The Best Financial Moves For Your 40s

Your 40s are your golden decade. With a stable career and kids who are old enough not to wake up 15 times in the middle of the night, there’s much to look forward to.

Making the right financial choices now will set you up for success in your 40s and beyond. Here’s what you should be doing with your money.

#1: Focus on your retirement 

According to Syfe’s latest retirement readiness survey, 61% of Singaporeans are not adequately prepared for retirement and 71% don’t believe they can retire comfortably. 

Your 40s are a critical time for growing your retirement nest egg. Your income is likely to be peaking, and you still have a good 20 years or so for your funds to compound

For instance, a 40-year old earning the median salary of $5,900 a month will have a total investment of $626,434 by the time he turns 65, assuming he invests $800 a month and earns a 7% annual return on average. 

$800 may seem steep, but that’s similar to the average monthly payment for a car in Singapore. If he is able to invest 20% of his income ($1,180 a month) however, he could retire a millionaire with $923,989 in the bank. 

Prioritising your retirement in your 40s can mean the difference between retiring comfortably and relying on your children for financial support. Work out how much you’ll need to retire and start saving and investing with that goal in mind. 

#2: Maximise your earnings

There are three levers when it comes to building wealth: savings, income, and expenses. To fast-track your financial journey, you need to increase your income even as you save more and spend less. 

One way is to create passive income streams. Investing in real estate investment trusts (REITs) and dividend stocks is a smart option. To build wealth quicker, reinvest the dividends you receive. You end up accumulating more assets, which boosts the compounding effect on your funds and supercharges your long-term returns.

#3: Marie Kondo your portfolio 

In your 20s and 30s, you could have invested your money across a variety of investment types and accounts. 

Some of these investments may no longer serve your purposes, or there could be scope for optimising costs or performance.

Streamlining your investments can be very powerful. Having more of your funds in one place can also qualify you for lower annual fees, which means you get to keep more of your investment returns. For instance, Syfe charges just 0.4% per annum for investments over $100,000. 

#4: Help your parents plan for their old age

Talking about finances with your parents can be a potentially awkward situation. But having the money talk early can help ensure a better outcome for everyone.

Discuss how much they have in their CPF and other retirement accounts, and find out whether they think the funds will last for the rest of their lives. 

Given that life expectancy is expected to hit 85 years, ensure that not all of your parents’ savings are held in cash. Over the next 10 or 20 years, the value of your parents’ hard-earned money will depreciate if left in a bank

Point out that they can still invest in relatively lower risk investments such as government bonds, or they can park their savings in a cash management portfolio like Syfe Cash+, which provides a projected return of 1.75% p.a. on all deposits. 

#5: Protect your family  

Having an emergency fund is crucial at any age, but your 40s are really the time to ensure your emergency fund can tide you through any storms

To protect your family financially in the event of your death or a total disability, make sure you have adequate insurance in place as well. Another consideration is your will. Who will inherit your home and other assets? Who will take guardianship of your children?

It goes without saying, but taking care of your health is the best way you can protect your family. Eat a balanced diet, exercise more and go for those annual health check-ups no matter how much you dread going. 

Stick to the plan

Remember, building wealth and securing your family’s future is a marathon, not a sprint. These five financial moves may not feel “fun”, but getting them right sets the course for the next 40 years of your life. 

If you feel you need external guidance as you navigate this decade of your life, consider speaking to Syfe’s wealth experts for a free review of your current financial situation. They’re platform-agnostic and completely objective in helping you map out your financial plan.