Is it too late to invest your money?
You might think it’s too late for your parents or grandparents to invest their money when they reach a certain age, but this isn’t the case. Here’s why…
It’s never too late for an older person to invest their money, and it can actually be beneficial for them to do it.
There are lots of reasons to invest your money when you’re older, and just as many ways to do it. This post will share those reasons with you, and leave the most important investment funds explained along the way. Take a look…
Why to Invest Your Money When You’re Older
When you’re an older person, investing your money might seem like a lost cause, but there are actually lots of reasons to start now. Here are some of the main reasons to invest your money as an older person:
1. You may live longer than you expect
Lots of people think that, once they reach retirement age, they should focus on preserving their assets instead of growing them. This is often comes from the feeling that their life won’t last much longer so what’s the point in making any more money?
The reality is, lots of retirees will need their money for 30 years or more, and the money they have won’t stretch that far. Investing your money will allow older people to stretch it as far as possible. A £100,000 nest egg that would only last a few years could work for itself and make excess to live off of for many years to come.
2. Many investments are safe
Some people view investments as risky and volatile, but this isn’t always the case. Stocks can be very common and useful investments that rarely lose money.
For example, dividend stocks generate income for the investor but tend not to rise and fall dramatically, which makes them perfect for older investors. Also, some industries are safer than others, such as consumer goods, that offer steady returns with very low risk.
3. Have some money to pass on
Having enough money to make it to the end of your life is one thing, but what about the people who come after you? Your parent or grandparent could use the money they’ve accumulated up until now to invest and live off the excess.
If their nest egg stays intact and they live off the money their investments make, they can leave more money to their children and grandchildren. Making sure their family is taken care of once they’re gone is a final comfort for a parent or grandparent at the end of their life.
How Do You Invest Your Money When You’re Older?
Now that we know why you might want to invest your money if you’re older, it’s time to tell you how your older relatives can invest their money.
1. Play it safe
As we mentioned in the last section, there are certain investments your older relatives can make that will ensure their money doesn’t get lost on the stock market.
If your relative invests in high-risk assets and they perform badly, they might not have the time to claw back their assets. They will have less time to ride out short-term market volatility. Stocks can be very common and useful investments for those who have a longer investment horizon and can afford to take on more risk in pursuit of higher potential returns.
Preservation of capital and income are more important than growth when you’re older. So, you should invest your money in a way that gives you enough excess to live on, but not so risky that it grows your capital.
It’s best to stay away from fad stocks like cryptocurrencies and cannabis, and stick with tried and tested investments that retirees have been using for a long time.
2. Capital vs Income
The ‘capital versus income’ question is the main one to focus on. You need to strike the perfect balance between capital preservation and income. As we’ve said, it’s best to focus on preserving your nest egg instead of growing it when you’re in your older years.
If your older relative has a large retirement portfolio, they can live off dividends and interest without eroding any of their capital. To accomplish this, they need to balance different investments that generate income, offer capital protection, and appreciate in capital value.
Focus on the total return of an investment fund or portfolio and structure withdrawals according to your relative’s requirements. Review this regularly with a cash flow planning exercise to make sure the strategy is sustainable.
One thing to make sure when you invest your money, or that of a relative, is to set aside sufficient capital reserves for the first few years in case you don’t get the returns you expect due to market conditions and other factors.
3. Work a little longer and live frugally
If your relative has managed to make it this far in life and not saved any money, they need to assess whether they can go on working for a little longer.
It doesn’t take long to save money for retirement investment once they make the decision to do so. Getting started late doesn’t mean they can’t save enough money to invest, as long as they’re willing to work a little longer to save that money.
Whilst they’re putting in those extra few years, convince them to live frugally and scrape together every penny they can. Relocating to a cheaper area or living in a cheaper house could save them money on monthly expenses and give them a lump sum of cash.
Cutting back on dinners and extravagant spending will also help your older relatives put enough money away to invest in future. Living frugally for a few years could be all they need to set them up for a more comfortable retirement.
Investing When You Get Older is Possible
In this post, we’ve done our best to convince you that it’s never too late to invest your money. There are good reasons for doing it and, as long as you know how, there’s no reason not to.
Speak to your older friend or relative and share what you’ve read here today with them. It might appear complicated at first but, once you understand how to invest money and balance capital and income, their retirement will be that much easier.