What this article covers
Opher Ganel asked three fellow top finance writers, Charlie Brown, Ben Le Fort and Jason Clendenen, for their best money advice for your peak earning years, the 40s and 50s when median income approaches its high point. The panel urges readers to resist lifestyle inflation, make retirement planning the top priority, buy a reasonably priced home and keep spending on experiences that make life enjoyable.
Key Takeaways
Your 40s and 50s are your peak earning years, so financial decisions then carry the most weight
Citing CNBC, the article notes that college-educated, full-time workers reach peak earnings around age 55, with median income about 87% higher than at age 22 for men and 57% higher for women. By 40, men’s median income is already within 12.5% of its peak and women’s within 2.5%, which makes these two decades the window that can make or break financial freedom.
Make retirement planning your top priority in your peak earning years
Ben Le Fort calls this period crunch time, with a limited number of years left to benefit from compounded returns. Jason Clendenen adds a nuance: if you aren’t on track, learn personal finance and investing to catch up, and if you are, learn to generate cash flow and see whether you can retire early.
Avoid lifestyle inflation, but don’t postpone all enjoyment
Charlie Brown advises against letting a higher income push spending higher, saving the money you don’t spend chasing things you don’t need, and spending with intention. Opher Ganel suggests buying a home without overstretching (a primary residence saves rent but usually isn’t a great investment) while still spending on fun experiences, since no one knows how long they will be healthy enough to enjoy them.
Are you entering or already in your peak earning years?
If so, here are some great financial tips….
According to CNBC, college-educated, full-time workers reach peak earning around age 55, with median income about 87% higher than at age 22 for men, and 57% higher for women.
At age 40, men’s median income is already within 12.5% of their peak, and women’s median income is within 2.5% of their (lower) peak. By age 60, both men’s and women’s median income is already a few percentage points off their respective peaks.
Your 40s and 50s, your peak earning years, are when financial decisions can make or break your financial freedom dreams.
That’s why I asked several fellow top finance writers to offer their best financial tips for this crucial period.
Meet the Panel: Four Personal Finance Writers in or Near Their Peak Earning Years
First up, Charlie Brown, whose Medium profile says, “11x top writer. Traded a wine career for writing. Expect entrepreneurship, minimalism, finance + personal development.”
Second, Ben Le Fort, economist and personal finance writer and enthusiast, whose Medium profile reads, “Making of a Millionaire editor | Personal finance writer | Author of ‘The Financial Freedom Equation’.”
Third, Jason Clendenen, who works full time, but makes his real money from a residential real estate portfolio. His Medium tagline reads “Self-taught investor helping busy professionals learn how to ignore mainstream advice and build real wealth. Build your ark today!”
Finally, yours truly, full-time consultant, part-time financial strategist, with several other income streams including residential and office real estate.
Interestingly, Charlie and Ben are about to enter their 40s, Jason is already there, and I’m almost to the end of my 50s, so between us we span that 20-year period (though I expect my income to keep growing, and I suspect the same will likely be true for most or all my co-panelists).
What Should You Do With Your Money in Your Peak Earning Years?
Charlie, our resident free spirit who sold everything and moved abroad to pursue her dreams says her advice for your peak earning years is similar to what she advises people just starting out. specifically:
- Don’t allow your higher income to drive your spending higher (a.k.a. lifestyle inflation), and most especially don’t try to “keep up with the Joneses”
- That money you don’t waste chasing stuff you don’t need? Save it!
- What you do spend, “spend with intention”
Ben’s advice centers on retirement planning:
- “Make retirement planning your #1 priority. [You’re] entering crunch time and have limited number of years to leverage compounded returns.”
Jason echoes Ben, but adds a nuance:
- “Depends on your financial situation. If you aren’t on track for retirement, learn about personal finance and investing to get on track. If you are on track, learn about generating cash flow to see if you can retire early.”
Rounding things off, given that Ben and Jason already hammered home the importance of retirement planning, I’ll offer two tips – the first mainstream, the second less so.
- If you haven’t done so already, buy a home; just don’t buy more home than what you’d be happy with because someone (your lender?) says you can afford more. Your primary residence is a great way to save on rent, but isn’t usually a good investment (true, my first house doubled in value in the 5 years I owned it, and my current house is worth 40% more than in 2019, that’s far from typical).
- While you’re busy buying a home and investing for financial independence, make sure to also spend on fun experiences – you don’t want to put off all enjoyment to the future, since you don’t know if you’ll live long enough and be healthy enough to enjoy the fruit of all that financial prudence.
The Bottom Line: Be Reasonably Frugal, Plan for Retirement and Still Enjoy Life
Between the four of us, we advise people in their peak earning years to be reasonably frugal, but not to such an extent that they put off enjoying their life. We emphasize the importance of planning and investing for retirement, as well as buying a (reasonably priced) home, and educating themselves about investing for appreciation and for generating cash flow.
Frequently Asked Questions
At what age do people reach their peak earning years?
According to the CNBC figures cited in the article, college-educated, full-time workers reach peak earnings around age 55. Median income is already close to that peak by age 40 and only a few percentage points below it by age 60, so the 40s and 50s are generally considered the peak earning years.
What should I prioritize financially in my 40s and 50s?
The panel’s top priority is retirement planning, since you have a limited number of years left to benefit from compounding. If you are behind, learn about personal finance and investing to get on track; if you are on track, learn how to generate cash flow and consider whether early retirement is possible.
How do I avoid lifestyle inflation as my income grows?
Don’t let a higher income drive your spending higher, and avoid trying to keep up with the Joneses. Save the money you would otherwise spend on things you don’t need, and spend the rest with intention.
Is buying a home a good investment in your peak earning years?
The article recommends buying a home if you haven’t already, but not more home than you would be happy with just because a lender says you can afford it. Opher Ganel notes that a primary residence is a great way to save on rent but usually isn’t a good investment, even though his own homes appreciated well.
Find financial advisors who specialize in helping people like you
Search Wealthtender by specialty, location and fee type, compare advisors’ approaches, and read what their clients say before you reach out.
Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.
About the author
Contributing Writer, Wealthtender
My career has taken some unexpected turns, from earning a PhD in experimental high-energy physics, to conducting cosmic-ray research in Antarctica, to supporting NASA projects and programs, to running my own consulting business. I also run several other small businesses and help my wife run her Marriage and Family Therapy practice.
Those experiences taught me to question assumptions, think critically, and recognize that real-world decisions of any significance rarely have simple answers that apply to everyone. Today, I bring that perspective to writing about personal finance. Drawing on my analytical background, business experience, and research, I explore financial decisions, challenge conventional wisdom, and help readers understand the tradeoffs that can affect their financial well-being. To complement my own research and experience, I also weave insights from financial professionals into my articles, drawing on their expertise and real-world experience helping clients navigate financial decisions and challenges.
At medium.com/@opher-ganel, you can read more of my articles and subscribe to receive email notifications when new ones come out.