Financial Planning in Your 40’s

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Don’t panic, you still have time to properly manage your finances.

If you are in your 40s and do not already have a solid plan for your retirement, now is the time to reorient your finances and optimize a retirement fund.  If saving for your retirement has not been a priority up to now, you really need to maximize your contributions to the top limits of any 401k or IRAs that you have, adding extra every chance you get.

Have you been procrastinating about setting up these retirement accounts?   Or wiped out during the recent economic downturn or some other financial crises?  Your 40’s is the ideal time to review and adjust your existing plan, or finally take action and get a plan started.  Part of the planning may include reducing or eliminating that unsecured credit card debt you have been accumulating since your 20’s (free online debt negotiation tools are available to help you through the debt settlement process).

IMPORTANT NOTE:  Don’t rely solely on your employer’s retirement plan.  Add your own by opening an IRA or some other private retirement fund plan.  It’s not too late, but you do have a lot of investing to catch up on.  Talking to a professional financial adviser is a good idea.

FP Stocks Chart ClimbTake a step back and look at the big financial picture. 

Remember that any type of investment carries at least some amount of risk, and finding a plan that sufficiently suits your needs and current financial situation will take some serious thought.  If you have been aggressively investing in volatile investments like stocks and/or mutual funds, it may be a good time to consider consolidation.  Investigate rearranging your allotments, putting about ¾ of your total assets into stock options and placing cash into bonds or CDs.  If you do not have the financial wherewithal to accomplish this, then at least make sure you are on a path to be debt free.  Once you achieve this objective, you will be able to concentrate on and make those critical investments that will carry you into retirement.

Since you are usually at your peak earning power in your 40’s, you will probably want to begin concentrating your investments into wealth consolidation funds instead of growth-oriented funds.

How Long will you be Around and What will it Cost?

It is time to start taking a guess at about how long you will live and how much money it will take to maintain your lifestyle.  At this time you may wish to begin considering leaving assets to beneficiaries of your estate.  This will require a different strategy than simply determining a good income level for the rest of your life, leaving nothing behind when you die.  The numbers may shock you into making solid plans if you have been procrastinating.

There are some other issues that need addressing at this time.  For instance, you might want to consider setting up a living will if you haven’t done so already.

FP Dollar SignAs retirement approaches, the balance of your finances should shift from wealth consolidation to income producing instruments that yield a regular income stream without reversing your capital growth rate.  Always keep some growth funds as they will help to ensure that you have adequate assets to see you through the remainder of your life after retirement in the lifestyle you choose.  At the very least, you should start saving as aggressively as your circumstances permit.  Your older retired self will thank you!

Please keep in mind that this information is intended for educational purposes only.  For specific advice, please contact a qualified, licensed professional.

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