Investment advice abounds for people just starting out in their careers, as well as for those who are getting ready to retire.

But for midcareer investors, people in their 40s and 50s? Not so much.

Workers at this life stage may be at their peak earnings level, and therefore may have more-complex financial needs than their younger counterparts. Moreover, midcareer investors frequently are juggling the competing financial demands of school and university for their kids and retirement savings for themselves.

That’s no small task, especially when you stop to consider the big price tags associated with each, as well as the complexities of calibrating two separate pots of money with two different time horizons.

Even so, you tend to see less information about how midcareer accumulators should invest and manage their finances differently than their younger and older counterparts.

Like 20- and 30-somethings, midcareer accumulators still have a decent amount of human capital, or earnings power. And with a runway of 15 or 20 years until retirement—and perhaps 25 or 30 more years in retirement—they can usually afford to take plenty of equity risk with their investment portfolios.

At the same time, people at this life stage may face serious life—and in turn financial—setbacks from which they never fully recover: a debilitating health condition that limits work, for example, or time away from work to care for aging parents.

Here are some key priorities to keep in mind if you’re a midcareer accumulator looking to make sure you’re on the right track with your financial and investing life.

  1. Nurture your human capital.
  2. Protect what you have.
  3. Combat lifestyle creep and step up your savings.
  4. Begin to derisk your portfolio.
  5. Don’t assume a larger portfolio means more complexity.
  6. Rightsize your advice.

1. Nurture your human capital

Investing in human capital—via additional education or training—is close to a slam-dunk for early career accumulators.

If you can increase your earnings power with such an investment, you have a long time until retirement to benefit from it.

The calculus isn’t as simple as you get older, which helps explain why medical schools and high-priced MBA programs aren’t jam-packed with people in their 40s and older. Higher lifetime earnings may not offset the outlay of money and time for costly training later in life.

Yet midcareer accumulators should still make an ongoing investment in their own human capital—taking advantage of continuing education programs and conferences to enhance their skills, networking, and simply staying current on the latest news and developments in their fields. And no matter your field, staying current on the latest major technology developments, both on and off the job, is a crucial way to ensure that you stay relevant.

2. Protect what you have

The more assets you amass, the more important it is to protect what you have.

The same basic insurance types that were valuable in your 20s and 30s—health, disability, property and life insurance if you have minor children—remain every bit as essential as you head into your 40s and 50s.

In addition to reviewing your insurance needs, be sure to take stock of your emergency fund. Whereas young accumulators might reasonably stick with the usual rule of thumb of three to six months’ worth of living expenses in cash, midcareer accumulators, especially higher-income folks, should target a year’s worth of cash. That’s because the higher your income and the more specialised your career path, the longer it could take to replace your job if you lost it.

3. Combat lifestyle creep and step up your savings

The 40s and 50s are often considered the peak earnings years. But with higher earnings, it’s easy to let “lifestyle creep” gobble up every bit of your extra income.

Before you know it, you’re driving a luxury car with a high monthly payment and shelling out for dog walkers and house cleaners.

So how do you stop lifestyle creep? In short, the more you earn, the more you should save. Without increasing your savings rate, you may fall short in retirement because of your adjusted living expectations.

To determine how much to save, the authors of Morningstar's report, More money, more problems: How to keep a bigger paycheck from spoiling retirementsuggest following one of these three rules of thumb:

  • Spend twice your years to retirement. If you are going to retire in 10 years, you should spend 20% of your raise and save the remaining 80% for retirement.
  • Save your age, as a percentage of the raise. If you are 50 years old, you should save 50% of the raise.
  • Save at least 33% of your raise. If your take-home income increased by $1000, you should save $333 of that new income.

Morningstar found the “spend twice your years to retirement” strategy works well across all age groups, but also requires the most savings. For younger investors, “'save your age” is a good alternative until around age 45 and may not be as onerous.


4. Begin to take some risk off the table in your portfolio

Portfolios for people in their 40s and 50s should still include plenty of higher-risk assets with higher return potential; after all, such individuals could be drawing on their portfolios for at least 40 or 50 more years, so they can’t be content to hang out in low-risk assets with low returns to match.

That said, by the time you reach your 50s, it’s a good idea to begin holding a bit more in lower-volatility investment types, especially high-quality bonds. True, the return potential of bonds is apt to be lower than is the case for stocks. But bonds can serve as valuable shock absorbers for your portfolio, cushioning the losses when stocks go down.

That can help on a psychological level, of course, ensuring that you don’t panic and sell yourself out of stocks when they’re in a trough. Holding at least some assets in safer securities can also help serve as an insurance policy: If you are forced to retire early or find yourself out of a job prematurely, having a cushion of bonds can help you avoid tapping stocks for living expenses when they’re in a trough.

5. Don’t assume a larger portfolio means more complexity

As their assets grow, many investors assume that their portfolios should include more moving parts. But that’s not necessarily so.

Even as you may need to spread your assets across more and more silos as your assets grow, that doesn’t mean you need to maintain distinct and/or narrow holdings in each of these accounts.

In fact, it’s hard to go too far wrong with a simple three-fund portfolio consisting of a total market US index fund, a total foreign-stock index fund, and a core bond offering; you can own that same cluster of holdings in each of your accounts.

6. Rightsize your advice

As your financial life grows more complex and you get closer to retirement, paying a financial professional for help can be money well spent.

You may glean insights that you hadn’t picked up on in your own reading, or receive counseling in complicated areas like tax and/or estate planning.

Be sure to rightsize any financial advice you pay for, however. While investors who have complicated financial situations or need a lot of ongoing hand-holding might benefit from paying an advisor a percentage of their assets each year, investors who only need periodic checkups will find it more cost-effective to pay for advice on a per-engagement or hourly basis.