages and actually turn that into money that if you get it invested and give it enough time, it’s going to be magical. Magical. And you’re going to understand the power of compounding growth.

Bo: You also have the opportunity at this stage to begin building these unbelievable habits that will serve you well later. You get to really understand the idea behind long-term investing and why that time can be so valuable. We’ve talked all the time about folks in their 20s that have this early start edge, this early start advantage. If you’re a 20-year-old and your goal is to get to a million dollars by the time that you get to retirement, by the time that you hit 65 years old, you’ve only got to save about $95 a month. But if you wait, just waiting 10 years, it makes it actually four times harder. Instead of a 20-year-old having to save $95 a month to get to million-dollar status, a 30-year-old has to save $340. And if you wait until you’re 40, it’s actually 10 times harder. The earlier that you can figure this out, the easier the process becomes. In your 20s is a great time to start figuring this out. Maybe you didn’t figure it out at 21, 22, 23. So what? If you’re 24, 25, 26, it’s not too late.

Brian: Yeah. And I think that this hopefully empowers you to now realize the next thing: the opportunity for your 20s is you have the maximum amount of freedom and flexibility. A lot of times you’re not necessarily married or you don’t have kids yet. And this is why you get to kind of figure things out. You get to try to figure out, hey, what can I go invest in myself? What skill, what trade, or what side hustle can I go do because I have extra time on my side? There are lots of ways that you can take your moment in time and try to figure out how you can create some type of arbitrage to put this money to work so it creates something for you in the future.

Bo: Okay, so let’s talk about now what does it actually look like to be wealthy in your 20s? And again, this is not the Instagram highlight reel. This is not the summer in the Maldives. This is not the fancy car. This is not the expensive watch. A wealthy person in their 20s actually looks a lot different. It looks like someone who’s living within their means. They recognize I’ve got X number of dollars coming in. I’m tracking where those dollars are going and I’m making sure that my living expenses are less than that amount. I’m naturally building up margin in my life.

Brian: Well, you’re seeing we just said live on less than you make. That’s the key. You’re never going to build success unless you can live on less than you make, because once you start creating that margin in your life, now you can start building an emergency reserve so you can avoid the desperate decisions. And I’ll take it a step further. Now you can start investing something for retirement. And Bo, we laid out if you start doing this now, I know we keep repeating, we talked about $100 a month to get you to millionaire. I think it’s important if we take that same concept but we show what percentage of those savings is your contribution versus how much of it is actually compounding growth.

Bo: Yeah, it’s wild. If you think about that 20-year-old that saves $95, $96, $100 a month and gets to millionaire status by the time they get to retirement, of that million dollars they’ve built, 95% of those dollars are growth dollars. Of the million, $955,000 of that is your money making money. You only actually had to save about $52,000 over the course of your working career to get to that million-dollar status. But as time goes on, you’ll notice it decreases. But maybe you’re 25, maybe you’re 30, you should still get excited because if you have a two in front of your age, time is on your side.

Brian: Well, I want to put an exclamation point on this. You think about somebody that’s in their 20s having to save $96 a month. When we talk about the latte effect, this is probably the only age where literally consumption decisions can turn you into a millionaire. If you fast forward to when you’re 25 years old, now you have to save about $184 a month. That maybe is a little bigger than consumption, but now we’re talking about lifestyle decisions. Maybe instead of you buying the fancy car to impress people who really don’t care, you drive something much more modest when you’re 25 years old. At 30 years of age, I know we’re about to move into the next decade, but this might be the apartment you move into for that $340 a month. That might be the difference from you just living in a normal, still good part of town apartment versus getting the one that’s got the quartz countertops or plantation shutters. Remember when you were relocating up here? You and your wife chose an apartment that was very nice, but it wasn’t the one because we toured. I came up here and toured with you on some of these and I was like, one of them was like, “Wow, this is the one you bring people to to impress them.” And the other one was just very nice. And the difference in the monthly rent was huge.

Bo: Huge. I think another characteristic of wealthy people in their 20s is that they’re actually positive about the future. Again, I think it’s so easy for us to become discouraged and negative and have this pessimistic view. Well, we ask our wealthy clients every single year. We interview them. We say, “Hey, would you describe yourself as a pessimist or an optimist?” And overwhelmingly, our folks who have had financial success say, “Hey, I’m an optimist. I always believe that my best days are ahead of me. Opportunities are in front of me. Things will likely work out.” So, if you can frame your mindset to have that positive attitude, even in the midst of the challenges of student loans and low income and all these other things that might be difficult right now, you’re going to likely set yourself up for success because the future is bright if you start making the right decisions today.

