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
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”
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 part
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.
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’
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
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
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.