Money in your 40s: It's make or break

By Liz Pulliam Weston

Middle-age spread isn't necessarily limited to your waistline.

Your net worth in your 40s should be expanding as well, but so, perhaps, are your debts. You're probably earning more than ever before, but the money may not seem to go far because you're grappling with such big expenses: homeownership, your children and their educations, your own retirement (which no longer seems like an impossibly distant event).

You have less time to recover from missteps, so it's important to get your money right. Here's the snapshot of the typical 40-something's finances:

• Incomes and wealth are up. The median income for 40-something households, nearly $58,000, is about 20% higher than for 30-something households, according to the Federal Reserve's latest Survey of Consumer Finances. Net worth is dramatically higher for the older group: a median of $117,800 versus $44,200 for 30-somethings. Nearly three-quarters of 40-something households own their own homes, compared with 60% of those in their 30s.
• Credit card balances are ticking up. A majority of people in their 40s carry credit card debt, and the median balance is $2,900, sharply higher than the $2,000 carried by households in their 30s. The percentage carrying big balances is up as well: One in 10 people in their 40s have more than $10,000 in credit card debt, compared with one in 12 people in their 30s.
• Yet fewer are falling behind. Higher incomes and more experience managing money may explain why less than 8% of 40-somethings are 60 days or more late on a bill, compared with nearly 12% of those in their 30s. Negative net worth is more of an anomaly as well, with just 7.5% of people in their 40s owing more than they own, compared with 11.1% of those in their 30s.
• More people are getting serious about retirement. The percentage of people who have workplace retirement plans or IRAs rises to 59% for those in their 40s, compared with 53% of 30-somethings. Account balances are higher as well: a median of $40,000 versus $17,000.

More facts and figures:

Money in your 40s

What you have	Amount	Read more
Median net worth	$117,800	Your free financial report card
Median net worth of top 25%	$338,100	5 lessons the rich can teach you
Median net worth of top 10%	$719,800	So you want to be a millionaire
Median income	$57,505	Live well without busting your budget
Life expectancy*	79.5 years	Insure Your Life Decision Center
Children in household	67.6%	Raise Kids Decision Center
Homeownership	74.3%	Home-buying Guide
Median value of home	$175,000	Home Equity Calculator
Own a car or cars	89.5%	Save on a Car Decision Center
Median value of vehicle(s)	$18,100	Insure Your Car Decision Center
What you owe
Households with debt	88.4%	Debt Evaluator
Median total debt	$92,000	Your Credit Rating Decision Center
% carrying credit card debt	56.3%	Credit Card Smarts Decision Center
Median balance	$2,900	Debt Consolidation Calculator
% carrying student loans	13.1%	Saving for College Decision Center
Median amount owed	$8,000	Cut College Costs Decision Center
% carrying installment loans	52.1%	Manage Debt Decision Center
Median amount owed	$12,000	A survival guide for new grads
% with a mortgage	64.5%	Home Financing Guide
Median amount owed	$102,000	Insure Your Home Decision Center
Households on the edge
Negative net worth	7.5%	Learn to Budget Decision Center
60 days late on a bill	7.9%	How not to pay your bills
Owe $10,000 or more on credit cards	10.7%	Huge debts, paid off fast
No health insurance	18.7%**	A guide for the uninsured
Your future
Households with a pension	28.8%	Create a Plan Decision Center
401(k) or IRA	59.0%	A Beginner's Guide to Investing
Median value of accounts	$40,000	Retirement Planner
Source: Federal Reserve's 2004 Survey of Consumer Finances
*Life expectancy from National Center for Health Statistics, 2006 **U.S. Census Bureau, 2004 (ages 35-44)

What to do now

Clearly, those retirement-plan balances are still a long way from comfortable nest eggs, which is why it's so important to take these steps:

• Make retirement savings your priority. With all the other claims on your paycheck, it can be tempting to skimp here. But every dollar you fail to put aside now could mean $10 less in retirement income. Use MSN Money's retirement-planning calculator to figure out how much you need to save and make the sacrifices necessary to put aside that money. At the very least, make sure you're taking full advantage of any company match in a workplace 401(k) or 403(b) plan.
• Pay off those credit cards. Swelling credit card balances -- or really, credit card balances of any amount -- are a sign of trouble. MSN Money's Decision Centers on budgeting and debt management can help you get on track. If your balances are so big you can't pay them off within a few years, consider talking to a legitimate credit counselor (one affiliated with the National Foundation for Credit Counseling) and with a bankruptcy attorney about your options.
• Smart college strategies. Parents want to give their kids a good start in life, but don't gut your own future while you're trying to ensure theirs. Be wary of taking on more debt than you can easily repay, and consider lower-cost alternatives if paying or saving for college means stinting your own retirement savings. MSN Money's Decision Centers on cutting college costs and on saving money for college are must-reads.

Related links:

• MSN Lifestyle: 20 things to get before you're 40
• MSN Lifestyle: What women must know about money
• MSN Careers: Job goals for every age

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published March 26, 2007