How Late is Too Late to Start Investing?

 

Nearly half of Americans don’t have enough money saved for retirement. There are many reasons for not being able to save money; emergency expenses, not making enough to cover basic necessities, high health care bills and so on.

No matter the reason, if you find yourself without retirement savings in your late ’40s, ’50s or beyond, believe it or not, there’s still hope.

It might not feel like it, but there are things you can do if you start now. Keep reading for some tips and tricks on how to start investing. It’s never too late.

The Hard Truth

The truth of the matter is, it’s not ideal to start investing this late in the game. But not ideal does not mean impossible. It won’t be easy, but if you start playing catch up now, financial independence is not out of reach.

The first step is to start trimming the fat. You need a bit of money saved up to start investing, so that’s the first thing to tackle. Get some money in that savings account.

Assess your current situation. If you can downsize, do it. If there’s a side-hustle that can start making you some extra money, get started. If there’s an old car in the garage that you never use, sell it.

This might be hard to hear. But if you haven’t already, don’t worry so much about sending your kids to college. They have the advantage of time on their side and are able to take out low-interest student loans.

It’s becoming less and less common for parents to fully pay for their children’s post-secondary education. If it’s going to wind up eating into your retirement fund, your kids will understand.

If you’re not contributing to a 401(k) through your employer. Ask them (and yourself) why not. Most employers offer the setup of a 401(k) and some will even match your contributions.

The Numbers

The maximum amount you’re legally allowed to contribute annually to a 401(k) is $17,000. That’s savings of just over $1400 a month. If you’re on a $45,000 salary that would work out to being roughly half of your monthly take-home.

While it might seem unfeasible to save half of your income, consider this. $17,000 per year at a 7% return over 15 years would turn into $1 million.

While a million does seem like a lot of money, experts say it’s roughly the amount you’ll need to live comfortably after retirement. Assuming you have no pension or other income streams working in your favor.

This is based on the 3 to 4 percent rule. Experts recommend using 3 to 4 percent of your investment portfolio each year after retirement. $1 million in the bank, spending $30,000 per year will buy you 33.33 years after retirement. That takes you from 65 to 98. Not bad.

We casually mentioned a 7% return. This won’t happen in a regular savings account. You’ll have to read up and become savvy in mutual funds and diversified portfolios. Hire a financial advisor if you can, it will help to get your head around it.

$17,000 a year invested in diversified portfolios and mutual funds when done right, can you get that sweet 7% return and have you laughing all the way to the bank. Do your research and get more details about the right trading options for you.

If there’s no way you can manage $17,000 a year, take a serious look at your finances and figure out what you can manage. It might mean skipping the annual vacation for a few years, but your future self will thank you.

The Takeaway: Start Investing NOW

No matter your age, the best advice out there is to start investing now. Every month that passes is an opportunity lost. Hire an investment specialist or do the research yourself.

Diversified portfolios and mutual funds could be your saving grace. Check out our blog for more tips and information on how to invest wisely in 2019. And best of luck to you.

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