You might not be thinking too much about retirement on your 40th birthday, but by the end of the decade you’ll probably be within 15 years of actually retiring. At this point, retirement is no longer an abstract concept decades down the road but something you’ll face before you know it.

                By                    Vance Cariaga

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Luckily, your 40s are also when you reach your peak earning years, so it’s an ideal time to begin maxing out your 401(k) contributions. Thanks to a new rule unveiled last week, you’ll be able to contribute a lot more beginning in 2023. On Oct. 21, the IRS announced that the 401(k) contribution limit will rise to $22,500 in 2023 from $20,500 in 2022.

That extra $2,000 might not mean much to younger workers trying to get by on starting salaries while also paying down college debt and saving up for their first homes. But workers in their 40s, who are in a much stronger financial position, should aim to reach their contribution limits.

Indeed, the typical American worker earns the highest income of their career beginning in their 40s. The median income for U.S. employees ages 45 to 54 is $63,648 a year, according to the Bureau of Labor Statistics. That’s the highest of the six age groups tracked. Workers in the 35-44 group earn the second-highest median income, at $62,244 a year.

Those high salaries also come at a time in life when most people already own a home and don’t have to worry about saving up for a down payment, which should free up more money to put into your retirement savings accounts. The Betterment website lists retirement contributions as the No. 2 major expense to plan for in your 40s, after than paying down high-interest debt.

If you need an overall retirement savings target to shoot for, Fidelity Investments recommends saving at least 15% of your pre-tax income each year, including any employer 401(k) match. By the time you reach age 45, you should have four times your salary already saved up for retirement, Fidelity Vice President Meghan Murphy told U.S. News & World Report.

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“The ultimate goal is to save 10 times your salary by the time you are 67,” Murphy said.

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