Is it Too Late To Start Investing in Your 50s and 60s?
The simple answer is no – it’s never too late
You’re in your 50s or 60s, and you’ve not embarked on your investing journey yet. You’re reading about how investing can help you reach your financial goals, and the concept of making your money grow seems like an exciting prospect. However, with being that little bit closer to retirement, you might be worrying that you’re a bit late to the game and the investing ship has already sailed for you. But the truth is, it’s never too late. Investing is something that can benefit us at all stages of life, there might just be different considerations to take into account.
The importance of investing money when you’re older
When you reach your 50s and 60s and retirement is in sight, it immediately feels like the investing train has left the station. But there’s a number of reasons you should be investing as an older person.
1. You may live longer than you expect
The truth is, people are living longer which makes it crucial to invest your money. In the United States, for example, the average life expectancy has increased from about 70 years in the 1960s to about 79 years today. And many people live way beyond that. So if you retire in your 50s or 60s, it’s possible you’ll need money for 20 or 30 more years, and which current pension plans and savings might not cover. So investing your money will allow older people to stretch it as far as possible. A $100,000 nest egg that would only last a few years could work for itself and make excess to live off of for many years to come. So why wouldn’t you give your money the opportunity to grow?
2. Most investments are safe
When you’re older, you may associate investments with risk and volatility, which doesn’t seem like an alluring prospect when preserving capital and assets is at the forefront of your agenda. But not all investments are risky – in fact, there are a ton of safe investments out there. For example, dividend stocks generate regular income for the investor, which is perfect for older investors. You can also think about investing in more non-cyclical bonds – stocks that belong to vital consumer companies that are not as reactive to market movements than cyclical bonds. And let’s just say the thought of stocks all together doesn’t appeal to you, there are safer options such as bonds or actively managed funds, which could reduce the amount of stress you’re putting on yourself as you get older.
3. Having money to pass down to the next generation
Whilst the decision to invest is usually for the individual themselves, there are other people who can benefit from your investment pots – your children and grandchildren. Investing later in life means you can ensure your family is in good hands, which a final comfort for a parent or grandparent at the end of their life.
Why investing in your 50s and 60s is a good idea
1. Time horizon
When considering investing in your older years, it’s important to have a long time horizon, as it will affect your appetite to risk as well the investment choices you make. To ensure you achieve overall gains, it’s usually advisable to aim to be invested in the stock market for at least three to five years.
In your 50s, for example, it is likely that you’re around 10 to 15 years off retirement. This means that you still have up to three market cycles of five years to see out. Three! These ups and downs of the market are a little more crucial however, as you don’t have as much time to regain any losses made in a market dip. As a result, it is wise to opt for a smaller percentage of high risk and volatile investments in your portfolio. Whilst holding some is good for overall growth and balance, you may need less than someone in their 20s.
2. Life experience
If you’re in your 50s or 60s, it’s likely that you will have decades worth of life skills and knowledge to bring to the table when it comes to getting started investing. You might well have a pension, even if it’s been managed by your employer. You may have bought a property at some point. These life skills will all give you a head start when it comes to knowing what you want and what you want to achieve from investing.
It's never too late. Just remember that.
3. Tax nuggets
Thirdly, you have (hopefully) been in the tax system for most of your working life, which could be anything over 20 years. Tax systems often offer allowances and benefits for getting started investing, particularly if it is with a retirement goal in mind. Use any knowledge of the tax system you already have and apply it to your investing journey – it will benefit you.
4. Peak earnings
Finally, if you’re in your 50s or 60s and haven’t yet started investing, it may well be the case that you have seen out some of life's bigger expenses (getting married and having kids, for example) and be at the peak of your career and earnings. That’s to say, you’re likely to have more ability to save funds than ever, which is great for being able to put larger sums of money into investing and get the compounding magic to start working for you quicker.
Finally, consider your risk appetite when investing
Since you’re going to need your money sooner than the 20-year-old who just started investing, it’s worth including a combination of both high and low risk assets so that you can ride out the ebbs and flows of the volatile market. But that doesn’t mean you need a completely risk-free portfolio. A good rule of thumb is:
- Stocks: 50% to 60%
- Bonds: 40% to 50%
So ensure you’re investing in assets that satisfy you and your risk appetite.You need to consider how willing you are to risk a chunk of your capital and if you have the money to do it, you can opt for the riskier assets like stocks and shares. The choice is ultimately yours! Getting professional advice can also be a good step to feeling secure in your investment choices.
Final thoughts
Yes, you can invest in your 50s and 60s. In fact, it's a good idea to continue investing for as long as you are able, as this can help to grow your wealth and prepare for retirement. However, it's important to carefully consider your investment options and ensure that your investment portfolio is well-diversified in order to manage risk. Getting started in your 50s means you will need to make different investment choices to someone who has a longer time scale to be invested. It does not mean it is too late and that you can’t succeed in growing your savings by investing if done wisely.
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