Future Focus: Make your 40s matter more than your 20s
It’s never too late to maximise your outcomes.
I’m passionate about getting investors into the market early. One way that I try to do this is focus on the significant difference to return outcomes with an extra decade or two in the market. I’ve found this motivates young people. Investing when you’re 20 as opposed to when you are 40 could result in a seven-figure difference to your outcomes.
I recently got the opportunity to present to high school students about the importance of investing. Naturally, there were teachers and facilitators that were also listening to this presentation.
Although they weren’t the intended audience, my presentation instilled a sense of quiet panic that they were ‘too late’. My presentation revolved around harnessing time and compounding to create wealth, even with minimal investment. It is meant to get younger investors to understand they are in a prime position to change their lives.
This was not the first time I’ve had a similar reaction from older participants in these workshops - ‘I wish I knew this earlier’. My fear is that my attempt at motivation ends up discouraging people. These lost years of compounding feels like an insurmountable missed opportunity.
Perhaps a change of perspective is warranted. Life is about using whatever advantages each of us has in the best way possible. For young people that is time. For those who may feel they’ve left it ‘too late’ to invest are often in a prime position to catch up.
Vanguard has conducted research on what it takes to prompt action from investors to engage with their finances. The results show the key is pointing out the difference to outcomes once action is taken. It’s hard for someone in their 40s to take action when filled with regret for not making a decision in their 20s.
This is my ode to a common but often ignored exhortation – it is never too late.
The good news
One positive to being in your 40s is that you likely have much higher earnings and more discretionary income to devote to your investment goals. It is easy to tell young people to invest, but they often lack the means. In my early to mid-20s, I was lucky to have $100 a week spare to invest for my financial goals.
Figure: Median salary by age, latest data from Australian Bureau of Statistics (2022-2023)
You also likely have a larger capital base to start with. Below is Westpac data on the average cash saving balance by age. This is cash that isn’t invested and sitting in transaction and savings accounts.
Figure: Average cash saving balance by age, Westpac – correct at 22 January 2025.
More money, and more money coming in. I’d classify that as good news.
Your earnings are also more consistent and stable. You are past the average age for a caregiving-related career break (33 years), which leaves uninterrupted earnings until retirement.
Last piece of good news – you’re already investing in your superannuation, and you have likely been investing since your 20s anyway. You’ve got established capital bases in and out of superannuation that can be invested if you haven’t started.
Source: ASFA data for June 2023, supplied October 2025
If you’d like more information on how to optimise your superannuation, I’ve written an account here on how to maximise your outcomes. This particular piece was inspired by a Rainmaker study that said that 35 was the best time to take your super seriously. The premise was similar to what I’ve proposed in this ‘good news’ section – you’ve got a good capital base and regular payments coming in that are 12% of your salary during some of your highest earning years.
The realities of life
The difference between your financial firepower in your 20s and 40s is stark. What these numbers don’t reflect are the additional responsibilities and commitments that come with age. Children are an expensive endeavour, you may have caring responsibilities for ageing parents and you may have large continuous financial obligations such as mortgages, car loans and school fees.
What is net of these commitments however, are the cash savings balances (Westpac) and superannuation balances (ASFA). There’s room here to make a difference to your financial outcomes and quality of life.
How the maths works
The image that I show during my presentations that tends to scare older investors runs through the savings needed to save $1,000,000 by the time you’re 65. This graphic illustrates the capital outlay required at different ages. Most of us will need a lot less than that to fund a slightly earlier retirement if we start earlier.
Source: Morningstar Investment Management. The image represents the monthly savings necessary should the investor earn 7% per annum from a hypothetical asset. No adjustment has been made to account for inflation, fees, transaction costs, or taxes.
As you can see, it is not a linear progression. The older you are when you start investing, the more you need to save to reach the same end goal. The reason for this is explained in the graph on the right, which shows the split between capital (the amount you invest) and growth (the gains you make from investing). The earlier you invest and the more time you have in the market, the less you need to save.
The graph on the right shows that when you start saving at 25 your capital contribution to your investment is $194,211. The market, and compounding, adds the rest. That is a significant contribution. This is compared to the 45-year-old, where almost half comes from contributions, and half from market returns.
What it will take to make up for two decades
Investing early, as demonstrated above, does take a lot of the hard work off your plate. It’s important to remember though, as powerful as time is to your outcomes, it’s not the only lever that investors have.
Let’s compare two investors who have different incomes and abilities to contribute to their investments.
Investor A has had their money work harder for them, with compounding lifting the total comparative to the capital contributed. Investor B has been able to contribute more, in a shorter amount of time. They ended up with similar outcomes.
Time can take the heavy lifting out of it when you invest earlier, but a higher income goes a long way.
It’s easy to think of these examples at the surface level. What’s behind these examples are the circumstances surrounding the additional investments.
When you’re 20, spare cash to invest often comes from saying no to lifestyle experiences and forgoing holidays and leisure activities. In your 40s, spare cash may be more available due to higher salaries, bonuses, and dependants becoming less financially dependent.
This trade off often means less sacrifice per dollar invested.
Final thoughts
Your 40s are a great time to invest. You still have decades in front of you and can create a meaningful difference to your life. Investors tend to fixate on those early ‘missed’ compounding years, but what is underestimated is how quickly higher contributions compound.
In the example I used, tripling that monthly contribution adds more money to your account, but also compresses decades of missed investing into a shorter time frame. Investing in your 40s may not be ideal – but it sure beats starting in your 50s.
Invest Your Way
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