Expert advice for investing at Forty

When we turn 40, we need to look back on our lives and think about what we’ve done, but how much time do we take to look at our wallets? Turning forty can be a pivotal point not only in our lives and careers, but also in our investments. So if you hit the big 4-0, take a moment to review your investment portfolio alone or with your advisor to make sure you’re still on track to hit all of your goals. Below are some guidelines from our experts.

Scot Johnson (CFA) of Adell, Harriman & Carpenter, INC believes that every individual is different. What your portfolio looks like at forty or another age depends on your specific situation and goals. Having an advisor can be very helpful in helping you navigate through all the different variables. Scot says, “In our view, what you own comes back at any age when you need to tap into your savings to fund expenses rather than fund it with recurring work-related income.”

When you look at your portfolio in your 40s, Scot asks, ‘Are you staring at tuition in the near term, or is it further down the road? When do you plan to retire? How much did you manage to save? How much extra money do you expect to be able to save before you retire? How much of your savings is in a 401k or IRA type vehicle that you can’t touch until a certain age versus in an after-tax account you can access today?”

A good advisor has knowledge and expertise in dealing with possible answers to these questions. With that knowledge, they can help you create a tailor-made portfolio. According to Scot, “There can be multiple action plan options to choose from, but the key point is that a good advisor is not a one-size-fits-all solution. The circumstances may be similar and therefore offer some guidance from previous experience, but circumstances differ from household to household, and solutions should be too.”

Darryl Lyons (CFP, AIF, ChFC, BFA), the CEO of PAX Financial Group, illustrates a specific example of how someone might invest at 40. In Darryl’s example, he says, “We have some heuristics that say someone who is 40 and makes about $100,000, should have a net worth of $400,000.

However, the assets are not the same as your investments. Net worth typically includes your home, business, and any debt.

He continues his example by saying, “If someone is investing around the age of 40, he must maintain a large exposure to the stock market. A stock market allocation of almost 100% is not insufficient for someone in their early forties.”

While the market will have ups and downs, a 40-year time horizon justifies stock market allocation if your stomach can tolerate it. Moreover, a substantial allocation is necessary because the prospects of a reduction in social security for this specific age group are likely. This potential reduction makes the need for successful compound investment returns much more important.

When investing at the age of forty, a good advisor can be critical. There are many factors to consider, and guidance from someone who has seen your situation or something similar can be incredibly helpful. In addition, an advisor can use their expertise and experience to create a specific solution for you. Above we see that one expert is not only looking at the current situation, but also far into the future. Aggressive investing at age 40, he says, is a good idea and a necessity because of potential future changes in Social Security. If there is a cut, the difference in income gets to individual investors through the investments they make today.

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Jeff Cooper

Jeff is a fan of all things finance. When he’s not changing the world with his blog, you can find him on a run, playing a Mets game, playing video games, or just playing with his kids.


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