What should I do if I’m 50 and have no pension?

Have I left it too late to invest for retirement?

The conventional wisdom is that by the time you’re in your 50s you should be at the pinnacle of your career. Your earnings are likely to be at their zenith and you will have saved up significant assets for your retirement. You will be starting to count down your remaining years of paid work and looking forwar to a well funded retirement.

However, the reality for many people is very different. Life has a habit of not quite working out as planned, and for many working expats they find themselves wondering what happened to that fortune that they came to seek, and do they have time to do anything about it before retirement.

Well, the good news is that it’s never too late to get started. The sooner you start, the better. Even small actions can make a big difference in your retirement. Of course, you can’t cheat the logic of maths, and you may have to accept that your retirement plans might not quite be what they would have been had you been saving and investing half your income from age 18, but you can always improve your situation.

“It’s never too late to get started”

The time-honoured principles of money management are no different at aged 50 or 20, but the difference for you is likely to be a sense of urgency. Your timeframe to retirement is so much shorter, that you can’t afford to mess around.

So here’s what you need to do:

My 8 Top Tips for late starters

Come up with a plan.

Draw up a detailed budget if you don’t have one already. Calculate your basic living expenses, and what you think they will be in retirement. Then you have a starting point. Work out what income you think you could be happy with when you finish work. Do you have any other sources of income that will be coming in that you can rely on? A government pension? Income from a rental property? Could you see yourself not fully retiring but maybe having a small parttime job? Add all of these things up and subtract them from your income target. You may be surprised how much they come to. 

Once you have an income goal, you need to aim to build up a pot of investments that will finance that budget in retirement. A lot of people use the 4% (or 25x) rule of thumb. Multiply your expected expenses by 25 and that’s roughly how much you need to save up. Work out how long you have left to hit these goals, and that should give you an idea of how much you need to put away every year. Break this down in to monthly savings goals, then commit to hitting them.

Spend less that you earn. A lot less. 

You may to have to take some seemingly drastic action. Maybe move home to somewhere cheaper. Get rid of the car with expensive monthly payments and buy something cheaper for cash. Maximise your savings rate and stick to your plan. You need to be hyper-focussed on this because of your timescale. Can you even afford your current job? If you can’t save enough to hit your goals then maybe it’s time to try and leverage your years of experience to find something that pays you more, if you’re serious about this. 

Prepare for a rainy day.

Before you get stuck into investing, you really need to protect yourself against the unexpected. Building up a cash buffer of a few months’ worth of expenses will give you breathing space for when life throws you a curve ball. People always imagine the worst-case scenario, and if you lost your job and had hospital bills to pay, then this money will certainly help you cover them. But it could be good news as well – maybe your daughter just announced her engagement, or your son just got into university. If you have a cash buffer this will stop you going in to debt to finance the unexpected things life throws at you.

Insure against disaster

You need insurance. There’s no sense in trying to build wealth for your retirement when you could lose it all in just an unfortunate event. Life insurance, if you have anyone dependent on you and especially if you have outstanding debt. Critical illness should help keep you and your family solvent in case you have a serious medical problem. And potentially the most important: income protection insurance. You are relying on your ability to earn a wage for the next few years, in order to finance your retirement. If for some reason you were unable to work, all your plans would be scuppered. You can insure a large portion of your monthly income for a relatively modest fee, and you should definitely consider it. 

Invest for the long run

You might be expecting to work for another 10-15 years, but you are hoping to live for much longer than that. Therefore, your investing timeline needs to be longer as well. You need your money to grow and to work for you. You should diversify your investments between asset classes to minimise the risk of volatility negatively affecting you, especially as you approach retirement. Either a selection of low-cost ETFs or tracker funds will serve you well, or a low-cost passive global multiasset fund, if you want an easy solution. Using a reputable online broker for this will help keep your costs down and your assets safe. 

Take control and execute

Don’t delay your actions. Inaction and indecision are going to get you nowhere. You need to radically change your mindset to one of focus and positivity. You can do this, and your future self will thank you for it.

Review it regularly

Set a date in your calendar. Maybe every quarter. Ask yourself honestly: Am I hitting my savings goals? Have my needs changed? Do I need to adjust my plans? Don’t change your investment strategy because the market hasn’t gone your way but do be prepared to change your behaviour or expectations if the reality of what you’re achieving is different from what you had planned for.

Don’t try and take shortcuts

Avoid get-rich-quick schemes and anyone trying to get you to put money into something that looks too good to be true. It almost certainly is, and you can’t afford to take a punt on anything speculative. You should stick to low cost diversified investments, and preferably ones that are self-managed, so you have complete control over them. You need to minimise costs, so paying a manager or an advisor is not in your best interests yet. Before you hit retirement, speaking to a good advisor may be useful, but all they can tell you now is spend less and save more.

And you just heard that from me here. For free.

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