Retirement Planning: 3 Things People in Their 40s Need to Know

By Markets Fool.com

If you're in your 40s and you're wondering what your next financial move is, we've got you covered! We asked three of our Motley Fool experts to offer up advice to 40-somethings and their suggestions just might help make you better prepared for the years ahead.

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Dan Caplinger:One big challenge that many people in their 40s have in planning for retirement is how to handle changing family dynamics. In particular, those who had children face multiple changes. On one hand, those who had children late have to juggle the wish to help their kids with their college expenses with the need to save for their own retirement. Meanwhile, those who had children earlier in life might well bid farewell to their now-adult children in the 40s, leaving them in a completely different financial situation.

The key to handling your 40s is knowing in advance what all these life events will be in your particular case and making adjustments as necessary. Those who need to save for college still need to remember that retirement saving is beneficial both for their own financial well-being and for qualifying for financial aid. Meanwhile, once your kids no longer depend on you financially, you can ramp up contributions to retirement accounts and be more aggressive with your investing. As long as you're ready for those big changes, you can navigate your 40s quite well and put yourself in the best position possible to enter the key pre-retirement years of your career -- all the while taking care of any family obligations you have.

: If you've arrived at your 40s and you're not independently wealthy enough to be assured a comfy retirement, then here's my biggest piece of advice for you: This is your big chance to turbocharge your retirement savings, by being aggressive about it. If you're, say, 45, you probably have about 20 years before you retire. That means any money you invest now will have a fighting chance of growing powerfully for you. The table below shows you how much you can amass in 20 years if you invest certain sums annually and earn certain average annual rates of return:

Invest this each year:

Earn 8% annually

Earn 10% annually

Earn 12% annually

$5,000

$247,115

$315,013

$403,494

$10,000

$494,230

$630,026

$806,988

$15,000

$741,345

$945,039

$1,210,482

$20,000

$988,460

$1,260,052

$1,613,976

The $20,000 sum might seem daunting, but it's do-able for many people, and you might even use tax-advantaged retirement accounts for this saving and investing. You can sock away $5,500 in IRAs per year in 2014 and 2015 (plus a $1,000 "catch-up" allowance for those 50 and older), and for 401(k) plans, the limits are more generous, capped at $17,500 (plus a $5,500 catch-up contribution) in 2014 and $18,000 (plus $6,000) in 2015.

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Take a little time toplay aroundwith the numbers that reflect your own reality -- sums you can scrape together and invest each year, along with the time you have until retirement -- and see what you're on track to accumulate. You might not need to ramp up your savings, but if you do need to, don't delay.

Jason Hall: As Selena points out, now is the time to be investing, since you still have time -- your most powerful investing weapon -- and should be entering into your prime earning years. Combine these two things, and it's amazing what can happen:

Based on $5,500 annual contributions, invested monthly, starting December 2000.

This chart shows just how powerful investing in stocks can be, putting regular monthly investments into a popularS&P 500index fund -- Vanguard 500 Index Fund Admiral Shares -- to demonstrate.

Our fictitious investor -- let's call the person Pat -- would have been actively investing through two of the worst markets in the past 50 years. From 2001 through early 2003, the S&P 500 declined 35%. From late 2007 through March 2009, the market would lose more than half its value.

But Pat was undeterred, armed with the knowledge that those bad markets gave him (or her) the chance to invest at bargain prices. Not selling at the height of the market panic -- to the contrary, still making monthly investments -- Pat's portfolio quickly recovered. If Pat had chosen to sell at a loss, those losses might mean working another few years to catch up. Instead, Pat'stimeline was the guide not the short-term behavior of the market -- and Pat invested accordingly and has been able to benefit from the incredible bull market of the past several years.

Be like Pat: Invest regularly, and let time do the hard work.

The article Retirement Planning: 3 Things People in Their 40s Need to Know originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. Jason Hall has no position in any stocks mentioned. Selena Maranjian has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.