If you’re in your 40s or approaching this age group, you might be worried about building your wealth for retirement and whether you have enough savings and investments.
There’s no benchmark as to how much you should have by this age, but a good measurement is six months of your current income. So if you’re earning $6,000 a month, your “savings” are generally adequate if you have at least $36,000 saved up, excluding CPF!
In terms of retirement funds, a retiree in Singapore needs at least $1,400 per month for basic living expenses. If you multiply that by 20 years, you’ll need no less than $330,000 in retirement savings if you retire at 62. This doesn’t even include inflation!
Don’t worry though if you’re nowhere close to this! The good news is, your 40s are still a great time to save and invest to grow your wealth further.
You might feel like you’re behind your peers, but the first step in saving for your future is to start today. Continue below to read our tips on how to maximise and protect your wealth for the future!
1. Pay off your debt first
It’s common to have credit card debt, mortgage, car loans, and personal loans in your 40s. You’re in the process of building your life after all!
However, at this point, you should have a solid plan for how to settle these debts. You can try the avalanche method and start paying the debt with the highest interest rate, which tends to be credit cards.
Once that’s been paid off, move on to the debt with the next highest interest rate, and then repeat the process until you’ve cleared yourself from debt.
Obviously, you won’t be able to pay for everything right away. It could take years, but at least you’re making early efforts to move through the later years in your life with lesser debts!
Going into retirement debt-free extends the life of your savings and makes space in your budget to accomplish life goals, like travelling and even setting up a small business.
If you need more tips, here’s our article on how to reduce your debt!
2. Learn how to invest
Investing is one of the key ways to grow your wealth in your 40s.
At this age, not everyone is capable of finding other streams of income, so investing is an amazing opportunity to earn outside of your job without sacrificing rest and weekends.
How you invest is up to you, whether you prefer stocks or real estate, there are plenty of choices to suit your financial goals. It’s worth noting that no investment comes without risks, so make sure you’ve done your research before putting your money anywhere.
You might consider consulting your trusted financial advisor as you’ll also need to be on top of market trends so you can make informed decisions for your investment portfolio.
If you know nothing about investing, reading our investment guide might help you get started!
3. Plan your estate
Another way to protect your savings and investments is by having an estate plan. It’s a piece of document that helps your loved ones in the event of your passing or incapacitation, determining who will handle your assets and how they will be distributed.
As someone building their wealth in their 40s, you likely have dependents to look after, so an estate plan can guarantee that your loved ones are taken care of as well.
We recommend consulting with your trusted financial advisor when drafting an estate plan to make sure all crucial financial affairs are considered.
We’ve written another article detailing the importance of estate planning!
4. Sign up for insurance
Insurance stands as a financial safety need for you and your family. By the age of 40, it’s ideal to already have multiple insurance policies with comprehensive coverage.
The problem with starting insurance late is the higher cost of premiums and more policy exclusions, but if you have a flexible budget, you might be able to work around these!
In the event of your passing, life insurance provides a death benefit to your beneficiaries that can be used for everyday expenses, education, and funeral expenses, among others!
Health insurance, on the other hand, covers hospitalisation and medical expenses, preventing you from dipping your hands in your emergency savings.
If you’re the breadwinner of the family, it’s important to sign up for insurance as we can never be certain of our earning capacity. It gives us a sense of relief knowing that something has our and our family’s back in case the unexpected happens.
5. Change your spending habits
Finally, it’s time to let go of your impulsive spending habits in your 20s and 30s. The biggest part of growing your wealth as a 40-something years old is saving as much as you can, especially if you don’t have much in your nest egg.
If you’re struggling to save money, you’re likely overspending, so cut back on some expenses. You can start by reviewing your bank statements to understand how you’re spending your money.
Try to categorise your spending into necessities and miscellaneous to learn more about your spending habits.
Being reflexive of our own spending habits teaches and reminds us to live within our means, which is an important skill to learn once we’re retired and no longer regularly earning money.
Financial planning in your 40s
Don’t get discouraged if you don’t have enough in your nest egg to live a comfortable and secure retirement! It’s never too late to learn from your financial mistakes in the past and cultivate your ideal retirement life.
If you want to talk to an expert about savings and investments and wealth management, feel free to send us a message! We can connect you with experienced financial advisors who can help you reach your financial goals!