I woukd stick with 40 gallons. It might be more efficient than your old one that may have a build up of sediment inside. Your homeowners insurance company will like that you replaced the old one also. We recently replaced ours. We looked at the heat pump type water heaters but decided theirs too much to go wrong with them and they are expensive. There's talk about the heat pump heaters being mandated by the epa so it's probably a good time to replace yours.

I used to have an 80 gal on a timer before moving here in 2020. It was the best! I had electricion put a timer on the wall for it. Timed it to come on at 5 AM and 5 PM for 2 hours. That thing was great. Always had hot water. Low cost to run it on a timer. Two people in the house (thought of resale on size).

Would love to add a timer to this 14 yr system. Will wait for the tank to RIP. Had instant in my first house here. I don't like instant... wastes 2-3 gal of water waiting for instant to reach the faucets. Would use a garden can to catch the waste for plants.

It’s all based on your lifestyle, not 1 size fits all. I would Never go smaller than 60 gallon and I would put a recirculating system in if possible.
Do you and your spouse take baths/showers at the same time or back to back? Do you have guests that all of you take showers/baths back to back? This determines how much hot water you need.
This is why any new home in the last 4 or 5 years (including ours) has a tankless system in place. We can take 1 bath or 4 baths/showers concurrently or back to back with no issues.
The problem with tankless is that they are inefficient when using electricity, they need natural gas to operate best, and gas is only south of 44 (or maybe around 44).
They also make heat pump water heaters that might save you money in the long run, and if you go this direction, I’d probably go with an 80 gallon to be safe.

Hot water heater
 

All my life I've had 50-60 gal electric heater. Had 2 boys that knew water never ended. Here in The Villages my heater is gas. Very fast recovering in fact seamless.I just hope I never have to replace it. The heater itself not pricy but installation will ruin a checking account. for just replaced his, for house sale and My neighbor just replaced his to sell the house. Mandatory certified gas techs, Had to redo the exhaust system and several conversions from old system to new codes. All told close to $4k.

I agree that it is based on your lifestyle, but when you decide to market a house with 2 full bathrooms, an undersized water heater will likely be an issue.

Buyer beware
 

Any home sale, regardless of age of the house, is subject to a buyer's inspection... You should never rely upon what the original developer or builder specifies.

We went tankless.

Consider Going Larger
 

New hot water heaters are highly efficient, both as to their burners as well as insulation. You can go to a 50 gallon heater and have the ability to run the washing machine and dishwasher at the same time you take a shower. What ever you do, don't drop down to a 30 gallon tank.

You have options:

1) tanked or tankless. There have been a number of conversations on this forum specific to The Villages about tankless water heaters in the newer sections and their inability to provide hot water quickly.

2) size of tanked water heater... One option that is mentioned by many plumbers is to use a slightly smaller tank and then turn the heat up. Very very hot but use a mixing valve on top of the tank.

I think a lot of home inspectors would not notice that the water heater is 30 gallons and not 40 gallons. They look very similar.

Go tankless. I love mine.
In the summer, when it is 100°F outside, the water starts at 100°F, saving electricity. You also save a lot of electricity by not keeping a tank of unused water hot.
It does take longer for the hot water to get to the tub. Rather than the 10 seconds for a tank, it is closer to 40 seconds. Yes, some people do whine and moan about that. For the money savings, it is worth it.

Edit: just checked, my electric bill in June was $55.

I neglected to mention that with whatever size tank you settle on, you should add a Watts recirculating pump. If it matters to you, a recirculating pump will pay for itself in reduced water usage over the life of the pump. The beauty of the pump is that you will have near-instant hot water at your shower and faucets. It is a great pleasure to not have to stand off to the side of the shower or outside the shower, waiting for the hot water to arrive.

The Watts pump is an ingenious device that sits on top of the outlet of your water heater. The pump runs at a very low pressure and the electric motor is a synchronous type like those used i electric clocks and cost pennies a day to operate. If you are really frugal, the pump has a built-in timer and you can choose the hours for it to operate.

The ingenious part of the Watts system is that the hot water is circulated or returned to the hot water tank through the cold water lines. This is done by a small manifold installed at the faucet that is furtherest from the hot water tank. When all of the faucets, showers, washers etc. in the house are turned off, the manifold directs the hot water into the cold water line which carries it back to the tank. When any faucet etc in the house is open, the valve in the manifold closes and only cold water runs in the cold water line.

Depending on the model of your house, the incoming hot water line may "split and run hot water in two directions. In that case, you will need a manifold at the last faucet on each line. The Watts pump with one manifold costs around $200. The extra manifold is under $50. They are easy to install for a DIYer, although you do have to lie on your back under the sink to install the manifold. When installed by a plumber at the same time as the new water heater, the additional cost to install the Watts system will be minimal.

And a smaller tank may be more money because it's not a standard size that most buy. And it will definetly be a negative when you eventually sell the house.

Look into this option
 

We just switched to a tankless through the TECO program. After looking into insurance alternatives, some would not quote with our 23 year old water heater. As a snowbird, I was always concerned about leaving with the old one popping and banging, waiting for it to let go. The tankless works great. $26/month for 5 years ain't bad at all. Still takes a minute for the hot stuff to get to the other side of the house, but welcome to Florida water pressure. AND we got the added bonus of a bit of extra storage space in the garage since the tankless is outside. IMO, worth looking into.:thumbup:

Quote "We have a 40-gallon tank (electric) that is 26 years old and seems to be in perfect working order."

So you are one of "Those Guys" who is going to wait till your tank fails to get another and brag that it lasted 30 years LOL

Here is what you need to think about:
1) Unless you are changing the anode rod in the tank every 5 or so years, its long gone and becasue the inside of you tank is now rusting, you are washing and possibly drinking with all that "contaminated" water.
2) Because the tank is literally eating itself from the inside out, when it does fail it has a good chance of being spectacular meaning it's probably going to be a large leak or flood due to all the corrosion.

If properly maintained, meaning yearly flushes and changing the anode rod every 5 or so years I guess it's possible it could last that long but not many ever do both of these maintenance tasks.

Time for a new water heater, if not, please let us know when and how it fails and how much it cost for you to fix all the damage.