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Call us atThe concept of financial planning may seem daunting and complicated to someone in their 40s. Retirement, investment, and debt planning are rooted in financial planning and strategy. Financial planning in your 40s can be challenging, particularly now that the economic outlook is uncertain. According to the Federal Reserve, only 34% of Americans between the ages of 30-44 are on pace with their retirement plans, and 71% have some retirement savings . 40% of Americans in the 45-59 age group are on track with their retirement savings, with 83% having any retirement savings. In fact, Americans save $73,100 on average in retirement accounts. When you consider that you want to retire by the time you are 65, this doesn't seem like a lot of money. This article will examine personal financial strategies for people in their 40s and give examples of how you can create an effective financial plan for your 40s and beyond.
When we reach our 40s, it is often a phase in our lives when our financial goals become a bit more focused and more tangible. It’s a time when people are typically more established in their lives and careers and have a better understanding of their long-term financial needs. However, plenty of opportunities exist to improve that financial planning and your long-term financial goals. In this section, we will look at some of the most common financial goals for people in their 40s and how they are more attainable than you think.
Retirement is probably on your radar by the time you are in your forties. Prioritize retirement savings and consider possibilities like 401(k) plans, Individual Retirement Accounts (IRAs), or other forms of investment like real estate, stocks, bonds, and high-yield savings accounts. Increase your contributions to make the most of employer matching programs, if applicable, and compound interest on what you are putting into the account. Always check your portfolio to make sure you’re getting the most return on investment and building your accounts the right way.
Many adults in their 40s still owe money on mortgages, auto loans, credit cards, or student loans. Make it a goal to concentrate on paying off high-interest debt and developing a strategy to eliminate debt altogether. You'll have the flexibility and financial freedom as a result in the future and allow yourself the ability to save in other areas of your finances, including retirement and education for your children if you have them.
Speaking of children, college isn’t cheap. You know this because you might still be paying off your own student loans! If not, congratulations (some people are still envious of you)! You might want to get started if you’re in your forties and don’t have a college savings fund started for your child or children. Explore different options to save for school, like the 529 college savings plan, which offers tax advantages and investment growth potential. It’s important to create a balance between saving for your retirement and saving for your children’s education, as both of these things are important for your future.
Things happen in life, some expected and some unexpected. In the event of an unexpected event, which can occur at any time, people in their forties can benefit greatly from having an emergency fund set aside. When planning out your emergency fund, aim to save for about three to six months’ worth of living expenses in a separate savings account. This fund essentially acts as a safety net during financial emergencies such as the loss of a job, unexpected car issues, medical emergencies, home improvements, or the loss of a loved one.
We talked a little bit about building a strong retirement fund, and part of that is having a well-diversified investment portfolio. As we get into our forties, it’s important to evaluate your investment portfolio and make sure it aligns with your risk tolerance and long-term goals. Consider diversifying your investments across multiple asset classes to spread out the risk and potentially maximize your investment returns. The help of a financial adviser can help you ensure that you’re getting the most out of your portfolio.
When we reach our forties, it’s important to make sure that you and your loved ones are covered and taken care of in the event that something unfortunate happens. Reevaluate your insurance policies like life insurance, disability insurance, and health insurance. Make sure that you have the correct coverage to protect you and your family, just in case. Additionally, it’s important to start planning out your estate. Create a will or update your existing one, establish powers of attorney, and consider setting up a trust if it’s necessary. This can help protect your assets in case of an event.
Our forties are meant to be a time of enjoyment with our families and continuing to build for the future. While you probably have a solid financial plan, there are always ways to improve it. If you don’t have a financial plan and are in your forties or quickly approaching them, this section will provide some examples of how to financially plan for certain situations.
Michael is a 44-year-old accountant and father of two kids, aged 10 and 14. He wants to make sure that he can provide a quality education for both of his children without burdening them with excessive student loans. He decides to create a financial plan that revolves around saving for their college education. Here’s his plan:
Lisa is a 48-year-old marketing executive who finds herself with multiple financial obligations. She wants to make sure she retires debt free, so she is prioritizing paying off her existing debts while also focusing on her retirement savings. Here’s her plan:
Working with a financial advisor can be a great approach to ensure that your plans for the future are as sound as possible if you are in your 40s or are soon to be in your 40s and need assistance achieving your financial goals. To assist you in achieving your financial objectives in your 40s and beyond, Expertise.com offers an online directory of the top financial experts in your local area. These financial advisors can help you create and maintain a solid financial plan to get you back on track or help you better prepare for the future, including retirement savings, college fund preparation for your kids, and stock portfolio building. Find the financial advisor of your dreams right now, and begin making plans for your financial freedom.
Expertise.com Staff Author
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