If wisdom comes with age, we should be making smarter money moves as we embrace each decade of life. Our money priorities change as we grow, from figuring how to pay off student loan debt to starting a family and saving to buy a home. And when you hit the big 4-0, things can get a bit more complicated. While there could be more work security and somewhat stable personal money habits by then, it’s not uncommon to also feel conflicted over financially supporting kids entering university and aging parents. That’s not all, this decade is also the crucial window to save enough before hitting retirement.
Here are five key financials moves to consider if you are in your 40s to help get you in tip-top fiscal shape before you reach those long-awaited golden years.
Money To-Do #1: Pumping up Retirement Savings
Being in your 40s, you should probably hit a good stride in your career which means some extra cash towards your retirement funds. This decade’s money goal should really be about pumping into your retirement funds. If you delay doing so, time wouldn’t be on your side to save enough when you hit retirement age.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Then it comes to sending your kid to university. While you may feel inclined to contribute as much money as possible to paying for your kids’ tertiary education, this could be detrimental to your own financial well-being in retirement. If you had this planning, there would be enough in your CPF savings to pay for your kid’s local tertiary education at the approved institutions. If you didn’t, start looking into merit-based financial aids and scholarships or student loans. You are doing yourself a financial favour by properly setting yourself up for retirement and also helping to save your kids from feeling the need to support you later.
Money To-Do #2: Reassess your Risk Tolerance
With age and retirement not that far off, it is a good idea to consider playing down the risk level and take a less aggressive stance with your investments. With every additional year of life means a shorter time horizon for recouping market losses. Reassess the appropriate mix of stocks and bonds in your portfolio based on your age and time horizon till retirement. One general rule of thumb is the Rule of 110 or 120. Subtract your age from 120 and that gives you the percentage of your portfolio to allocate to stocks, and the remaining in bonds. If this feels too aggressive, try subtracting your age from 110 instead.
Once you’ve figured the optimal ratio, make it a point to assess your portfolio every year and slowly shift towards more bonds. Bonds are typically considered safer investment vehicles and less volatile than stocks since there is a fixed rate of return.
Money To-Do #3: Getting the Right Insurance for the Future
You don’t want to grow old and worry about being unable to afford medical assistance. Now is the prime time to research on the different type of health insurance to help pay for medical costs, as well as protect your assets should you require specialized services. The basic necessities for insurance may be well covered by the Singapore government, but additional insurance may be required depending on your needs. Use the DrWealth Insurance Needs Calculator to make tracking a breeze.
Once you’ve crossed that off your list, another policy to consider is life insurance. If you have kids who depend on you financially in this decade, you need to account for funds should something happen to you. Insurance premiums increase with age so locking in a 20- or 25-year policy now will help last through retirement.
Money To-Do #4: Get Your Estate in Order
If you are like most Singaporeans who don’t have a will, now is the time to consider making one. In this decade, you’ve likely amassed some serious assets and it’s more important than ever to protect them. Most people put this off especially with its association to death, but a will is vital to ensure assets are allocated according to your wishes. Without one, it’s up to the state to direct distribution of your assets according to the Intestate Succession Act.
A will can be written for as little as $200 to $300, depending on the complexity of the document. This is a small sum compared to your estate and the thousands that could incur with lawsuits over a disputed inheritance. Review your will every two years or so as life circumstances and priorities can change.