Brian: Just do something in your 20s. I’m telling you, none of you are behind. If you’re watching this and your age starts with a two, just do something. You’re going to be ahead of the curve.

Bo: So, where should you be by the end of this decade? Well, again, we sort of have these mile markers or these benchmarks based on, okay, we don’t know exactly what our expenses are going to be in retirement, but if our goal is to replace 80% of our pre-retirement income, and we want to be on that trajectory, then by the time we get to the end of our 20s, by the time we get to 30 years old, we want to have at least one times our annual salary saved up in liquid investment. So if you make $60,000 a year and you have a portfolio of $60,000 across your Roth IRAs, 401(k)s, and after-tax accounts, we would argue that you are on track and you are where you should be in your 20s.

Brian: So let’s get to one times. And by the way, if you’re looking for a way and what to do with your next dollar, I would encourage you to go check out our Financial Order of Operations, completely free to you if you go to moneyguy.com/resources.

Your 30s: The Last Stop on Easy (14:02)

Bo: All right, Brian. Now let’s shift to the 30s. What does it look like to be wealthy for someone in the 30s? And let’s start with the financial snapshot. Right now in this country, according to the US Census Bureau, the median household income is a touch over $90,000 a year. Total non-mortgage debt balance is $32,500. Retirement savings is now increased to about $50,000 and net worth in total is about $104,000. Just one really quick thing I notice: we just said if you’re on track to where you should be, you should have one times your annual household income saved up. Well, on the median annual household income for someone in their 30s, $90,000, retirement savings $50,000. We’re already starting to see a discrepancy.

Brian: Yeah. We even the net worth is, and so you are going to start to notice that harder decisions come for those who procrastinate. And this is why I will tell you, and I think you just did a great segue because I was going to make the point: the 30s is the last stop on easy. So guys, I’m talking, when I get excited, I’m about to go through all the things that are struggles or challenges you’ll have in your 30s, but I’m still here to tell you your 30s is the easy button. You can do this. You’re still going to be ahead of the curve if you’ll just make something happen while compounding interest and your wealth multiplier is so high.

Bo: So, what are the challenges that we face in our 30s? Well, the first, I think you can’t ignore this: it’s housing affordability. If we’re going to be honest with ourselves, it’s getting harder and harder and harder to buy a home. But it’s not impossible, but it’s not easy. According to the National Association of Realtors, the median sale price of an existing home in July of 2026 was $434,000. Brian, do you remember how much you paid for your very first home?

Brian: Let’s just say that it was half of that.

Bo: And then you compound on top of that, the current mortgage rates are around 6.7% for a 30-year conventional loan. Buying a home right now is not easy.

Brian: And that’s where I have a lot of sympathy in the fact that look now, my interest rate on my first house was 6 and 3/4. So, I mean, that doesn’t freak me out. It’s really the affordability that we’ve taken a hit on. Because you shouldn’t have to pay for both. You shouldn’t have to have a high purchase price plus crazy high interest rates. You should hope that there are some cracks, and I plan on doing some content on this. There have been some cracks in certain markets in America right now where housing inventories are way up and prices are starting to get adjusted down. I’m not calling it, but at least you’re starting to see that hopefully we start to see some opportunities. It’s still not going to be like it was 10 years ago, but it could be better than what it is. But I still think it’s very fair to acknowledge this is a tough time. And that’s why we’ve done content on should you buy, should you rent. Go check this show out. This show was one of our better performing shows because I think we were very honest. We didn’t do the traditional thing where it’s always better to buy, and we also focused on, hey, your market’s going to vary depending upon where you live in the country. Please go check out this deep dive on the data and I think you’ll come out on the other end with a little better understanding of what’s going on in the housing market.

