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Mike Loo, MBA

Vice President of Investments


4 Financial Needs to Tackle When You’re in Your 40’s

| December 20, 2017
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During your 30’s, you may have established good spending and savings habits. Your 40’s then becomes an important decade for solidifying your financial goals and working towards them, from your future retirement to family vacations. To make financial progress, there are four important needs to tackle.

1. Boost Your Retirement Savings Contributions

It’s important to have a specific goal when saving for retirement so that you have something to work towards. Once you’re in your 40’s, but ideally sooner, I recommend saving 15% of your pre-tax income toward retirement. That is $15,000 for every $100,000 you make a year.

While the earlier and the more you save the better, 15% is a reasonable number for most people to fit into their budget. It works well because it is enough to build a nest egg, but not so much that it will hurt you in the present. If you aren’t at this rate yet, try systematically increasing your savings rate by 1% of your paycheck every few months until you reach 15% or a higher percentage based on your goals.

2. Boost College Savings

Parents might plan to take care of 66% of college costs for their kids, but most of them are only set up to cover 27% by the time they send their children off into the great big world. I recommend families start saving for their child’s college tuition in their 30’s, so that their 40’s becomes a time to boost those contributions and save more aggressively.

Just like your 401(k) plan, you need to monitor your 529 plan investments. While in the early years of saving for college you may want to be more aggressive with your investments, as college draws closer, the investment allocation should become more conservative. It is also helpful to monitor your balances, keep an eye on the changing college costs, and track your progress towards your goal.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program.  Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

3. Build a Vacation Fund

As my kids get older, I’m finding myself wanting more and more to create lasting, meaningful memories that they’ll always cherish. Many of my clients in their 40’s feel the same way. When you’re in your 40’s, spend quality time with your family making fond memories before your kids head off to college. Because vacations can be expensive, I recommend building a vacation fund. Similar to an emergency fund where you save and build a separate fund only to be used for emergencies, a vacation fund is a separate pot of funds that you allocate towards vacations.

Establishing a vacation fund helps your family set boundaries and can reduce the chances that you’ll overspend. When you go on vacation, you’d only use the money in your vacation fund, so it helps you stick to a budget and not dip into your main account. While a vacation fund can help you avoid overspending, it also allows you to actually spend money on a vacation and enjoy yourself, rather than stress about the costs involved.

4. Complete an Estate Plan

Most of us understand that having an estate plan is crucial, yet only around half of Americans have done any estate planning, which means half the population is taking a huge risk when it comes to caring for their families and assets. Regardless of the level of wealth, estate planning is important for most situations, if only to make it easier for family members and loved ones.

While it may seem daunting, the process of thinking through your estate plan does not need to be complicated or stressful, and the ensuing benefits are invaluable. Once you reach your 40’s, it’s a good time to sit down with your financial advisor and work on your estate plan. This includes creating a will, choosing an executor, durable and healthcare powers of attorney, and naming your beneficiaries.

Getting Started

Your 40’s is a crucial decade for building on the financial strategies you established in your 30’s. A financial advisor can help you stay on track as you work towards your retirement goals, send your children to college, make memories with your family, and start thinking about the legacy you wish to leave.

To learn more about how I work with my clients or the conversations I have with them, I encourage you to check out my blog at www.mikeloo.com/blog.

About Mike Loo

Mike Loo is an independent financial advisor with more than 20 years of experience in the financial services industry. His mission is to provide a meaningful impact on the lives of clients and the people they care most about, help them make educated decisions with their money, and build a strong financial foundation for both themselves and their next generation.  Mike is committed to meeting a high standard of excellence, taking the time to listen to clients’ needs, and designing strategies that aim to help clients save money and reduce debt. He seeks to fit a client’s investments into their life and educate them so they’ll understand their investments. To learn more about how Mike may be able to help, connect with him on LinkedIn, call his office at (949) 221-8105 x 2128, or email him at michael.loo@lpl.com.


Securities offered through LPL Financial, Member FINRA/SPIC.  Investment advice offered through Trilogy Capital, a registered investment advisor.  Trilogy Capital and Trilogy Financial are separate entities from LPL Financial.

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