When you are in your forties, you have roughly 15 years to go for timely retirement if you want to retire at age 55. If you want to retire early, perhaps you might want to retire in just few years’ time. This is the stage which you have a stable career that gives you stable income streams. You should be able to save better as you have higher salary. How are you going to manage your finance better?
First – review your retirement saving goal and ensure you are on track to your retirement goal. There is not much time left until your retirement age, so it is critical to ensure saving and investment are in place in 40s to have enough retirement fund when you want to stop work. Saving and investment work best if the time is in favour of you. The shorter the time you have, the harder it is to make saving and investment work for you. If you have no idea what your retirement saving goal is, you can click here to watch the video teaching you how to identify your retirement goal.
Second – build more passive income streams, when you have higher income at this stage, your saving amount shall increase too. This is time to look for more investments and business ventures to get extra passive income streams for retirement. When you stop work later, you do not want to use up the money saved so far, hence, it is recommended to have streams of incomes from various businesses or investments. The passive income streams can be built by investing into mutual funds that give regular distributions, Real Estate Investment Trusts which give regular dividends, investment properties which give regular rental incomes or even annuity insurances which give regular annuity payments. If you have higher net worth, you can also look for special business venture investments that give regular preference share dividends.
Third – get ready the education fund. If your children are almost time for higher education, you need to start identifying the source of fund for their tertiary education. If your fund is in the investment account, you might need to start planning to switch to more stable fund so that the amount is not affected due to market condition.
Fourth – review your insurance and EPF nominees. By this time, your children might be bigger. It is time to relook at the nominees for your insurance and EPF (employee provident fund). You might want to include new family members as your beneficiaries.
Fifth – have will and trust. At this stage, you have more assets so it is crucial to will away your assets when you are not around. For will, you need to decide the executor of the will who will help you to distribute your assets when you are not around. Choose someone you can trust and competent to do the work. If you have young children, you need to have guardians named in your will too. Also, will alone is not sufficient if you have young children. When death event happens, all the assets will be frozen. You might need to set up living trust to ensure your family has liquid cash to sustain while waiting for the assets to be unfrozen. Having will does not ensure the assets to be distributed within short period of time, it still needs time for the executor to get the grant of probate from court, gather the assets and distribute it. Before this is done, a living trust will ensure the spouse and the children have some monies to live on.
Sixth – Maximise the tax benefits. When incomes are more, the tax payment will increase too. It is important to understand the tax relief announced by the government every year and maximise the tax benefits. In 2020 tax year in Malaysia, you can get tax relief up to RM3,000 for life insurance premium, RM3,000 for private retirement scheme, RM 3,000 for medical and education insurance, RM 8,000 for SSPN which is the children education contribution.
Seventh – spend more time and money on health. Health is wealth. At this stage, health might start deteriorating. It is important to not over work and balance the relaxing time and work. Ensure you don’t fall sick easily that will affect your ability to work.
Watch the Youtube video here on this topic.
You can receive broadcast message relating to wealth creation to financial freedom through Telegram. Click here to subscribe to the telegram for the weekly newsletter and get updates on regular free classes on wealth creation topic.