Moving on, up...or out
Planning your future
Your forties can be an exciting time! With opportunities for promotion, the possible chance to take on more senior roles and the family growing up, what’s not to like? It’s also often a time when people choose to move up the property ladder and buy a bigger place, maybe with the help of bonus money or even an inheritance. However, for others, it can involve disruptive changes, such as divorce, and the subsequent need for one or both partners to move out of the family home. A grim thought, especially if you had settled into a good family work-life balance.
Mortgaged, with a partner or spouse, and potentially some children... you might also be starting a new family if you’re divorced or separated, and there could be some step-children in the mix as well. The old days of 2.4 kids are long gone!
You’re climbing the career ladder and you’ve probably got a bit of cash spare every month for holidays and treating yourself, as well as putting some savings away. You may well have built up some savings and investments over the years, as well as a range of pension benefits – but it’s hard to find the time to review these and check that they are still doing what you want.
If you’ve got children, they might be approaching further education or even a house purchase and they’re going to be tapping the bank of Mum and Dad for funds before you know it.
So what to do?
Check your existing pension benefits
Hopefully you have built up a range of pension benefits through the different jobs you’ve held, and maybe through your own pension savings too. No matter how small they are, it’s important to make sure the funds are invested in line with your attitude to investment risk and it’s also worth checking the charges that you’re paying on each plan. Don’t forget to check the death benefit nominations on your pension plans as well – you may have last made them when you were without a partner, or with a different partner.
Think about increasing your pension contributions
If you haven’t really bothered about contributing into a pension up to now, don’t panic – although it’s ideal to start saving for your retirement as early as possible, you’ve still got 20 years or so of work ahead of you…and maybe more. You’ll thank your younger self when you eventually get to retirement.
Check your (and your partner’s) State Pension entitlement
The State Pension is a valuable source of index-linked income in retirement. It’s a great idea to check what you might be entitled to when you reach State Pension Age – many people expect to receive the full amount but may find that they haven’t built up enough National Insurance contributions over the years. It is good to be prepared – and if you have a shortfall, you may be able to top this up. You can check your State Pension here.
Saving tax
If you are a higher rate tax payer, then pension contributions might attract higher rate tax relief which is well worth claiming. Don’t forget to add in taxable benefits, like a company car, that might push you into higher rate tax. Also, think about who pays what tax in your household. If you are a higher rate tax payer and your partner is not, you might want to make sure any taxable savings are in your partner’s name to keep the tax take down to a minimum.
What if you die?
You probably took out a life insurance policy when you took out your mortgage, or when your first child was born. Is it still relevant to your needs? Is it written in trust – and for the right beneficiaries? Also, check what you’ve got from your employer in the way of protection to make sure you’ve got enough to pay off debts and protect the family if you, or your partner, died or suffered ill health.
Make a will – or update the one you already have
With the potential of a family around and some accumulation of wealth, we hope you have a will in place. If not, get one made and if old, consider getting it updated.
We recommend that you use a solicitor, although you could use a Will Kit, which is available from any good stationer, if cost is an issue. The legal profession sometimes run a ‘free wills week’ and you might want to have a look out for this.
What about your other savings and investments?
You have probably built up some cash savings by this stage, maybe from regular savings or from an inheritance or gift. It’s important to keep cash savings equivalent to around 3-6 months’ income as an emergency deposit fund, just in case. If you’ve built up more cash than this, is it working hard enough for you? Interest returns are historically low, so check out the interest rates available on the High Street, such as ISAs, and don’t forget about other cash-type investments, such as NS&I Premium Bonds. The Government’s Money Helper service has some tips for choosing the savings account best for you here.
Divorce on the cards?
If you are going through a divorce, you will be facing the messy business of splitting your combined assets. In this situation, good financial advice is invaluable, particularly when it comes to tricky areas such as sharing pension benefits. A wrong move could change your future – make sure you tread carefully and take independent financial advice.
We hope you have been inspired to take action for your financial planning from the notes above. This SaidSo free guide is for guidance only.