The house, the kids' college and the raise: Where people in their 30s and 40s go wrong

By Kurt Supe

Big life decisions in your 30s and 40s will determine just how well you retire

A lot happens in your 30s and 40s, and big life decisions could distract anyone from thinking about their future retirement.

Some of my longtime clients are now in their 50s and 60s, and - despite the millions of dollars they've saved - they still ask the same question eventually: Do I have enough?

Whether they have $3 million or $30 million, the response to that question often depends on what they did in their 30s and 40s. The answer lies in how they made decisions about houses, college and work. Those decisions may not feel related to retirement in the moment, but they are.

In your 20s, as I wrote in my last article, you're brand new to saving for the future and spending on the big-ticket items, like a car or an apartment.

But somewhere in your 30s, usually without noticing it, you start to figure out what you actually want from your money. Maybe it's the freedom to walk away from work at age 55. Maybe it's paying for your kids' schooling without wrecking your own retirement. Once you know what it's for, your 40s are when you can work on making it happen. You're probably earning more than you ever have, and your account balance is finally showing off your hard work at saving.

Setting things up in your 30s

A lot can happen in your 30s: building a career, starting a family, helping aging parents, paying down a mortgage. I don't know of a graceful way through it. Mostly, you just work.

Here's what you should keep in mind as you're doing that work.

Don't let "lifestyle creep" get you. Your earnings usually climb in these decades, and your spending quietly grows right along with your paycheck. It doesn't feel like a mistake; it feels like something you earned. Some people call this "lifestyle creep."

You won't remember most of what you bought in your 30s. I've watched thousands of people get to their 50s, and that part is pretty consistent. What they remember is wishing they had the money. By 50, money is mostly about freedom. It's what lets you leave a job that's grinding you down, take six weeks off to help a parent, or say yes when something comes along that won't come around again.

Here's a simple rule: Every time you get a raise, allocate half of it to savings automatically before it ever reaches your checking account. You won't think to spend it because you won't see it.

Buy a house, but not the house you qualify for. Your lender will approve you for a number that assumes nothing else in your life costs money. Take that number and walk the other way.

Harvard's Joint Center for Housing Studies reported that 20.7 million homeowners - about 24% of all homeowners - were spending more than 30% of their income on housing in 2024. That's 4 million more than in 2019 and the most since 2011. Close to 1 in 4 homeowners is "house rich" and stretched thin everywhere else, and that usually includes retirement accounts.

Imagine a couple at 52 with a beautiful house, a home-equity line of credit, two nice cars in the driveway and $180,000 in a 401(k). People like to call a house an investment - but if the mortgage, taxes, insurance and upkeep are eating the money that should be going into retirement accounts, that house is costing you wealth, not building it.

Buy a house that leaves some room - enough room to max out the 401(k), fund your Roths, put something in the 529s and still take a vacation.

Save for college, but never ahead of your own retirement. Parents want to cover everything for their kids. I have kids; believe me, I get it.

But some things need more consideration. Your kids have options for college: loans, scholarships, grants, in-state schools, two years at a community college, a part-time job. There's nothing like that for retirement. There's no financial-aid office for 74-year-olds needing to fund their postworking years. If you shortchange your 401(k) for 15 years to pay tuition, you've created a new problem for yourself, and eventually for your kids if they have to help you later in life.

That said, start the 529 early, for the same reason you'd start a Roth early. A dollar you put in when your child is 2 has 16 years to grow. A dollar you put in when your child is 15 has three years.

Two changes in the last few years make this easier. Since 2024, the Secure 2.0 Act has let families roll leftover 529 money into the beneficiary's Roth IRA, up to $35,000 over the beneficiary's lifetime, with no tax or penalty. There are strings attached: The 529 has to have been open for at least 15 years, money contributed in the last five years doesn't qualify, each year's rollover is capped at that year's Roth IRA limit and your child needs earned income to cover it.

