How to Plan your Retirements in your 40s – Learn How to Save, Use the Passive Income Ideas to Invest and Build Wealth for your Family.
Aside from your voluntary retirement savings and contributions to Pension account, everyone is supposed to invest independently for passive income before one clocks 40. While this advice also applies to the 20s, 30s are considered the most appropriate time because it is the period one should aggressively build and own potential lifetime passive income assets.
When you clock 40, you ought to have moved from earning a salary to investing and from investing to generating a sizable passive income that will take care of you and your family.
The question is how much is considered a passive income? Well, there is no single exact figure to consider a passive income but I always think that if everyone has an idea of his/her monthly/annual living expenses, then one can work towards building an asset that generates a cash flow that covers these expenses with extra savings, this, in my definition, is what my definition of passive income.
For instance, if your family expenses on a monthly basis are between N100,000 – N150,000, (which translates to N1,200,000 annually), a true annual passive income, say N1,400,000 should cover these monthly expenses with extra cash savings.
Now if you are in your 20s or even 30s, you have enough time to start building your investment portfolio or asset for passive income. But if you are already above 40, that window may become narrower especially for the late 40s.
Here are practical and action steps to explore your remaining golden years without pressure.
1. Don’t panic
Sincerely, being in your 40s with no passive income generating assets means you will keep working for long which isn’t a good spot to be in. It could lead to pressure, panic and drive the thought of impoverishing retirements. So rather than panic, make changes that will reduce your expenses and free up cash from your monthly salary into a savings account. If you are able to save 10-15% over the next 12 months, you’ll accumulate some cash.
Will the amount saved in my account after 12 months be enough to build a passive income portfolio? Honestly, no. But did you know that is a great starting point to aim for?
Action Points for You:
- Open a special savings account with a stable bank.
- Initiate a standing order on one of your most active account (maybe salary account or an account that receives most of your income) and instruct your bank to credit the special savings account for 12 months.
2. Invest & Build Passive Income Assets
After making those meaningful changes in your budget like cutting some unnecessary expenses to free up more cash savings, the next step to consider investing in aggressive but secured investment opportunities. At 40, you may think that CBN Treasury Bill and FGN bonds are the only risk-free places to put your money since they are backed by the government, no that is not true, at this stage, you still need to consider some safe high return opportunities that beats inflation.
Here are some useful resource articles you should read for a better decision:
- Best Low-Risk Fixed Deposit Opportunities You Didn’t Know
- Where to Invest Your Money for Passive Income
- How to Pick Profitable and High Paying Dividend Stocks
- How Re-Investing your Dividend Will Make You Richer
- Best Investment Apps You Should Download Now
Imagine you are able to bring home extra 20 – 30% per annum on what you invested in the next 4-5 years by following some of the recommended opportunities and suddenly, things are looking a lot more promising than they were, won’t you be happy?
3. Make plans to work a bit longer
This key point depends on where you are in your 40. If you are between 41 – 45, resolve to work a bit longer so you can earn more, and save more money. Working for more years is an opportunity to not only increase your retirement savings but also boost your passive income investment portfolio.
But for older folks above 45, you may consider starting a side business where you offer consulting services to clients in your industry.
The last place you want to see yourself is to retire short of cash and struggle as a senior citizen. If you are in your 40s with no passive income pledge to take action immediately, the longer you wait, the more you put yourself and family at risk.
Feel free to share your questions and suggestions, someone in his/her 40 may find it useful.