CoFe-based alloys and rare earth (RE) elements are among the most studied materials in applying magnetic devices to improve soft magnetic characteristics. A series of Co40Fe40Sm20 films are deposited on a glass substrate via the sputtering technique, followed by an annealing process to investigate their effect on microstructural and optical properties of Co40Fe40Sm20 films. In this study, the increase in the thickness of Co40Fe40Sm20 films and annealing temperatures resulted in a smoother surface morphology. The 40 nm Co40Fe40Sm20 films annealed 300 °C are expected to have good wear resistance and adhesive properties due to their high values of H/E ratio and surface energy. Optical transparency also increased due to the smoother surface of the Co40Fe40Sm20 films.