The second change came from the One Big Beautiful Bill Act, passed in July 2025. Money in a 529 plan can now pay for more than K-12 tuition, including books, tutoring and test fees, and it can pay for postsecondary credentialing programs in addition to higher education. Starting this year, the annual limit for K-12 withdrawals also doubled from $10,000 to $20,000 per student. The credentialing piece is a bigger deal than it sounds. If your kid would rather get a welding certification or a commercial driver's license than sit in a university lecture hall, the account can still help, as long as the program qualifies. State tax rules don't always match the federal ones on 529s, so check your state's laws before you take money out.

Don't forget to talk to your child. Be honest about what you can pay for and work together to come up with a reasonable financing plan for college.

Invest in your own earning power, too. In my 30s, I went back to school at night to get the credit hours I needed to sit for the CPA exam. I was already working long days and had kids at home, so it was a pretty miserable stretch. It was also the best money I spent that whole decade.

That CPA helped me grow my business. You're probably busy paying for your kids' education right now. Don't assume yours is over.

Get the boring paperwork done. Buy term life insurance and disability coverage, write a will and make sure your beneficiary designations name the right people. It takes maybe an afternoon, and it's the difference between your family grieving and your family grieving while also being financially wrecked.

Pushing forward in your 40s

By your 40s, two things are usually true: You're at or close to your peak earning years, and your accounts have gotten big enough that what you keep matters more than what you pick. For most people in their 40s, tax planning can generate the highest returns for retirement. You're likely earning and saving more than you were earlier in your career, which means getting the tax decisions right can have a much bigger impact on how much of your money you actually get to keep later. This is when the work you did in your 30s starts to pay off.

Run the actual numbers. What does your life cost each year? What would it cost if you stopped working? In my experience, most people in their 40s have never sat down and figured this out, which means they're saving toward a target they've never defined. If you've kept debt low, kept housing reasonable and kept saving, financial independence in your 50s may be closer than you think.

Make tax planning a priority. For most people in their 40s, tax planning can generate the highest returns for your retirement. Tax preparation happens in April, but tax planning happens all year long. This is when you determine which account each dollar goes into and which year you'll pay tax on contributions or withdrawals. That means choosing between after-tax contributions to a Roth and pretax contributions to a traditional IRA; deciding what to hold in a taxable account versus a retirement account; and using a health savings account if you're covered by a qualifying high-deductible health plan. In 2026, you can put away $4,400 in an HSA for self-only coverage or $8,750 for a family. You get a deduction going in, tax-free growth and tax-free withdrawals for qualified medical costs. I can't think of another account in the tax code that does all three.

Keep growing your income. A lot of people in their 40s get strangely passive about their careers, like the path is already set. Usually, it isn't. A 20% raise at 44 has two decades to compound, and if you're still sending half of every raise straight to savings, you get the benefit twice.

Keep the portfolio boring. The temptation to branch out with your investments in your 40s looks different than it did in your 20s. You've got real money now, and people will start pitching you complicated products. Before you buy anything you couldn't explain to someone you trust in two minutes, ask what it costs you every year and how you get out of it if you change your mind.

What matters most

Every person I've seen retire in good shape saved seriously and consistently for decades. If you're 38 or 44 and reading this with a knot in your stomach, you still have time. At 45, you likely have 20 years of compounding ahead of you, along with what may be your highest-earning years.

And don't forget that money isn't everything. Identify your priorities - what really matters to you most in life - and align your goal of building wealth with them. Odds are that someday you'll sit across from someone like me and ask whether you have enough. You're writing most of that answer right now.

Kurt Supe is a CPA and retirement planner with CFD Investments Inc., Registered Broker Dealer, and Creative Financial Designs Inc., Registered Investment Adviser. For additional information and disclosures, visit www.creativefinancialgrp.com. Kurt is on X and YouTube at @KurtSupeCPA.

-Kurt Supe

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10-26-26 1542ET