The financial decisions you make in your 40s will shape your wealth for decades to come.
Yet many people in their 40s don’t have a clear financial plan. Most focus on day-to-day expenses rather than long-term financial security.
Protecting your family’s future
Build an emergency fund
Your 40s often come with increased responsibilities – whether it’s a mortgage, raising children, or supporting ageing parents.
Building an emergency fund of six months’ worth of family expenses is the first step in protecting you and your family for when things don’t go according to plan, for example, unexpected costs or temporary loss of income.
Consider life insurance
The right protection policies help ensure your family maintains their lifestyle if something happens to you.
It’s always worth understanding what employer provisions are available as part of your employment contract. As a minimum, most employers will provide some sort of life cover in the form of a death in service plan, however many employers seek to offer a competitive package and may offer further provisions such as private medical insurance, critical illness and more.
Income protection insurance becomes more relevant as your financial commitments peak. This cover provides regular payments if you’re unable to work due to illness or injury. Consider the length of cover needed and how it fits with your other protection policies. Some policies offer additional benefits like rehabilitation and back-to-work support.
Critical illness cover pays a tax-free lump sum on diagnosis of specific serious conditions. This money could help you adapt your home, pay for private medical treatment or provide financial breathing space during recovery. Some policies also include children’s critical illness cover at no extra cost, providing additional family protection.
Estate planning & wills
One of the foundations of a financial plan revolves around ensuring your assets are passed to the individual or individuals you want them to.
It’s important to make a will and ensure the ‘expression of wishes’ forms (for your pension and life insurance) are up to date.
Dying without a valid will leaves your estate to be distributed in accordance with the laws of intestacy. A will allows you to decide who inherits your property, savings, and possessions, as well as appoint guardians for your children if needed.
Make the most of your pension
A thorough review of your current pension position will show if you’re on track for a comfortable retirement.
If you’re employed, one of the most effective ways to boost your retirement savings is by taking full advantage of your workplace pension. Many employers offer to match your pension contributions up to a certain percentage. If you’re not contributing enough to get the maximum match, you’re essentially leaving free money on the table.
You might benefit from additional pension options beyond your workplace scheme. Self-invested personal pensions (SIPPs) offer wider investment choices and more control over your retirement savings. The tax relief on pension contributions makes them particularly attractive for higher-rate taxpayers.
Investing outside of pensions
Whilst pensions are seen as the primary source of income in retirement, it is important to build an income plan derived from various tax wrappers, to build a tax efficient income strategy for the future.
Options include ISAs, general investment accounts and investment bonds, which all come with differing tax treatments.
How can EQ help?
At EQ, we help our clients create comprehensive financial plans tailored to their circumstances and goals.
We’ll review your current position across pensions, investments, and protection to identify any opportunities and potential gaps in your financial planning.
Book an appointment with one of our financial planners to discuss how we can help you build a secure financial future.
Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, to determine the risks associated with the investment and its suitability.