Your 30s: Family Costs, Lifestyle Creep, and Saving 20-25% (17:22)

Bo: You know, another headwind I think a lot of people are facing in their 30s is this is kind of, if it’s not the very beginning, it’s right in the middle of the messy middle. And for most people, what the messy middle means is that we’re getting married and we’re having kids and we’re growing our family. And so just the cost of family, just the cost of our little nuclear circumstance gets bigger and bigger and bigger. According to Lending Tree, the average middle-income family spends approximately $29,000 on child-related expenses during a baby’s first year of life. Now, Brian, I’m going to be honest. I think that number to me seems high. I don’t want to question the data, but again, if we’re talking about averages, I do bet there are people who go buy the nice crib and the fancy car seat. And if you think about all the costs that you incur, it would not be difficult to rack those up. And I think a lot of folks in their 30s are facing the reality of those costs.

Brian: Yeah. And I think that ties into the next point: lifestyle creep is real. It can be not only having babies, but it can be just your lifestyle, the cars you drive, the house you live in. This is the age. In your 20s, you just kind of expect all of your peers are in the same boat as you. It is in the 30s that you start seeing some separation. But I’m here to tell you, it’s not always in the lifestyle that people look like they’re living. I’m here to tell you the 30s, I think, is the stealth decade where those who are making really good decisions in their 20s and 30s, you’re starting to see separation on the net worth statement. The problem is nobody walks around with their net worth over their head. So, I’m here to tell you, avoid the lifestyle creep, your ego, your pride. I know we all want to look good to our friends and family and our peers, but I’m here to tell you there is something very valuable in the future. Your future self will be so excited if you can just do a little bit of deferred gratification in your 30s.

Bo: And what’s great is if you can do that, your 30s is still an unbelievably powerful decade because there are tons of opportunities available to you. Not the least of which, most people, if you’re in a career and you’re pursuing a vocation, it is not uncommon that you are likely going to have a higher income in this decade than you had in your 20s. Well, obviously as your income increases, that gives you the opportunity to create more margin, to save more, to have more money going to work for you. So, where in your 20s things might have been so tight and they might have been on the razor’s edge, hopefully in your 30s, you’re starting to see a little bit of reprieve there, that then allows you to pursue some of your other financial goals. And this, and I’ve repeated this, but I think it’s a point worth repeating: you still have so much time in your 30s. Remember, the typical American doesn’t even discover that they can save and invest for the future until their early 30s. So, you still have the opportunity to make it work. And that’s why, by the way, when we have our deliverable, if you go to moneyguy.com/resources and look at our deliverable, How Much Should You Save?, we’ve done the math on this. This is still the easy button.

Brian: When people say, “Hey, why is y’all’s savings rate so high at 25%?” Look, if you look at our own savings strategy here, for somebody who starts saving and investing when they’re 20 years of age, if you want to retire at a normal retirement at 65, you only need to save and invest 6%. But nobody, most people are not saving and investing at 20 years of age. Fast forward to when you’re 25 years of age: 10% does a lot. A lot of you are just through your employer match going to get close to half of that covered. Fast forward up to a 30-year-old: now you’re starting to see some numbers here. You’ve got to be saving and investing 17%. Fast forward to maybe you deferred this until you’re 35 years of age, somewhere between 34 and 35, 24% for the 34-year-old and 27% for the 35-year-old. You can see why we landed on 25%. If you were curious, like I said, go to moneyguy.com/resources. We have a great resource here for you to line up when you think you want to retire. All my FIRE people, get in there. You can actually retire early with this chart too. Compare it to your age. You’ll know exactly what you need to be doing.

Bo: You know, Brian, it’s really interesting. One of the things I feel like we hear in our comments all the time is, “Man, I love these guys, but they’re just so hopeful for 20-year-olds and everything is just geared towards 20, 20, 20, starting out.” Yeah, it is true. If you start out early, it’s an easier path. But if you’re someone in your 30s, then that counts from age 30 all the way through 39. The reality is the three ingredients of wealth creation still apply to you in the same way they did to your 20-year-old self. If you can exercise discipline, discipline will be living on less than you make. Making the decisions to live smaller, not larger, making the decisions to defer gratification, you will create margin. And creating margin even at this age, applied across enough time, can be wildly impactful. So, it’s not like the rules change or the game changes in your 30s if you’re just now figuring this out. It still doesn’t have to be super difficult, but you are going to have to take an active role in building for your financial future.

