How turning 40 is changing my investment strategy

I turn 40 next week, and it’s wild how fast the last decade disappeared. The closer I get to our early retirement target, the more I can see how my money strategy has quietly shifted in the background.

My 20s were about getting out of debt. My 30s were about building wealth as aggressively as I could. My 40s are going to be about something different: turning that wealth into lasting freedom and protecting what we’ve built.

In this article I’ll walk you through what’s changing in my own plan and why—so you can think about how your strategy might evolve as you move from one decade to the next.

My 20s: the decade I decided debt had to go

My early retirement plan didn’t start in my late 30s. It started in my late 20s when I made one of the hardest financial decisions of my life: I decided to become completely debt-free except for my mortgage.

If it charged interest, I wanted it gone—credit cards, personal loans, car loans, even retirement-plan loans. I didn’t follow the “smallest balance first” approach. I attacked my highest-interest debt first, because that’s what was costing me the most every month.

By the time I turned 30, I had paid off more than $110,000 of debt. That didn’t happen because my income suddenly exploded. It happened because I chose sacrifice over lifestyle upgrades, again and again, while it felt like everyone around me was doing the opposite.

Friends were buying newer cars, bigger homes, and taking expensive vacations. I was rerouting every extra dollar to debt. There were many moments where I questioned myself, because when you’re sacrificing in the present, the payoff feels very far away.

But on December 21, 2015, I made my very last non-mortgage debt payment. For the first time in years, my paycheck actually belonged to me. That was the day my investment plan really began.

My 30s: building a simple but powerful foundation

Once the debt was gone, every dollar finally had a new job. Instead of paying interest to banks, it could start building my future. I focused on a few key building blocks.

Step 1: a real emergency fund

The first thing I did was fully fund an emergency fund with six months of expenses. That cash wasn’t there to make me rich—it was there to keep me out of debt and prevent me from having to sell investments at the worst possible time.

Years later, when my house flooded, that emergency fund did exactly what it was supposed to do. Without it, I would have gone right back into debt. Instead, we handled the crisis and kept our long-term plan intact.

Step 2: maxing out tax-advantaged accounts

After the emergency fund, I went all-in on every tax-advantaged account I could access, one step at a time:

• I contributed enough to my 401(k) to get the full employer match.
• In 2016, I started maxing out a Roth IRA every single year and treated it like a bill, not an optional extra.
• In 2017, I began maxing out my Roth 401(k).
• By 2022, I was also maxing out my Health Savings Account (HSA).

None of this was flashy. It was just consistent, automatic investing. Over time, those accounts became the foundation of our family’s wealth.

Step 3: keeping lifestyle simple on purpose

To this day, I still drive the same car I bought in 2018 and have no plans to replace it as long as it gets me where I need to go. That one decision alone has saved me thousands of dollars that I was able to invest instead.

This is a theme in my life: I’d rather let my investments grow quietly in the background than constantly upgrade my lifestyle. If you like this kind of approach, you might also enjoy the minimalist habits I wrote about in this article on steady, minimalist money habits.

Money and marriage: why being on the same page matters

When my wife and I got married in 2021, we were already aligned financially. We both believe in financial independence. We both value staying out of debt more than keeping up with what other people are buying.

We combine our finances, and we treat our money as “ours,” not “yours” and “mine.” Every month we sit down together, review our budget, decide how much we’ll invest, and check in on our emergency fund. These meetings don’t take long, but they keep us moving in the same direction.

Today, the only debt we carry is our mortgage—and even that has an expiration date. We have a plan to pay it off by age 53, about 13 years from now.

What doesn’t change as I enter my 40s

As I move into my 40s, a lot of the foundation stays exactly the same. I’m not suddenly throwing out the basics that got us here. Here’s what we’re continuing to do:

• Maxing out both of our Roth IRAs every year
• Maxing out my Roth 401(k) and contributing to my wife’s 457(b)
• Maxing out our HSAs as long as we’re eligible
• Investing extra money in a taxable brokerage account after we’ve filled the tax-advantaged buckets

The big difference now is that every investment decision is tied to a much more specific purpose: building flexible, reliable income for our 50s and beyond.

Our early retirement target: ages 50–55

Our target retirement window is somewhere between age 50 and 55. That sounds young to a lot of people, and I often hear, “But what will you do if you retire that early?”

