Financial Planning

From attending parties to raising kids to running a business, life is busy. Amid the joys and stresses of daily life, staying on top of your finances can be a challenge, let alone finding time to plan for the long term. And even if you had the time, how are you supposed to know what’s important for your financial future and when you need to take action?

As November is Financial Literacy Month (#FLM2018) in Canada, we’ve created the Your Money, Your Life series aimed at addressing these questions and highlighting key financial considerations for different age groups. Every individual is unique, so these aren’t hard-and-fast rules. Instead, they are signposts meant to guide you toward financial decision-making that makes sense for your situation.

 The following article addresses financial matters of importance to Canadians in their 40s.

Enjoying the fruits of your labour

For many Canadians, life is in full swing during your 40s. If you have little kids or teenagers at home, family life is probably full speed ahead. At work, you are hopefully progressing well in your career. While you are likely more financially stable than you were in your 30s, you are also at an age when major life developments like an inheritance or a divorce can suddenly change the equation.

So what are the key financial considerations that should be on your radar at this age? Here are a few of the major financial issues and milestones common among your peers in their 40s:

  • Taking on leadership roles at work
  • Dealing with aging parents
  • Receiving an inheritance
  • Buying a second/vacation home
  • Potentially grappling with separation or divorce

Your financial situation is shaped by life events and the choices you make, so your specific needs may differ from those of your peers. Nonetheless, there are basic financial steps that generally make sense for people in their 40s.

Protecting yourself and your family

From a financial perspective, your 40s are the time for ensuring that you have the right pieces in place to protect the financial well-being of yourself and your family. While you are in the midst of strong earning years, you also may be gearing up for major expenditures.

Here are five key steps that you can take in your 40s, in addition to the steps that you took in your 20s and 30s, to ensure you stay on course for a bright financial future:

1. Optimize insurance and asset allocation. As your finances and family situation may look a lot different in your 40s compared to your 20s and 30s, it’s a good idea to review and optimize your insurance coverage and asset allocation. While you likely have higher disposable income, this may be offset by increased financial responsibilities. According to an Ipsos poll from late 2017, Canadians aged 35–54 have average non-mortgage debt exceeding $10,000. To account for significant changes, you may need to adjust your insurance policies and investment holdings. Permanent life insurance is an excellent choice for both protecting your loved ones and growing your wealth in a tax-efficient manner, since funds you invest in life insurance can grow tax-free and eventually be paid out to your chosen beneficiaries with low or no tax.

2. Double down on planning for your retirement. A recent poll by a Canadian bank found that 32% of Canadians aged 45–64 have no retirement savings – an alarmingly high percentage. Although you may still be many years away from retirement, it’s important to make sure you’re on track for the golden years you envision. Your 40s is a good time to sit down with a trusted advisor to discuss when and how you’re like to retire, and what it will take for this to happen. If it turns out that you’re on the right path, congrats! If it turns out that you’re not saving fast enough for your planned retirement, the good news is that there’s still time for you to make adjustments and step up your efforts.

3. Protect the long-term viability of your business. If you are a business owner, the future of your business could be at risk if someday you are unable to work due to illness or injury. One way to ensure your business can maintain smooth operations in such a situation is with shared ownership of a critical illness insurance policy. Beyond safeguarding your business against the risks that would come from you being unable to work, this type of critical illness insurance can also provide advantageous tax benefits.

4. Get your kids involved in philanthropy. Just as you don’t have to wait until you’re old to engage in philanthropic efforts, your kids also don’t have to wait. In fact, it’s a great idea to expose your children to philanthropy so that they can learn about its importance from a young age and embrace your family’s values. Children can learn so much by observing their parents and by taking part themselves, no matter how small their efforts when they start.

5. Ensure your loved ones are looked after. Death remains a fairly taboo subject in Canada, but ensuring that your financial affairs are in order is important if you want to be sure that your loved ones will be looked after once you’re gone. Hopefully this is still many, many years away – according to Statistics Canada, the average life expectancy here is 83 years for women and 79 years for men. The estate planning process gives you an opportunity to articulate how your wealth should be distributed upon your death. It also helps you assess whether the plan you currently have in place is sufficient to protect the well-being of your family or whether changes are required.

Staying on track with a clear plan

During your 40s, you can increasingly reap the rewards of the hard work you put in during the early years of your career. You are also in a good position financially to revisit existing wealth management plans or implement new ones to ensure that your family will be well cared for no matter what happens later in life.

Seeking out support from a trusted financial advisor can help you better understand your options and develop or adjust a wealth management plan to match your needs. For a discussion about how we can help you reach your financial goals, contact Rubach Wealth at (647) 349-7070.


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