Brian: And that’s why I think it’s a good time for us to pivot the conversation and say, hey, what does it actually look like to be wealthy in your 30s? And the first thing is, if you went to moneyguy.com/resources, how much should you save? When people say, “Did y’all just stick your finger in the air and figure out a savings rate of 25%? Because that sounds heavy.” And we take a little flack for that. I’m like, “No, remember now you get to count your employer match, assuming your household income is less than $200,000. But for many of you, if you procrastinate too long, 25% is not even going to get it done.” This is the decade I want you to firm up getting to a savings and investment rate of somewhere between 20 to 25% depending upon how good your employer match is. And look, a great spot check you can do, and Brian, you hold the thing up for me, a great spot check you can do is, hey, am I somewhere between steps five and step seven? Have I maxed out my Roth IRA? Am I doing my employer match? If you’re doing that in your 30s, that’s a really good indication that you’re where you need to be.

Bo: And then when it comes to making these giant life decisions, it’s no longer the lattes. Now, it’s the place that you’re going to live. If you decide to buy a house, if you decide to get on the ownership train, you’re doing it the right way. You’re not buying more house than you can afford. You’re not becoming house-rich and life poor. And if you want to know how to do that, we have a rule around that. We want you to follow 3/5/25 where for your first home, now this is not for subsequent homes, this is not for home improvements, but for your first home, we’re okay if you put 3% down. You plan on living in the house for at least five to seven years and you keep your total housing costs below 25%. If you can check yes in the affirmative to all three of those, there’s a really good chance you’re not buying more house than you can afford and robbing from your future self.

Brian: Well, I want to take it also to another thing you need to pay attention to: are you taking full advantage of every time you get pay increases? You know, in your 20s, maybe you have a job but you don’t have a career. But I think a lot of you in your 30s are actually in full career mode now. But you look at your savings rate and you’re like, I’m saving. I remember I said I did a set it and forget it when I was 28 years of age and put 10% in. And you’re probably feeling pretty good about that. But meanwhile, you’ve gotten multiple pay raises since then. Now you’re 33 years of age and you’re like, why am I still just saving 10%? But you’re seeing our numbers, you’re feeling motivated. Here’s what I’d encourage you to do. If you don’t feel like you have any margin to save more, the next time you get a pay raise, why don’t you go with the 60/40 method? Meaning 60% of this new pay raise is going to show up in your future through savings and investment. Only 40% is going to be left for consumption and lifestyle. If you can do these type of incremental decisions with the goal of trying to get you to 25% as fast as possible, I think your future self will show and your numbers will show. Your net worth, your success, and the ability to have flexibility and live your best life will all show up from that small decision right now.

Your 30s Wealth Target: 3x Your Income by 40 (25:29)

Bo: So, where should you be by the end of this decade? Well, if you’re a Financial Mutant and you’re trying to stay on target, we would say that by the time you get to the end of your 30s, by the time you hit 40 years old, you should have three times your annual income saved up in liquid investment. So, if you’re making the median household income right now of $90,000 a year, we would expect by the end of your 30s your investment portfolio to be somewhere around $270,000. If you can say yes to that, we would argue that you are on track with where you should be by the end of this decade.

Our Shameless Plug (25:29)

Brian: All right, Bo, before we move on, let’s do a shameless plug for Abound Wealth.

Bo: I have no shame because I’m mighty proud of the work that we get to do for our clients every single day. Here at Abound Wealth, we’re fee-only. We’re fiduciary advisers. That means we’re legally required to work in your best interest. And we love helping our clients optimize their army of dollar bills so they can live their best life. And before you leave a mean comment about us self-promoting, keep in mind wealth helps us keep this entire thing going, creating free content, growing the team, and changing the financial landscape.

Brian: We’re honored you’re watching and listening. And we hope you use this content to help you learn, apply, and grow your army of dollar bills. And when your financial life gets complicated, it’ll happen. We’d love for you to come back to where it all started. That’s the Money Guy Show and Abound Wealth. And if you’re ready to take the relationship to the next level, check us out at aboundwealth.com or click the link below.

Your 40s: The Financial Fork in the Road (27:00)

Bo: All right, let’s talk about a new decade here. Let’s talk about those 40-somethings. The 40s, we often call Brian, it’s a little bit like the fork in the road. So, let’s take a snapshot at where the median American is. Median American incomes have increased here. The median household income is about $106,000. Total non-mortgage debt is about $28,000. Retirement savings is now up to $105,000, not anywhere close to where it should be. And the total net worth is at $265,000 on the median.

