Best Investments For 40 Year Olds


Stock #: Procter & Gamble And Colgate

Top Financial Advice For 40-Year Olds! (Become Wealthier Than Your Friends)

Skipping down to #23 and #61 on the 1980 list, we’ve skipped over some car companies, oil companies, and an AT& T subsidiary to arrive at the first consumer staple company. Because both of these are literally household names with continuity in stock data and product lines going back all 40 years, I thought it would be worth to include both in this chart. After the first six charts, it should be some relief to finally see some stocks that have actually outperformed the S& P 500 over the 40-year period. One reason for this outperformance, as simple as it may sound, is that these two stocks are in very simple businesses that are boring, easy to understand, and based on serving simple needs that don’t change from decade to decade. It might be worth looking deeper into whether branding and marketing, conservative financial management, or other factors also helped these stocks outperform.

Can You Turn 10k Into 100k

Yes, this is possible but it would take decades.

You should probably expect investment growth of about 4% every year, so at that rate it would take about 60 years before your £10,000 pot grew to £100,000.

The key here is to remain invested for a long period of time and invest in assets with a high chance of return in order to grow your pot to £100,000.

Another tip is to drip feed money into your pot over time to give it the best chance of growing. Heres how to invest with little money.

A Couple Of Numbers That Could Change Your Future

In order to retire with $1 million in 25 years, a 40-year-old just getting started would need to invest $800 a montha little less than 20% of the average $50,000 income.

Delay retirement until age 67, and you can reduce your monthly investing amount to $650, a little more than 15% percent of a $50,000 income.

Whichever option you choose, you need to put your money to work where youll get the most bang for your buck. The easiest and often most effective way to get started is through your workplace retirement plana 401 for most of us. Most employers who offer a 401 will match a portion of your investment, so invest enough to get the full match for an instant and guaranteed 100% return on your money!

If your employer offers a Roth 401 option and the plan offers a choice of good growth stock mutual funds, you can invest the entire amount in your workplace plan. If a Roth 401 isnt available, simply invest up to the employer match in your 401 then open a separate Roth IRA to invest the remainder.

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Why Is The Savings Goal Not On Target

If it is because the budgeted amount is not being saved on a regular basis, and is that a result of the amounts being redirected toward unnecessary expenses? If so, an easy fix would be to stick to the budget and eliminate these unnecessary expenses. If the amount is being redirected toward things that the family needs, perhaps the retirement savings goal and the budget are not realistic and need to be revised.

Rule #: Dont Invest In Your Bank Account


Meet Anne, a 40-year old professional. Annes done everything right, and she has 100,000 francs in the bank. She doesnt need this money in the short or medium term its earmarked for retirement.

To live comfortably, Annes goal is to retire with 1,000,000 francs at age 65. This would give her an annual income of around 50,000 francs for 20 years, in addition to her payments from the old-age insurance system and her pension fund .

Annes goal is very achievable.

But theres one thing she should do straight away get that 100,000 francs out of the bank, where its collecting close to zero interest!

Not only is she missing out on an opportunity to grow her savings, but theres also the problem of inflation.

Lets assume inflation holds steady at todays rate of 0.7 percent per year, and a typical Swiss bank account continues to provide 0.01 percent returns. In five years, that means you will need 10,350 francs to buy what you could have bought with 10,000 francs today.

Meanwhile, your bank account will have only grown to 10,005 CHF. In other words, you will be poorer than when you deposited your savings.

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Live Within Your Means

Your 40s are typically peak earning years, but with the COVID pandemic on our doorstep, many things arent typical right now. One thing thats changed is where we do our work. Today at least 41% of Australians work from home at least one day per week, and many people are yet to go back to the workplace4. While there might have been some initial expenses to set up a suitable home workspace, theres also a reduction in day-to-day costs like commuting. Consider funnelling any of this cash into your savings instead, to actively save for your retirement.

Become more mindful around spending on big-ticket items as well before a splurge, try taking a day to give yourself time to think about how much you really need the item. Youll be surprised at how often you decide its not essential to your life, and the money you save can be added to your retirement savings instead.

Know Your State’s Laws If You Get Married Or Divorced

Getting married or divorced can have a significant effect on your retirement nest egg. If you are getting married, this could affect your retirement nest egg in several ways. From a beneficial perspective, your financial projections can include your spouse’s assets and income as well as projected shared expenses.