For me, retirement has never meant doing nothing. It means having complete control over my time. I’ll still work on things I care about. I’ll probably still write, create content, and build tools that help people with money. The difference is that I won’t be doing any of it because I have to. I’ll be doing it because I want to.

We also have a long list of places we want to visit and experiences we want to have while we’re still young and energetic enough to enjoy them fully. That’s what all these years of saving and investing are really buying us: options.

Shifting from pure growth to growth + income

Right now, almost everything we own is positioned for growth. That’s helped us build our net worth quickly in our 30s. But as we get closer to actually living off our investments, that mix will gradually change.

By the time I retire early, I’d like our portfolio to be roughly:

• About 50% focused on growth (to outpace inflation)
• About 50% focused on dividends and income

I’m not doing this because dividends are “better” than growth stocks. I’m doing it because the job of our money is going to change. At that point, the goal isn’t just to grow our net worth—it’s to create reliable income without constantly needing to sell investments.

This shift won’t happen overnight. It will be a slow, deliberate transition over the next decade.

Building multiple income streams on purpose

By the time we retire early, our income should come from several different places, including:

• My military pension
• My wife’s state pension and her 457(b)
• Dividend income from our taxable brokerage account
• Roth IRA and Roth 401(k) contributions we can withdraw tax-free
• A Roth conversion ladder from traditional accounts later on

Many of these Roth withdrawals will be tax-free. Every piece adds another layer of flexibility. If one source isn’t ideal in a particular year—for tax reasons or market reasons—we can lean more on another.

That’s the kind of resilience we’ve been building toward. I don’t want to reach retirement with just one lever to pull.

Why our taxable brokerage account is such a big deal

One of the biggest levers in our plan is our taxable brokerage account. Since we’re aiming to retire around 50–55, we’ll have several years before some retirement accounts are fully accessible without penalties.

That brokerage account will act as our “bridge” between our working years and traditional retirement age. It gives us money we can access whenever we need it, without having to touch accounts we’d rather leave alone a bit longer.

To build that bridge, almost every future raise, bonus, or increase in income already has a job: go to our investments, not our lifestyle. We’re intentionally choosing not to let our spending creep up every time our income rises.

If you’re a young family trying to balance limited income with big goals, you might find my simple roadmap in this game plan for young families on a tight budget helpful.

Using Roth rules and conversions to our advantage

When I eventually retire, I plan to roll my Roth 401(k) into my Roth IRA. That matters because of Roth IRA withdrawal rules: contributions come out first, tax- and penalty-free, before earnings.

If everything stays on track and we keep maxing out our Roth accounts, my wife and I expect to accumulate well over $800,000 just in Roth contributions between our Roth IRAs and Roth 401(k)s. If I retire at 50, that’s roughly $80,000 per year in available contributions for 10 years before I hit 59½. If I retire at 52, that’s about $100,000 per year for 8 years.

On top of that, we expect to start making Roth conversions from traditional accounts in our mid-to-late 40s. We’ll convert money from pre-tax accounts to Roth, pay the tax at what we expect will be relatively known rates, and then let that converted money grow for at least five years before touching it.

Think of it like planting trees you know you’ll need later. You don’t wait until the day you need shade to plant them. You plant them years in advance so they’re ready when the time comes. That’s how we think about Roth conversions.

Planning ahead for our daughter’s education

Another milestone that gives us a lot of peace of mind is our daughter’s education. By the time we’re around 50, she’ll likely be done with college.

We’ve already fully funded her 529 college savings plan, and I transferred my Post-9/11 GI Bill benefits to her while I was still in the military. If she doesn’t use all of her 529, current rules allow up to $35,000 of unused 529 funds to be rolled into her Roth IRA (subject to the detailed IRS rules in place at the time).

Knowing her education has been planned for since she was born removes one of the biggest financial stressors many parents carry into their 50s. Instead of choosing between “pay for college” and “save for retirement,” we’ll be able to focus more fully on the next chapter of our own lives.

Balancing growth with protection

In my 20s and 30s, almost everything was about growing the portfolio as fast as possible. That aggressive phase served its purpose. But as retirement gets closer, protecting what we’ve built deserves just as much attention as growing it.

For us, that means:

• Staying diversified
• Keeping a healthy emergency fund
• Avoiding new debt
• Managing taxes strategically
• Planning for health care long before Medicare

It also means thinking decades ahead about things like required minimum distributions (RMDs). Our goal is to have our traditional pre-tax accounts drawn down or converted by the time we reach RMD age, so we’re not forced into large taxable withdrawals later.

