The Perfect Financial Plan For Turning 40

turning 40Turning 40 is the perfect time for a wholesale review of your financial planning. Statistically, you’re at about your “earnings peak.” British workers are most likely to achieve your ultimate earning power at the age of 38, according to the Office of National Statistics.

Depending where you are in your forties, you could be considered either a late baby boomer or a member of Generation X. Either way, you’re at a time in your life when you’re putting youth aside and should be doing some serious financial planning for your future and your family’s future.

What’s most challenging about this stage in your life, is not what your generation is called, but the way you are sandwiched between making provision for older children to buy a home or go the higher education and still accumulating wealth for retirement. Not to mention you may have a pretty hefty mortgage commitment too.

Not having a financial plan is actually just having a really bad plan

Financial plans are specific to you, but there tends to be some similarities in your income, saving priorities and priorities for paying off debt that we can draw on.

These financial planning tips are meant to help 40-somethings find balance in their hectic lives of spending and debt.

The first step in any financial planning is to establish your backup plan. There are a number of components.

  • Surprisingly, half of the people with a mortgage in the UK have no cover in place if they died. Leaving themselves and their families financially exposed if the unforeseen were to happen. So the first step is to protect your home, you can read more about this by clicking here.
  • A third admit that if they or their partner were unable to work for six months or longer due to ill health or personal injury, they’d be unable to live on a single income. So the next step is protect your income in case you or your partner were unable to work. That’s not just your own illness or injury, what if you had to become a carer for your children or a parent?
  • Three to six months of your normal income in an account that’s safe and liquid is your emergency fund if you lose your job. Don’t stop when you reach that figure, you can use it to set aside for large future costs, like replacing central heating or windows.

Debt Reduction

Your next priority should be to reduce and eliminate the biggest drain on your income so that you can channel it into saving and investing for the future. Credit card debt, student loan debt or car loans should be paid off as quickly as possible. The longer you carry it, the more you are robbing yourself of a great retirement.

A first step is to review the interest rates on your credit cards and loans to see if you can find lower rates.

Saving for your life after work

Retirement seems a long way off at 40, but when it arrives, it could last for 30 years, That’s why it is so important to contribute the maximum you can to retirement savings. A third of British workers approach their 40s without having a penny saved for retirement, according to Zurich. So in addition to your workplace pension, make the maximum allowable contributions to ISAs.

Whatever you have planned for your massive gap year, it is going to cost money. To give you an idea, a lump sum of £100,000 at 55 will give you an annual gross retirement income £3,706 on top of your state pension. That’s on a fixed level annuity basis, without a guarantee period.

Because annuity rates can differ so much it is essential to compare annuities to find one that will suit your requirements.

If your ambition is to retire from work as soon as you can or simply protect your family, our advisers can help you. Even if you don’t need to make any immediate changes to the way you save, contact us today for an initial consultation.


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.

Your pension income could also be affected by interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

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