You’re near­ing your 40s – have you in­vested wisely?

It’s never too late to start sav­ing, but once you en­ter your late 30s, it’s time to take stock of your sav­ings and con­sider whether you are up to speed with re­gard to your fi­nan­cial goals.

Finweek English Edition - - MARKETPLACE - Editorial@fin­week.co.za Wendy Fo­ley is an ad­vi­sory part­ner at Ci­tadel.

haveyou ever said to your­self: “I save what I can, but I don’t have a proper fi­nan­cial plan in place. When should I start fo­cus­ing on this?” Or: “I’m near­ing 40 and I’m not sure if I’ve in­vested wisely. How can I tell?”

By the time peo­ple reach their 40s, three out of four of them have saved some­thing to­wards their re­tire­ment. And so they should: they are hit­ting their peak earn­ing years and they should be well on their way to reach­ing their long-term sav­ings goals.

How­ever, life has a habit of get­ting in the way – some­times mak­ing it chal­leng­ing to con­tinue sav­ing and reach one’s in­vest­ment and fi­nan­cial goals. A dilemma faced by those in their 40s is that they typ­i­cally need to save for univer­sity tuition for their chil­dren, while also sav­ing to­wards their re­tire­ment and per­haps even build­ing a house as well.

Your 40s may seem like the ideal time to switch into over­drive, but many 40-some­things are in­stead put­ter­ing along in first gear. They save what they can, do their best and fig­ure that they’ll sort out their fi­nances later.

But, not hav­ing a fi­nan­cial plan is ac­tu­ally the same as hav­ing a re­ally bad plan.

Ev­ery fi­nan­cial plan should be spe­cific to an in­di­vid­ual’s par­tic­u­lar needs and life­style re­quire­ments. For your own plan, you should look at your net in­come and as­sess your cur­rent level of debt. Then you need to set pri­or­i­ties for pay­ing off that debt and sav­ing for your dif­fer­ent needs. The quicker that debt can be paid off, the more you can save for re­tire­ment. You want to have all debt paid off by the time you re­tire – the last thing a re­tiree needs is to be pay­ing off debt with­out the ben­e­fit of a salary. ex­penses as soon as you can. 3. Pay off your debt with your ex­cess monthly in­come. As a guide­line use one third to set­tle debt and two thirds to­wards your re­tire­ment. 4. Max­imise your com­pany’s re­tire­ment fund con­tri­bu­tion up to the al­low­able limit. 5. Con­sider in­vest­ing in a re­tire­ment an­nu­ity to max­imise the re­duc­tion of your tax­able in­come. 6. Do an in­sur­ance needs anal­y­sis for your fam­ily. For a healthy per­son in their 40s the cost of life cover is not ex­or­bi­tant. 7. Check your dis­abil­ity cover – many com­pa­nies will only pay up to 75% of your gross monthly in­come. 8. Con­sider your house­hold and car in­sur­ance needs.

You want to have all debt paid off by the time you re­tire – the last thing a re­tiree needs is to be pay­ing off debt with­out the ben­e­fit of a salary.

As a gen­eral rule of thumb, if you started sav­ing in your 20s you can get away with sav­ing ap­prox­i­mately 12% of your take-home pay. If you are in your 40s the gen­eral rule of thumb is that you need to in­crease your sav­ings rate to about 20% of your net in­come. If you have not been sav­ing enough be­fore now, it’s time to up the rate.

It seems that too few peo­ple have taken the nec­es­sary steps to pre­pare them­selves to be fi­nan­cially se­cure in re­tire­ment but it is im­por­tant to re­alise that it is never too late to start.

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