Financial Fortifications for Forty Somethings

It’s often said that the best years are the forties – and for so many reasons! Whilst everyone is different, it’s good to state at the start of this article that this perspective is becoming even more prevalent.

Some forty year-olds are in their first marriage with kids, others are in their second or third… with kids. Some have never been married and have no inclination of doing so. These situations place people in very different landscapes, but they all have one thing in common – over forty years of life behind them.

It poses a unique opportunity to view the ‘hike up the mountain’ from a higher perspective than before, and with the goal of retiring even closer in sight than it was in your twenties and early thirties. It’s healthy to pause and reflect, but it’s crucial to then keep on moving forward!

Forty-year olds need to prioritise staying on top of their finances as this is often a time of higher rising costs – regardless of your life choices.

Here are four quick things to consider!

Managing money and investments in your forties

There are often various significant demands on your time during your forties from building your career and family, which means that many investors in this age demographic don’t set up a proper financial plan or neglect to review the plans they already have in place.

If your employer is not contributing to a pension or provident fund for you, it is critical to save for your own retirement and to utilise the tax deductions allowed by SARS in full to build up tax-efficient, inflation-beating long-term investment savings over your working life.

Risk cover should be a priority

In your forties your biggest risk is that you will lose your ability to continue to generate an income. If you don’t belong to a group life scheme through your employer’s retirement fund, it is really important to ensure that you own a personal risk income protection policy to provide adequate cover for your needs.

If you cannot generate an income it also means that you can’t save and invest. If you are unable to work and earn regular income due to an accident, illness or disability event it could turn out much more expensive than to untimely pass away. It is therefore important to ensure that you have adequate cover, including disability and dread disease cover, and to review it as you earn a bigger salary over time as your lifestyle expenses will also increase.

You should also ensure that appropriate medical (health care) and short-term insurance cover is in place and is sufficient for your specific needs.

Tertiary Education Saving

One of the most popular options for this savings goal is the National Treasury’s “new” tax-free savings account (TFSA). Individuals (including minors) are allowed to invest up to R30 000 a year (up to a lifetime limit of R500 000 per person) in a TFSA that can grow tax-free.

It is also more flexible than approved retirement funds as it is fully accessible before 55 and not limited to the Pension Funds Act’s Regulation 28 asset-allocation rules. However, this TFSA is not a replacement for a good investment-linked retirement fund vehicle.

These TFSAs are excellent long-term savings vehicles and investors have access to the money prior to retirement. The longer the investment time frame, the better. It will take roughly 16 years to reach the lifetime capital contribution limit in these accounts.

Play catch up with your RA

Some forty-year olds may only be beginning to save for their retirement. There are strategies to accelerate your savings plan – but you need to meet with a qualified financial planner.

An appointment with a qualified financial advisor for a wealth planning diagnosis is similar to visiting your medical doctor for a regular health check-up.

If your health state has never been checked to see if you are at risk for cancer or other serious diseases, you would never know if you have a reason to intervene and adapt your behaviour. This is also the case with financial planning. If you haven’t done any retirement planning needs analysis and if you do not have an appropriate strategy in place it is important to see a professional financial advisor to assist you in drafting an integrated lifestage plan and to assist you to implement it according to your priorities and goals.

In performing the financial needs analysis to identify shortfalls concerning specific areas of importance an independent financial advisor worth his/her salt can add considerable value with sound guidance and by offering appropriate alternative solutions.

Are you in your forties? Do you have friends who would benefit from this article? Please feel free to share it with them – or get in touch through my contact page!

Several points for this article were taken from: source

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