You’ve heard it since you were young—the sooner you start investing, the sooner your money can start compounding. But what if you’re already well into adulthood, and retirement is looming, yet your investment portfolio is sparse? Is it too late to start investing and secure your financial future?
Absolutely not. While it’s ideal to begin investing as early as possible, it’s never too late to get started, even in your 40s, 50s, or beyond. With prudent planning and commitment, investing can still help grow your wealth substantially.
In this post, we’ll explore why and how you can start investing at any age. While you may have to play some catch-up, time and options remain on your side.
Why Starting Late Is Still Worth It
No matter your current age or savings, beginning to invest now carries significant upside:
- Your money can still compound. Compounding growth means your returns start generating even more returns. Give your investments more time to compound, and the effects are dramatic.
- You can take more risk to accelerate growth. Younger investors should invest more conservatively. But later in life, investing more aggressively can help rapidly build your portfolio.
- Tax-advantaged accounts remain available. Even if retirement is near, tax-deferred vehicles like 401ks and IRAs allow your investments to grow tax-free.
- Employer matches are free money. Many workplace retirement plans provide matching contributions from your employer up to a percentage of your salary. Take advantage of this free investing perk.
- Other options exist beyond stocks. While stocks often provide strong long-term returns, expanding into other assets can reduce risk.
- You know your financial needs better than ever. With your projected retirement lifestyle and expenses clearer, you can invest to target specific income needs.
- You may have more disposable income to invest. Without young kids to support, you may have significantly more free cash flow to put into investments.
While starting sooner is ideal, it’s clear that investing, even at a later age, can still set you up for financial security during retirement.
Crafting Your Late-Start Investment Strategy
Investing later in life requires some adjustments to help you make up for lost time:
- Save aggressively each year. Invest as much as your budget reasonably allows. Consistently max out contributions to retirement accounts like 401ks and IRAs.
- Prioritize rapid portfolio growth. Include assets focused on growth rather than just income generation. Be willing to tolerate more risk and volatility.
- Consider delaying Social Security benefits. Waiting until age 70 to claim Social Security can dramatically increase your monthly payout.
- Explore catch-up contributions. Once over 50, tax-advantaged retirement accounts allow you to contribute even more than normal limits.
- Assess your expenses closely. Look for areas to save so that you can divert more cash towards investments.
- Get help creating a plan. A financial advisor can assess your specific situation and build a detailed investing strategy.
- Prepare to work part-time in early retirement. Easing into retirement while still earning income can help offset starting investments later.
- Use online investment platforms. Digital investing apps make getting started quick and easy. Automated robo-advisors require minimal effort.
- Remain invested during market swings. Don’t panic and sell when the market dips. Stay invested for long-term growth.
While the above tips require effort and discipline, they demonstrate that growing your wealth substantially is still feasible even with a late start investing.
Investment Vehicles to Consider
These investment tools are ideal for beginners, hands-off investors, and those looking to grow their portfolios rapidly:
- 401(k)s and IRAs: Contributing to tax-advantaged retirement accounts should form the core of your investing approach. Take advantage of any employer match offered.
- Index funds: Investing in index funds provides instant diversification and exposure to broad market performance. Index funds offer consistent, reliable long-term returns.
- Robo-advisors: Automated digital platforms like Betterment and Wealthfront make investing easy. Just answer a few questions, and algorithms handle portfolio management for you.
- Real estate: Options like real estate investment trusts (REITs) give you exposure to real estate gains without being a landlord.
- Dividend stocks: Stocks paying dividends can provide a growing passive income stream to supplement your retirement. Dividends also compound over time.
It’s Never Really Too Late
Sure, investing at 20 is better than 60. But investing at 60 is vastly better than not investing at all. While starting early provides the most runway for compound growth, investing at any age can have profound positive effects on your long-term finances.
Even if retirement is just a decade away, investing diligently gives your money the opportunity to work for you. Coupled with sensible saving and planning, becoming a first-time investor even later in life puts you light years ahead of keeping all your money in cash.