Sequence of returns risk: why timing matters

One of the biggest reasons I’m gradually adding more dividend investments and cash flexibility is something called “sequence of returns risk.” It sounds technical, but the idea is simple.

Imagine you retire with a portfolio that’s almost entirely in growth stocks. A year later, the market falls 30%. You still need to pay your bills, so you’re forced to sell investments while they’re down. You’re locking in losses just to create income, and your portfolio may never fully recover.

Now imagine a different scenario. You have:

• Dividend income
• Cash reserves
• Pensions
• Roth contributions you can tap
• A taxable brokerage account

When the market drops, you don’t have to sell your growth investments at a discount. You can live off other parts of your plan and give your growth assets time to recover. That’s exactly why our portfolio will evolve over the next decade—not because I’ve stopped believing in growth, but because I want our plan to work in both good markets and bad ones.

Health care: planning for the gap years

Another major piece of our early retirement plan is health care. If we retire before Medicare kicks in, we’ll need a way to cover health costs in those “gap years.”

Our Health Savings Accounts are a big part of that strategy. We’ve been maxing them out, investing the money, and letting it grow. Later, those HSA funds can be used tax-free for qualified medical expenses, which gives us another pool of money dedicated specifically to health costs.

Because I’m retired military, I also have access to options like TRICARE and VA health care. Even if we’re covered by those, we can still use our HSA to reimburse eligible expenses—we just can’t keep contributing to the HSA while covered by non-HSA-eligible plans.

Tax flexibility: not letting the IRS dictate our plan

When we finally reach financial independence, I don’t want every dollar of income coming from one taxable bucket. That’s how people end up with bigger tax bills than necessary.

Instead, we’re building:

• Roth accounts (tax-free withdrawals under the rules)
• A taxable brokerage account (capital gains and dividends)
• Traditional retirement accounts (taxable when withdrawn)
• Pension income

Every one of those income sources is another lever we can pull depending on tax laws, market conditions, and our spending needs in a given year. The more flexibility we have, the more we can control our tax bill instead of letting it control us.

Investing performance and staying humble

Over the last decade, my portfolio has averaged strong returns through a mix of broad index funds and a small allocation to individual stocks. Some years were fantastic; others were rough. That’s just how investing works.

I never put more than about 10% of my portfolio into individual stocks. The other 90% stays in diversified index funds. I don’t chase every hot trend. I stay invested, keep learning, and stick to a strategy that matches our goals.

But I also don’t build my retirement plan on the assumption that the future will look like my best years of returns. Investing has a way of keeping you humble. Some years are great, some are average, some are painful. The plan has to work across all of them.

Thinking beyond our own lifetimes

When I was younger, investing was mostly about taking care of my own future. Now I also think about my family long after I’m gone.

If things go according to plan, our portfolio won’t just fund our retirement. It’ll also become something we can pass on—to our daughter and, hopefully, to future generations. To me, building wealth isn’t just about creating freedom for ourselves. It’s about creating opportunities for the people we love.

What your 40s really reveal about your money

Turning 40 doesn’t magically make you wealthy. Turning 50 won’t either. Birthdays don’t change your financial life overnight. What they do is reveal the habits you’ve been practicing for years.

Your 40s are usually a reflection of what you did in your 20s and 30s:

• If you spent those years paying down debt, investing consistently, and living below your means, you’ll probably enter your 40s with options.
• If you ignored those habits, your 40s will expose that, too.

The good news is that no matter how old you are today, the next 10 years are still yours to shape.

• If you’re in your 20s, you’re building the foundation your future self will stand on.
• If you’re in your 30s, this is the decade where consistent investing can completely change your life.
• If you’re in your 40s or beyond, it’s not too late to make better decisions. The best time to start may have been years ago, but the second-best time is today.

How my strategy is evolving in my 40s

As I step into my 40s, here’s how I think about the past and the road ahead:

• My 20s were about getting out of debt.
• My 30s were about building wealth as aggressively as possible.
• My 40s are about turning that wealth into lifelong freedom and protecting what we’ve built.

If everything goes according to plan, my wife and I won’t retire because we’re exhausted or burned out. We’ll retire because we’ve reached the point where our time finally belongs to us.

And to me, that’s what financial independence has always been about—not escaping work forever, but having the freedom to choose how you spend your days.