Brian: Now, you gave the prelude and you said fork in the road. I think this is because this is the decade that if you did anything in your 20s and 30s, you’re starting to see the fruit from this. You’re feeling really good because you’ve got now probably 15 to 20 years of compounding growth. Your army of dollar bills is getting pretty sexy and pretty exciting. If you’re somebody though who’ve procrastinated, you know there can be lots of excuses, but this is still an okay time to wake up and realize, hey, I’ve still got opportunities. But I do want to be honest: there are a lot of things still pulling at you at this stage. Now, the good news, this is the decade that millionaires start showing up on the scene. A lot of research shows that people somewhere between 27 to 29 years of saving and investing cross into the two comma club. That two comma club, that’s seven digits, meaning you become officially a liquid millionaire.

Bo: But there are also challenges. And the first one, we call this the sandwich generation, Bo. And that’s because you’re getting sandwiched between children that are getting older and they’re getting more expensive because you’ve got college and as well as just all the activity fees that come, but also your parents are getting older and you’re getting squeezed because of aging parents and some of the decisions that go with that. This is something to pay attention to. 54% of Americans would describe their situation as: I’ve got aging parents and some of their care falls on me, and I have growing children and their care obviously falls on me, and so I feel like I’m stuck in this middle place and you’re feeling pressure on both sides. And when you feel that pressure on both sides, it becomes very, very easy to begin taking your eye off of your own financial circumstance, which is noble. You want to be able to help your loved ones. You want to be able to serve them. But if you allow that to drag you into a bad position, you could end up repeating that same negative cycle that you’re beginning to experience.

Brian: Also, I think the 40s is the decade where maybe you’ve gotten soft with a higher standard of living. Look, I get it. In your 20s and 30s, you can handle anything. By your 40s, if you’ve been making bad decisions by accelerating your luxury and other things, you might be straight up just bougie. But look at what this is going to be in the future. Use this as motivation. If you’ve made yourself bougie because you’re soft in the fact that you need to stay in nice hotels when you travel, you need your house to be a certain way, your car a certain way, I want you to ask yourself, what is my future self going to look like?

Bo: If you have to go back down the rungs of success, this is not going to be good. So, pay attention to what you’ve done with lifestyle creep and a higher standard of living. And look, if you’re doing it right, we have a natural release valve built in. We have a natural release valve at step number eight of the Financial Order of Operations. You can live in luxury. You can do those things because you know you’ve done the stuff that you’re supposed to do. But far too often, again, this is part of that sandwich: we begin prioritizing the wrong things at the wrong time. And one of the big challenges, especially for folks in their 40s, is your kids are now getting a little bit older. By the end of this decade, your kids might be going off to college. And so, you’re now beginning to have this pressure. Oh my goodness, I’ve got to save for college. I’ve got to prepare. And now caring for the next generation from a financial standpoint takes precedent and priority over you making sure that you’re on solid financial footing. If you do that and if you miss out this decade by getting your priorities wrong, it can put you in a bad spot for the next two, three, four decades.

Your 40s: Peak Earnings, Catch-Up Investing, and Tax Strategy (30:52)

Brian: Okay, let’s talk about what we’ve got going for us in the 40s. Here are some big opportunities you have going for you. Peak earning years. This is the decade where hey, if you’re going to be behind, why not have the biggest shovel of your life? Statistically, this is the best time. Don’t take our word for it. Look at the median household income. And there it is. Look at that. The peak earning years are somewhere between 35 to 54, with the 45 to 54 running away with it. Get in there, catch up. You can do lots of stuff. If you’ve procrastinated or put things behind, this is a great opportunity. With a bigger shovel, you can move more dirt. That’s just a fact of the matter. In your 40s is when that often happens. And it’s likely that in your 40s, now you begin to own your time a little bit more. In your 30s you feel like you have to say yes to everything, every social commitment, every work commitment. In your 40s, perhaps now you’ve attained a level where now you can actually start saying no to some things. And you can make sure that you’re spending your time and your efforts and your energy doing the things that you want to be doing, not just doing the things that you feel like you ought to be doing.

