If you are in your forties it’s not too late to start your financial planning, according to Rita Cool, Certified Financial Planner at Alexforbes.

Cool said that people who are in their forties can still achieve their targets for retirement if they plan properly, especially if they are more settled and have more income available.

Kirsten Smit, Citadel Advisory Partner, said: “Your forties are an absolutely essential period to build up your nest egg where it needs to be for you to reach financial independence.”

“Investing is an efficiency game and your best way to maximise returns, manage risk, and avoid making emotionally detrimental decisions when it comes to your finances, is to partner with a trusted financial adviser,” Smit said.

Cool and Smit offers people in their forties financial planning tips.

Know the ins and outs of your cash flow

If you know your cash flow then you can ascertain

1. How much you can save each month

2. How you can potentially increase your earnings and thus save more.

Smit said: “It is important to differentiate between essential expenses and discretionary expenses. Your morning Vida coffee, while awesome, isn’t essential, and by cutting this out you could be on your way to saving an additional R1000 per month.”

According to Smit, boosting earnings via a side hustle or securing a raise/promotion/new role is a great way to expedite your way to financial independence.

“Just be sure that this additional income is appropriately directed towards savings.”

Sort out your debt

Interest rates on the rise make it essential to try and pay off all debt as soon as possible with a focus on eliminating high-interest debt first.

Smit said that as soon as debt has been paid off those same contributions can be directed into investments.

Cool advises people to “look at their debt and work out a repayment plan”.

“Do a budget, identify what you can allocate to pay off debt like credit cards and personal loans so that you do not have debt when you retire,” Cool said.


When it comes to investing, diversification is key.

According to Smit, diversification covers more than just choosing a retirement annuity (RA) over a tax-free investment, it means that people need to ensure:

– that their overall asset allocation is appropriate

– they have exposure to different sectors, geographies and currencies

– they have considered institutional risk; and

– they have taken liquidity requirements and time frames into account.

“In your forties, you still have 20+ years ahead of working so it is essential to ensure that your investment portfolio is equity-centric to ensure that you outperform inflation and maximise your opportunity for growth,” Smit said.

Savings goals

People in their forties need to set and know their savings goals so they know what they are saving towards.

Cool said: “Set your goals, short term, medium and long term – without them you don’t know what you are aiming for.”

Tax efficiencies

Smit said that as a corporate earner, the ways that people can save on tax are limited so they need to be smart and maximise every opportunity.

The two easiest ways are to ensure that they have contributed the most they can to their retirement fund and make an annual contribution to a tax-free investment.

“It doesn’t matter whether you have a pension, provident fund or retirement annuity (RA) fund – or even a combination of all three – you’ll qualify for a deduction of up to 27.5% of your taxable income (up to a maximum of R350 000 per year),” Smit said.

“Any South African tax resident (including minor children) can have a tax-free investment. You are able to invest up to R36 000 per year with a R500 000 lifetime limit. Also remember that tax-free investments aren’t limited to money market type funds – you are also able to invest in ETFs and unit trusts.”

Get your life cover sorted

Cool said, “You probably have not picked up too many health issues so lock in that health status in your premiums when making sure your loved ones are looked after if you die. Ensure you have a disability benefit, if you don’t already have it through work.”

Ensure that your affairs are in order

Most people in their forties have dependants including – spouses, children and parents – so it is essential to ensure that:

– their will is up-to-date and in line with their long-term estate planning strategy.

– their beneficiary nominations on their policies and retirement products are accurate.

Seek advice

Cool said that people can speak to a certified financial adviser to help with their goals and how much they need to get there.

“They can help you make your money work harder for you, instead of working harder for your money,” Cool said.

Article credit If you are in your 40s it’s not too late to start financial planning (iol.co.za)

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