3 smart money moves to make in your 40s

Are you saving for retirement, funding your children's education, and taking care of your family in case something happens to you?

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By the time you reach your 40s, you should be on fairly solid financial footing with a fully funded emergency cash account, a good handle on your debt, and a substantial amount in retirement savings. Take this time to assess your progress toward your savings goals, as you still have a few decades or so before retirement to make any necessary corrections. Here are three financial moves 40-somethings should consider making now.

1. Max out your retirement savings

As you get closer to retirement, you start to get a better sense of your future income needs and where that income will come from. It's a good idea to consistently evaluate your retirement savings. You likely haven't been able to max out your retirement contributions in the past, but as your salary rises, you should strive to contribute the maximum allowable amount into your workplace retirement plan—for 2017, that's $18,000 for those under age 50. If possible, you should also contribute the maximum of $5,500 for 2017 into a traditional or Roth IRA.

Starting at age 40, saving that $5,500 in an IRA for the next 25 years and earning a 6% return could yield an extra $300,000 or so in retirement savings (not accounting for increases in the contribution limit or inflation). That could significantly change your living standards during retirement.

As a bonus tip, as you evaluate your portfolio, it's also a good exercise to head over to the Social Security Administration's website, set up an online account, and review your potential Social Security benefits. While you should continue to focus on your self-funded savings, it's a good idea to know what your expected monthly Social Security payout will be and how that can supplement your own savings.

2. Save for your children's education

If you have young children and you plan to help them pay for their higher education, then consider a 529 education saving plan. 529 plans are administered by the states, and almost every state offers one. You don't have to use your home state's plan, but doing so may get you a state income tax deduction. These accounts allow you to contribute after-tax dollars that then grow tax-free and can be withdrawn tax-free as long as they are used for qualified education expenses.

3. Protect your estate

It may not be fun, but at your age, you should think about what will happen to your assets when you die. Having a will in place is a good first step toward outlining your financial wishes should something happen to you. You spend your life working hard to build financial security for you and your family, but it is just as important to plan and provide financial security for your family after you are no longer here. That's why proper estate planning is important. If you have young children, it's also prudent to have guardianship papers in place as well.

But with all of this talk of death, let's not neglect to think about what will happen if you're alive but unable to make decisions for yourself and your family. Here's where a durable power of attorney and an advance healthcare directive come into play. These two documents allow you to authorize someone to make financial and medical decisions on your behalf. Of course, you should always consult an attorney for specific advice. But remember that personal financial planning doesn't always involve money—having these critical documents in place can keep your finances in order in case of an emergency.

Are you meeting all your financial goals in terms of saving for retirement, funding your children's education, and taking care of your family in case something happens to you? If you are, then keep doing what you're doing. If not, then you still have time to get on the path toward a secure financial future.

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Article copyright 2/22/2017 by The Motley Fool.
The statements and opinions expressed in this article are those of the author. Neither Fidelity Investments nor your employer can guarantee the accuracy or completeness of any statements or data.
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