Brian: Well, with these big earnings that you have in your 40s, this is also when, because we’re probably running through the Financial Order of Operations, we’ve blown through step five with tax-free growth. We’re starting to max out our 401(k)s. We’re getting to the point where maybe under step seven, we’re even doing after-tax brokerage accounts. This is when you can really be opportunistic with your tax optimization. We always talk about the three bucket strategy. What we’re talking about is tax-free assets, which are your Roth accounts. You take advantage of all the tax-free money. Your tax-deferred, that’s your employer match that you’re doing with the 401(k). And then after-tax, that’s that brokerage account that you’re opening up to hopefully build the bridge to your future retirement. Take advantage. You can legally optimize the tax code when you’re in your 40s because you have the income and the assets to make it work.

Bo: Yeah. A lot of times these things change. In your 20s and 30s, Roth may have made all the sense in the world, but now that your income is up, now that the tax benefit has increased, it might make sense to shift your dollars to pre-tax. And oftentimes when you do that, just shifting your dollars to pre-tax might save you enough in taxes to fund some of those other financial goals like maxing out a backdoor Roth, like saving more, like getting your savings rate up. So, what does it look like for someone to actually be wealthy in their 40s? I think one of the truest signs is it’s someone who is thriving in their career. It’s not just a job, it’s not just a thing that they clock in and clock out of, but it’s something they actually do and are excelling at and find some sort of fulfillment and purpose in. It may not be the thing that you feel like you were put on this earth to do, but it’s a thing that while you’re doing it, you’re able to do it well and you’re able to find the enjoyment in it. You’re also saving and investing at least 25%, maybe even beyond 25% if you’re in catch-up mode.

Brian: I also like that, hey, we said fork in the road. For those who are behind, you might be saving and investing greater than 25%. But if you made good choices in your 20s and 30s, maybe this is the decade you get to start making some of the lifestyle decisions where you get bigger purchases and you’re making them with cash. You don’t have to jeopardize your future because they’re just not moving the needle from the future. You’ve had enough success that you can reward yourself in step eight.

Bo: You’re also beginning now to likely start optimizing your investment strategy. Perhaps you’ve been doing target retirement index funds. You’ve been focusing on save, save, build. But now you’ve reached that critical mass where asset allocation and asset location can add some benefits. So you graduate from a generalized financial solution, a generalized investment portfolio, to something very specialized to your situation. And again, this is the decade when most folks hit the two comma club. And so, you want to make sure you adjust accordingly. So, where should you be by the end of this decade? How do you know if you’re on track? Well, if you get to the end of your 40s and you have 6.4 times your annual income saved up, we would argue that you’re on track. So, if you have the median household income of $106,000 a year and you’ve saved up 6.4 times that amount, that means that by the time you hit 50, your investment portfolio would be around $680,000. Man, now we’re getting to the point.

Your 50s: Retirement Readiness Gets Real (35:21)

Brian: This is where it all comes together. I’d like to talk about the 50s and beyond.

Bo: So, if we look at a snapshot of the median American in their 50s, their income is now about $117,000 as a household. Non-mortgage debt has stayed pretty consistent. It’s right around $23,000. Retirement savings are now up to $200,000 and total net worth for the median American in their 50s is $363,000.

Bo: I think that this is probably a great time to talk about challenges because a lot of Americans are having to make tough decisions. The first thing in your 50s, you’re probably very aware of your age. You’re also very aware of where your retirement account is.

Brian: Yeah. A 2024 AARP survey found that one out of five adults over age 50 have no retirement savings. They’ve not done anything. And they found that three out of five adults over the age of 50 are worried that they won’t have enough retirement savings to support themselves. They’ve done something, but they’re beginning to have the realization and recognition: I have not prepared the way that I should have.

Brian: Yeah. And I’m looking at all of my people who are in high-paying, especially if you’re in fast-growing industries like the IT industry and so forth. In your 50s and beyond, you’re going to have less job stability. This one breaks my heart because I’ve actually experienced this with a lot of my clients. Unfortunately, 56%, and that’s not a misprint, 56% of workers over age 50 are laid off or pushed out of the workforce into retirement. Not from their choosing, but because this is just what’s brought to them. So guys, if you’re in your 30s and 40s and watching this for the 50s, get to work because this is when you don’t always get to choose your exit. So begin with the end in mind and plan accordingly that you might not always get to be in control of what happens with your income.

Bo: In that same vein of not being in control, we often don’t get to control what’s going on with our health as well. Because as we age, naturally, our medical costs and what it costs to remain healthy are going to increase. A 65-year-old that retires in the year 2026, according to the Employee Benefit Research Institute, can expect over the life of their retirement to spend $185,000 on healthcare and medical expenses. If you remember, the median American right now has about $200,000 in retirement savings in their 50s. By 65, they’re going to spend nearly that full amount on healthcare. And that’s certainly a challenge that you want to make sure you’ve at least thought through and accounted for when it comes to how you’re building your financial plan.

