Suppose you’re in your forties, earning over $250,000 a year and dreaming of an early retirement, congratulations. In that case, you’re in a prime position to make strategic moves to supercharge your wealth and minimize your tax burden. This decade is all about maximizing your earnings, shielding assets from taxes and setting yourself up for a smooth glide into financial independence. Extra credit for also prioritizing your happiness and health along the way. Let’s dive into the nine steps that will make money more fun and your future more fabulous!
1. Max Out Retirement Accounts (And Beyond!)
Your 401(k) and IRA contributions should be at their peak. Take advantage of catch-up contributions (an extra $7,500 for those 50 and older in 2025), and if you’re self-employed, consider a Solo 401(k) or Cash Balance Plan to amplify tax-deferred growth and potentially save millions in taxes between now and retirement.
If you are just getting started with a new 401(k), at the bare minimum, contribute enough to get the full employer match. This is like free money from your employer, and even better, you won’t owe taxes on this income until you withdraw the funds from your retirement account.
2. Increase Your Tax-Free Income Via Roth Strategies
Traditional tax wisdom says high earners should go pre-tax, but a Backdoor Roth IRA can help you sidestep income limits and build tax-free wealth. Roth conversions can also be useful in low-income years. Since we are talking about high-earners, if you are making $250,000 or more, just contributing to your 401(k) is not likely going to give you the dream retirement you are expecting to have.
If you are already maxing out your employee contributions to your 401(k), $23,500 for 2025, check to see if your company allows for mega-backdoor Roth contributions. This fabulous tax-planning strategy can allow you to sock away an additional $46,500 each year into the Roth portion of your 401(k). If you contributed this much from age 40-45, you could have over $3 million that you could withdraw tax-free at age 70, assuming a 10% net return over this period. How fabulous is that?
3. Optimize Tax-Efficient Investments
While the stock market has been scary since Trump announced his Liberation Day tariff plans, I am confident there is plenty of money to be made investing between your 40s and the time you retire. That being said, today is always a good time to be strategic about your taxes on income and investment gains.
Municipal bonds, tax-managed funds and ETFs that minimize capital gains can help grow your wealth without giving Uncle Sam a huge tip. How much you trade, which shares you buy and sell and which type of investment vehicles you hold can either level up or level down the tax drag on your portfolio’s performance.
4. Charitable Giving With Tax Benefits
Donor-advised funds (DAFs) let you give generously while scoring tax deductions today. If philanthropy is a part of your legacy, this is a win-win strategy.
5. Slash Taxes With Strategic Business Ownership
Owning a business, being an independent contractor, or even a nice side hustle can unlock a wide array of extremely valuable tax deductions on health insurance, auto expenses, home office expenses and retirement contributions. Plus, it offers flexibility for your next career pivot or even semi-retirement.
If you have self-employment income, work with a tax-planning-focused financial planner to help you take advantage of all the tax-saving strategies you are entitled to. The bigger your income, the bigger the potential tax savings will be. I’m based in California, where many business owners see their last dollar of income taxed at more than 50% when combining state and federal taxes, not to mention the additional cost of local taxes and things like the Medicare surtax.
6. Prioritize Your Health
While money can’t buy you perfect health, it sure can help make it easier to make healthy choices along the way. Likewise, money helps you afford even the most expensive items on your bucket list; if you aren’t physically up to the adventures, how much fun will that be?
The steps you take today can help you improve your healthspan and enjoyment of your 50s and beyond.
7. Bulletproof Your Estate Plan
If early retirement is on the horizon, protecting assets from unnecessary taxes and ensuring a smooth wealth transfer is crucial. A revocable trust, gifting strategies and state-specific tax planning will keep things airtight. At the very least, check to see if your beneficiaries are up to date on your various accounts.
Hopefully, you prioritize your health, as mentioned in the sixth tip; even the healthiest person could get in an accident. I’m in my 40s, and I’m well aware that not everyone I went to high school and college with is still among the living.
8. Know When To Relocate (For Tax Savings!)
Living in a high-tax state? Moving to a low-tax state like Florida, Texas or Nevada before retiring could save you hundreds of thousands over time. Run the numbers before settling into a retirement destination. Also, consider the quality of life. I was just commiserating with a few Los Angeles friends about how they miss growing up where they were able to experience the four seasons. As a native Californian, I think it seems like a small price to pay not to have to shovel snow. It did rain for a bit this weekend, so that is enough weather for me.
Palm Springs seems to be my client base’s most common retirement destination. Others are planning to retire abroad. If they have built their wealth and financial freedom in the California economy and tax system, their budget is used to the cost of living in CA. However, if you want to move from many other parts of the country, matching your preretirement income may not cut it if you move to Manhattan, San Francisco, West Hollywood or Palm Springs.
9. Design A Fabulous Retirement Plan That Fits Your Lifestyle
Retirement isn’t just about money—it’s about freedom. Do you want to consult, travel, launch a passion project, volunteer or truly unplug? The more intentional your plan, the smoother your transition will be. Most people will combine several things to fill their days once work is an option.
Especially for those of you looking to retire early, what you want to be doing in your 60s may not be the same as when you are in your 80s. A fabulous retirement plan will allow you the financial freedom to pivot and continue enjoying life wherever your heart’s desire takes you.
Your 40s are a golden time to secure your financial future. By implementing these strategies, you can accelerate wealth-building, lower your tax bill and lock in the freedom to retire early on your own terms. Want to make these moves work for you? Start now—the best financial future is the one you craft today!
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