Expert Advice for Investing at Forty  

Turning 40 will have us looking back on our lives and reflecting on what we’ve done, but how many take the time to look at our portfolios? Turning forty can not only be a crucial point in our lives and careers but in our investments as well. So when hitting the big 4-0, take some time to look over your investment portfolio on your own or with your advisor to make sure you’re still on track to achieve all your goals. Below is some guidance from our experts.

Scot Johnson (CFA) of Adell, Harriman & Carpenter, INC believes each individual is different. What your portfolio looks like at forty or any other age depends on your specific situation and goals. Having an advisor can be highly beneficial to help navigate all the different variables. Scot says, “ In our view, what you own at any age comes back to when you’ll need to tap into your savings to fund spending vs. funding it from recurring employment-related income.”  

When looking at your portfolio at forty, Scot asks, “Are you staring college tuition in the face near-term, or is it farther down the road? When do you plan to retire? How much have you managed to save? How much additional money do you anticipate being able to save before retiring? How much of your savings are in a 401k or IRA type vehicle you can’t touch until a specified age vs. in an after-tax account you can access today?”  

A good advisor will have knowledge and expertise in handling any answers to these questions. With that knowledge, they will be able to help tailor a portfolio specific to you. In Scot’s point of view, “There might be multiple action plan options to choose from, but the main point is a good advisor doesn’t present a one-size-fits-all solution. Circumstances might be similar and thereby provide some guidance from previous experience, but circumstances do vary from household to household, and solutions should as well.”

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 states, “We have some heuristics that say that someone who is 40 and makes around $100,000 should have a net worth of $400,000.” 

Net worth is not the same as your investments, though. Net worth typically includes your home, business, and any debt you might have.

He continues his example by saying, “When someone is around age 40 and invests, they must maintain a heavy exposure to the stock market. A near 100% stock market allocation is not inadequate for someone in their early 40s.” 

Although the market will have ups and downs, a 40-year-old’s time horizon justifies the stock market allocation if your stomach can tolerate it. Moreover, a stock-heavy allocation is necessary because the prospects of a reduction in social security for this particular age group are likely. This possible reduction makes the need for successful compounding investment returns that much more critical.

When investing at forty, a good advisor can be critical. There will be many factors to consider, and having guidance from someone who has seen your situation or something similar can be incredibly beneficial. In addition, an advisor will be able to use their expertise and experience to create a solution specific to you. Above, we see that one expert not only looks at the current situation but far into the future as well. In his opinion, investing aggressively at forty is a good idea and a necessity due to potential future changes to social security. If there is a reduction, making up the difference in income will be on individual investors through the investments they make today. 

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