Your 50s: Catch-Up Contributions, Health, and Financial Freedom (38:02)

Brian: I think we’ve thrown enough cold water on this decade and beyond. So, let’s talk about opportunities. I do like that the government at least has realized, hey, for a lot of people that might be waking up and realizing they’re a little behind on the savings and investments, you can legally now get catch-up contributions on your retirement account. The government will help you by allowing you to save and invest even more for the future.

Bo: That’s catch-ups across your 401(k), across IRAs, even in your HSA. So, if you are above 50 and you don’t know the additional catch-up amounts, make sure you educate yourself on that because this additional savings, combined with the size of your portfolio now growing at a faster rate, assuming you’ve done what you’re supposed to do, is powerful. If your $10,000 in your 20s made 10%, it’s not life-changing. But if your million dollars in your 50s makes 10%, now you’ve made $100,000. The bigger the numbers get, the bigger the numbers get. And you’re likely beginning to see that in this decade.

Brian: Yeah. This is also, for those who’ve made good decisions, a lot of you are Financial Mutants watching financial content on YouTube or listening to this in podcast form. You’ve actually done well. So you get to start thinking about what’s your legacy. How are you going to actually bless the generation after you? What are you doing to make sure that you are stewarding this wealth well? And I think a big part of that is we can transition into what does wealth look like in your 50s. Guys, don’t sleep on what your health looks like because one of the saddest things I’ve dealt with is people who save what they need but they just don’t have the health to do the traveling or do the adventures. So make sure you’re not sleeping on that, because health is wealth especially in your 50s and beyond.

Bo: Another sign of someone in their 50s that’s doing well is they understand risk management. Now they’ve begun to move into a place where they’re completely debt-free and they’re actually beginning to experience more freedom. They actually control their financial life, control what their dollars do, and are not encumbered by having to make a monthly payment or make debt payments every single month, year over year.

The Wealth Milestones That Can Put You Ahead (40:08)

Brian: Yeah, I love this. This is kind of bringing it all together. You’re actually at the stage where you get to multiply your wealth. You know, all through these milestones that you should look for, if you think about from your 20s to your 30s, by the time you get to 30, you want to have one times your income. If you’re saving and investing for the future, by the time you get to 40, you want to have three times your income. We decided, hey, what if we actually took somebody who discovered the Money Guy Show? We’ve been doing this 20 plus years now. Somebody who’s 25 years of age, making $60,000 of income, who just started saving and investing just 10% of their income. And if they did that all the way to age 65, would that 10% reach these same milestones that we’ve been detailing by every decade? Well, we found that at 65, they’d have about $2.6 million saved up. And do you recognize if you did that, you would have blown the milestones out of the water? If you can figure this out early, if you can start making the right decisions early on in your journey, not only will you be able to hit these milestones, these markers we’re talking about, but you will blow them away. And that’s going to open you up to more options, more flexibility, more opportunity to live the life that you want to live on your terms.

Conclusion: Preparing for Retirement and the Next Stage (41:29)

Bo: Well, you’re also getting to the point where you’re ready to land the plane. And a lot of you, you’re not going to remember what small decision has led to this big great big result that you’ve created for yourself. But you are realizing, man, there’s a lot of things you just don’t know. You don’t know where your blind spots are. And you are starting to realize, hey, man, I have just one retirement. I don’t know what I don’t know. And is it complicated now? Because I’m thinking about doing Roth conversions.

Brian: I’m thinking about the taxability of Social Security. I hear about Medicare and IRMAA payments. What are these guys talking about? You start realizing there’s a lot of complexity that success has brought to your doorstep and you’re like, “Hey, how do I do this better? How do I make sure that I’m not sleeping on something that could be a mistake that costs me literally millions of dollars?” That’s where you can take the relationship to the next level. We literally work with clients all across the country on a long-term relationship format. I think you can tell we love planting the seeds of knowledge and then waiting for you to create that success. And then once you reach that, now we say this is the abundance cycle fulfilled. So go check us out at moneyguy.com and become a client. I’m your host Brian joined by Mr. Bo. Money Guy Team, out!