However, while projections may show that the amount you need to save on a regular basis is less than the amount you would save if you were not married, it may be wise to continue saving at the higher rate if you can afford to do so.

If your spouse dies and you do not remarry, you would be solely responsible for funding your retirement nest egg. Should you get a divorce, you may be required to share your retirement assets with your spouse. Alternatively, you could be on the receiving end as your spouse may be required to share their retirement assets with you.

If you had IRA assets before you were married, consider whether you want to keep those assets in a separate IRA and add new contributions during your marriage to a new IRA. If state law determines that marital or community property is defined as that which is accumulated during the marriage, you may not be required to include your premarital IRA assets in the property settlement. Consult with a local attorney regarding the rules that apply to your state.

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Boost Your Retirement Contributions

When was the last time you adjusted your retirement account contributions? Chances are you were in your 30s the last time you upgraded your contributions. If you are making more money now than you were five or 10 years ago, it’s time to boost your retirement contributions.

Instead of putting that money toward lifestyle inflation, put some of it toward your future. This could be adding more to your 401k plan at work, opening a Roth IRA, or starting a taxable investment account. If you’re still uncertain how to get started, here’s the best way to invest for retirement.

Investment Planning In Your 40s

Investment Advice for Young Professionals (20 – 40 Years old)

08 min read.

Investment planning is an important part of every earning individual and should be given due importance to realize the value and benefits of ones hard-earned money. Each and every individual depending on their profession and the income should plan their investments accordingly. This article covers the following:

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Finish Paying Off Your High Interest Consumer Debt

One of most important things you can do for your finances in your 40s — or at any point in your life — is to pay off high-interest consumer debt. If you have high interest debt, finish it off once and for all during your 40s. All it’s doing is holding you back. If you think just because your in your 40s and you’ve lost some of your spunk, let this newlywed couple inspire you. They were able to pay off $52,000 of debt in 2 years.

Is It Possible To Retire In Your 40s

Yes, but it will be really tough.You need to be incredibly disciplined and make big sacrifices while you are young. It also helps to have a well-paid job.

It requires some luck too the Fire movements rise in popularity coincided with a sustained bull run on the stock market, which has boosted the investments of Fire fans.

If big sacrifices dont appeal, you may prefer a lower level of Fire saving while living a more normal lifestyle.

After all, the basic principles of the movement save and invest make good financial sense.

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Is Investing Right For Me

The decision to invest will depend on what else is going on in your life, so here are some things you should think about:

  • Make sure you have an emergency buffer of between three and six months expenses. Its a good idea to keep this money in an easy access savings account.
  • If youre planning a big life change such as having a baby or moving house, make sure you have extra cash in a savings account.
  • Do you have expensive debt such as money owed on credit cards? You may well be better off putting your £10,000 towards that and switching to the best 0% balance transfer credit card.
  • Homeowners might consider overpaying their mortgage to save hundreds or thousands of pounds in interest.
  • Are you about to retire soon or in ill health?

If you are concerned about the risk involved with investing £10,000, we recommend leaving your money invested for at least five years.

Investing is definitely a good idea in the long run given than most banks offer paltry interest rates on savings accounts that dont beat the rising cost of living, measured by inflation.

Currently inflation in the UK is at 5.1% in November 2021, while the average rate on savings across all banks is just 0.19%, with many offering just 0.01%.

If investing ticks the boxes, read on, but also check out our Investing for beginners guide.

Do You Need A Financial Advisor

4 Financial Goals You Need to Meet by Age 40

When you’re in your 20s, it doesn’t make a lot of sense to meet with a financial advisor. There simply isn’t enough they can do for you to make it worth it. However, in your 30s, it can make sense to meet with a financial planner to discuss creating a plan if you don’t feel comfortable doing it yourself.

We recommend using a fee-only financial planner to put together a financial plan for you. If you don’t know the difference in types of financial advisors, read this article: The Shocking Truth About Financial Advisors. The bottom line is you want to pay for a service, and not be concerned about any potential conflicts of interest.

We recommend talking to a financial planner around life events. The reason? The same financial plan should work during the same period of the life event. For example, if you create a financial plan as a newlywed, the same plan should work for you until you have children.

Here are some good life events to think about meeting a financial planner:

  • Getting Married
  • Changing Careers
  • Having Children
  • Approaching Retirement
  • In Retirement

An alternative to meeting with a financial advisor, if you just want to stick to investing, is to use a robo-advisor. These are online platforms that do all of the investing “stuff” for you, like setting up an asset allocation and rebalancing your portfolio.

