Your forties are when you are likely to hit your peak earning potential. Your expenses may be starting to reduce, and you may find that you are in line for inheritance windfalls.
But what does this mean about the kind of financial planning you need?
The simple answer is that you should be thinking about investing for the future – retirement is coming closer. The traditional answer for accumulating wealth – putting money into a savings account – now means very poor returns. Low interest rates and steady inflation may mean that the real value of your saved cash will actually tend to fall.
That may mean it is time to start making the most of investing.
Your priorities in your forties
It is time to start looking at ways to secure your investment portfolio for the future, and to make the most of your pension pot.
Of course, the big expenses may still be a drain on your resources. The mortgage will probably not be paid off, and if you have children, you may want to start thinking about ways to provide for their education now, and in the future as they go to university.
You may need to dip into your financial reserves to help them.
But you may also need to start thinking about the ’empty nest’ scenario. Your financial needs could be changing over the next few years.
Life insurance will still be a must, and dealing with debts is vital, but remember that time is money, and building up the kind of wealth you want for the future needs to be underway.
But your investment aims may be changing. Making money is still important, but you may be starting to look at investments with less risk than you did in previous years.
Many people will keep their investment profile fairly consistent though their thirties and forties, but as your wealth grows you may feel that you can afford to have less risk. If your portfolio is large enough, you don’t need to take a speculative approach. Being able to move steadily to more secure investment is one of the advantages of a planned investment roadmap.
Returns may be slower but worry about losing what you have already made may be reduced.
A stocks and shares ISA may still be the backbone of your investments, but if you have more than £20,000 (£40,000 as a couple- the ISA allowance per person for tax year 2020/2021 is £20,000) available to invest each year, you may need to start thinking about other investment vehicles.
You may be becoming an investment expert
If you have already been investing for a few years, you may have developed some investment knowledge, and be ready to invest in equities or bonds. But if you are new to investing, or simply don’t feel comfortable in making detailed investment decision, we can help you find funds with a more cautious approach which might match your own.
Keep a close eye on your pension
In your forties you need to keep a close eye on the performance of your pension. Retirement could still be almost a quarter of a century away – but remember, you could be looking forward to retiring at just 55 if you wish and if you have sufficient funds.
Making the most of a company pension scheme where your employer matches your contributions is a sound move – but if you are thinking about retiring early, a personal pension could work alongside your employer’s plan to help bring your retirement forward.
Thanks to the very attractive tax relief provided by the government, it could be the most rewarding investment you ever make.
What should you do?
At Continuum we have prepared an infographic on the different ages of investment here. It shows how your needs and solutions may change through life. We are looking at each stage in more detail.
But whatever your age, and whatever your plans for the future, we can help you find the solutions you need for your investments or pension,
The value of investments can fall as well as rise and you may get back less than you invested.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products or investment or retirement strategy, you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate taxation advice.
A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.
Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.
Your home may be repossessed if you do not keep up repayments on your mortgage