Financial planning for ‘peak earners’

In 2009 peak income occurred between the ages of 40-55. Twenty years ago, people reached their peak earning at the age of 28-30 and those in their peak earning years took home about twice as much as workers between the ages of 20 and 24 now. Here are some top saving tips to get you through this phase financially secure. Remember, the higher your expected standard of living, the more discipline you require.

If you are a ‘peak earner’, it is highly likely that your money spending at this stage is higher than ever. With the cost of housing and living going up, many households are left with little of their earning or nothing at all. The cost of housing and other aspects of family life has risen faster than wages, leaving many households spending everything they earn. It is for this reason that here at Acumen, we are more than happy to help you come up with a financial plan, when you are still at your peak earnings to avoid financial frustrations during retirement.

Save for a rainy day

It’s highly recommended to always plan ahead. At times, we forget that things might not work as planned. Having savings for at least six months means you will be safe against any financial setbacks that may occur. Angela Maher, Managing Director at Acumen Financial, recommends maintaining a cash emergency pot of six months’ worth of salary before making any investment, regardless of your marital status.

Angela said:

We would always advise clients to plan for the worst but expect the best. It is definitely prudent to wait until you have a secure financial base before you even think about making an investment. Once you have this buffer, you can then take a higher level of risk with your investments and reap the rewards in the long-term.

Get some form of income protection

One of our financial plan packages is income protection. Long-term income protection (IP) is an insurance policy that pays out if you’re unable to work due to injury or illness. Figures from the Telegraph shows that for a 39-year-old earning £50,000, an income protection policy that would pay out until age 65 would cost £60 a month.

Income protection usually pays out until retirement, death or your return to work, although short-term income protection policies are now available at a lower cost. However, income protection doesn’t usually pay out if you’re made redundant, but will often provide ‘back to work’ help if you’re off sick. You can defer the payout for 12 months which would reduce the cost to just £20 per month.

Adapt your budget to allow you to save

Have you got a substantial budget in place? It’s time to make one. Well, you’ve probably still got a large mortgage to pay off, school fees to pay and not to mention a young family who are costing much of your earnings. The last thing you probably want to hear is that you have to reassess your budget to save more. Start easy by switching utilities such as insurance, banking, broadband and other household services.

Choose and plan the right investment for you

Once your current financial status is sorted, and provided you have at least 10 years to retirement, you should be able to afford a reasonably high level of risk with your investment. Decide on whether you want to spend money on pension or individual savings account. While ISAs offers great flexibility, pensions have a clear advantage.

With ISAs you can access the funds for a higher rate tax payer (earning more that £42, 385) while pensions offer 40pc upfront tax relief. Therefore, if your primary goal is to build a retirement fund, pension should be prioritised.

If you are or nearly at your peak earning period, and are looking to make investment financial plans, here at Acumen we have various plans to offer and we will point you to the right direction.

To discuss your financial plans with one of our dedicated team please contact us today on 0151 520 4353 or email acumen.