Advice if You Started Investing Later in Life?

Dave gets this question all the time: “What financial advice do you have for people who started investing later in life?”. Hear his answer from our “Office Hours” podcast in this clip.

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So thrilled that you called in. What question can I help you with?

My question was, um, we had, three kids, busy years. We didn’t have a lot of extra money to invest in our child-rearing years. And, um, just wanted to know if you had any advice for, we’re in our fifties. My husband’s late fifties.

I’m early, mid fifties. And, if you had any advice for us latelies?

Well, it’s a great question. Again, it’s one I get a fair amount. First off, I always said only have two kids. Joanne, you blew that one. You had that third, so, okay. We can’t do anything about that now though. That that’s just the way it is. We can’t do anything about that now. So, I mean, I’m gonna give you a hard to hear answer in some ways.

Time is your greatest asset when it comes to financial planning, saving, et cetera, because it lets you take advantage of, in the most powerful concept out there, compounding. Those two things walk hand in hand to create the kind of wealth you often need in retirement. So when you get started late, it’s tough.

Even if you raise your savings rate dramatically, it’s difficult because you’ve lost all those years of compounding. Probably the most important thing I have to drive home, and it’s not often well received by people on the other end of the line, is you probably have to work longer. Because if you work longer, a lot of good things happen.

A) You’re earning more money and therefore you can save more money. B) You don’t start the drawdown for a number of years. You’ve delayed that. That’s absolutely key. It gives your pool of capital longer to grow. But the third thing is precisely because you are working longer, that early savings year in your fifties, you may have enough time, the 10 to 15 years to put that in more aggressive investments

that could give you better returns. Now again, you need to get specific advice on that from a good planner/advisor, but I think that’s the first thing I wanna say. If you didn’t get off to a good start and you’re a little behind the eight ball, often working longer is something you have to do.

Okay. All right. So you don’t have any super secret, short term, high return. Uh.

No, if I had any really short-term low-risk, high-return investments, I wouldn’t even share them with you. I would keep them for myself because I, I wouldn’t wanna spoil them by having everybody rush into them. No, unfortunately there are no magical answers. There really aren’t, again, going back to talking about working a little bit longer.

The other thing I’ve seen some very prudent people do is, they get accustomed during those years of working to cutting back their expenses a bit. They get accustomed to trying to deal with a little bit less, going out less frequently, and so on and so forth. And so they control their spending a little bit, which obviously is as important as keeping a fairly good income.

So none of these are fun necessarily, but they’re things you have to do to make the math work.

Right. Okay.

Okay. Thanks for calling in.

All right. Thank you.