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More Examples Of Bonds Outperforming

Take a look at the performance of the Vanguard Long-Term Bond Index Fund versus the S& P 500 ETF since 1999. VBLTX has thoroughly outperformed SPY by an impressive 62%.

Now of course, not all bond funds are the same. Although VBLTX is considered a reasonable proxy for bonds, other bond funds may not perform as well.

Here is another chart showing the performance of the VBMFX, another Vanguard bond ETF versus VTSMX, a Vanguard S& P 500 ETF. In this scenario, bonds outperformed the stock market from 2001 to about 2013, or 12 years. Since 2013, stocks have outperformed.

Bonds dont get as much love as stocks because they are considered boring. Its hard to get rich quick off a bond. But it is possible to see a quick windfall if you pick the right high-flying stock.

Despite the lack of sexiness in bonds, if youre serious about achieving financial independence or are already financially independent, bonds are an integral part of your portfolio.

Not only do bonds provide solid returns, bonds also offer defensive characteristics when stocks are selling off.

Understanding Your Goals & Being Real With Yourself

So, the real question becomes – how do you figure out your goals, and how can you be honest with yourself in achieving them?

For most people, you goals should be:

  • Take care of your immediate needs for yourself first
  • Ensure you’re taking care of your family
  • Save for your future
  • Plan for big events
  • Let’s start with taking care of your immediate needs first. This means ensuring that you have at least a 6 month emergency fund already saved. If you don’t, this needs to be your primary goal. Read about saving an emergency fund here: What You Need To Know About Emergency Funds

    You also need to ensure that you’re financially organized. The only way you’re going to be successful in saving for your future is if you keep accurate records and know where all of your money is. If you don’t already have a good system in place, look at using a free tool like Personal Capital to keep track of all your bank accounts.

    Once you’ve taken care of yourself, it’s important to ensure that you’re taking care of your family. This is very important, because nothing you do to build wealth matters if you’re just going to leave them screwed if you die. When I’m talking about taking care of your family, you need to have the following completed:

    Once you have these essential tools in order to protect your family, you can finally start looking at saving for your future.

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    Candidates For Survival Asset Allocation:

    • Believe the stock market has a higher chance of underperforming bonds, but are not sure given historical data points to the contrary.
    • Are within 10 years of full retirement and do not want to risk losing your nest egg.
    • Depend on your portfolio to be there for you in retirement due to a lack of alternative income streams.
    • Are very wary of the stock market because of all the volatility, scams, and downturns.
    • Are an entrepreneur who needs some financial safety just in case your business goes bust.

    Encourage Your Kids To Make Good Financial Choices

    How a 40 year old plans for early retirement at 50.

    Instead of enabling your children, now is a good time to encourage your kids to make good financial choices. Actually, it would have been good to teach them earlier. However, it’s never too late to start teaching your kids about smart finances, and encouraging them to do what they should to become financially independent on their own. That way, you won’t have to worry about supporting them instead of enjoying your retirement.

    Think about the conversations and attitudes about money that you expose your kids to. Is that the example you hope to instill in your children? If not, face any shortcomings in your own financial habits, and your parenting on the topic will automatically follow suit

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    What Accounts Should You Be Investing In

    In your 30s, you should be placing a high focus on saving for retirement. As such, you should be following the proper order of operations for saving for retirement.

    This order is all about what types of accounts to invest money in, in the best order, to take advantage of as many tax-deferrals as possible.

    The best order to save for retirement is:

  • Contribute to your 401k up to the company match
  • Go back and max out your 401k to the annual contribution limit
  • If you qualify for an Health Savings Account , contribute to the max and treat it like an IRA
  • If you earn a side income, take advantage of a SEP IRA orSolo 401k
  • Save any excess in a standard brokerage account
  • Calculate How Much Youll Need For Retirement

    Keep tabs on how much youre likely to need in retirement by checking the retirement standards published quarterly by the Association of Superannuation Funds of Australia 2. Calculate this against your own super balance to give you an idea of how soon youll be able to say goodbye to the 9 to 5.

    According to the Association of Superannuation Funds of Australia, by the time you reach 49 youll have between around $80,303 and $165,5873 in your super account. The same group estimates healthy singles who own their own home will need retirement savings of $44,818 per year for a comfortable retirement, while couples will need combined retirement savings of $63,352 per year of retirement. Are you on track to getting there in the next couple of decades?

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