I only started investing in my 40s/50s

i've had hundreds of comments from viewers in their 40s and 50s who've recently discovered investing but they're worried that they've left it too late they feel like they've missed the boat and there's not enough time to catch up so much so that they're wondering if they should just give up now and spend any extra money that they do have because their retirement is ruined anyway this narrative needs to stop in this video i'm going to show you why you are not behind and how with a bit of discipline you can get yourself to where you want to be [Music] hello and welcome back to the channel if you're new here hi my name is james i'm a financial planner and this is a place where you can learn to make smarter financial decisions one of the first videos i ever made was called eight rules for investing in your 20s and 30s and that video has actually got the highest ratio of comments to views of any video i've put out with most of those comments coming from older people who are saying that they wish they had started investing sooner and what triggered those comments was an example that i used to demonstrate the power of compound growth and i'm going to show you that example again now we were looking at two people that had started investing at different ages first we have alice that starts investing at age 20 investing 5 000 pounds a year until she's 30. she then keeps this money invested until she's 60 years old but doesn't add anything to it after those first 10 years of savings so in total she invested 50 000 pounds and then we have ben that starts investing when he's 30 years old again investing 5 000 pounds a year but he then keeps on investing every single year until he's 60 years old and over that full 30-year period he would have invested a total of 150 000 pounds now they both invested their money in the same global index fund that achieved returns of seven percent a year on average now the question is which one of these two do you think ended up with the most money at age 60 well these were the results it's pretty shocking even though alice was only saving for 10 years she ended up with almost a hundred thousand pounds more than ben at age 60. now if you're in your 20s you're probably looking at this thinking damn i really need to get onto this and start saving more and if you're older than alice or potentially even older than ben you're probably thinking you've left this too late and you're screwed hence why i got those comments on the video but you're both wrong i like showing these examples because it shows you how powerful things like compound growth are and why it is so important to start thinking about this stuff early it's supposed to be motivating but this type of content often has the opposite effect as an analogy think about the huge number of fitness bloggers you now find on youtube instagram and tick tock all putting out great educational content that's meant to get you motivated and feeling good about your body but often it has the opposite effect it makes us feel inadequate and we lose track of what a normal dad bod looks like well the same thing happens with content like this it can be demoralizing every week i speak to people that are in their 40s and 50s people that have still got kids at home and they still don't have a huge amount of disposable income but they have been steadily paying off their mortgage and making pension contributions along the way these are people that have noticed that retirement is rapidly approaching so they've started to research online what it is they need to do to get themselves back on track and as they're going about it they've come across examples like alice and ben and other posts on reddit about software engineers saving 50 of their income and other posts from people that have been able to retire at the age of 40. and when they get on the phone with me they say james like i feel embarrassed i'm so far behind is there any point and i say what are you talking about you are totally normal you've built up some great equity in your home the cost of your kids are starting to fall away you've matured in your career and you're finally getting to a place where you can start to save you are normal examples like alice are not and although it's cool to see what you could have done and read about things that other people have done it often ends up setting unrealistic saving expectations especially when you're young and whether you're in your 20s or 40s or 60s and you're sitting here watching this video educating yourself about investing and equipping yourself for the future you need to remember that you are way ahead of everyone else that's your age yes it would have been great if you'd started earlier but you need to stop looking backwards because you can't change that you also need to stop looking around you and comparing yourself with others i imagine some of you are looking at this example and thinking gosh i feel like ben i'm behind but wait a minute ben is absolutely smashing it it's only because we're comparing him with alice that he looks behind it's like when you're driving along the motorway and somebody else comes speeding along past you and all you're focused on is how much faster they're going than you but you forget about the fact that you're already bombing along at 70 miles an hour you need to stop looking backwards and grumbling about the mistakes that you've made you need to stop looking around you and comparing yourself with other people look forwards concentrate on your own race because you are the only one that you are competing against now i often get questions from people in their 50s asking whether it's too late to start investing and the answer is always no never let's just look at ben at 50 years old he had 220 000 pounds which is not bad at all but he then keeps on investing 5 000 pounds a year through his 50s and he more than doubles the size of his retirement pot in 10 years in reality if he was actually able to save 5000 pounds a year from the time he was 30 he'd probably actually be able to save a hell of a lot more by the time he gets to his 50s if you're in your 50s you're probably earning more than you ever have before the cost of children have gone you've pretty much paid off your mortgage and suddenly you find you have the capacity to save a huge amount your 50s is often where the magic happens we also need to remember that ben's money will not stop being invested at 60 when he retires he will start to draw an income from it but the vast majority of that will remain invested for much longer potentially even 30 or 40 years so if you're 50 years old your investment horizon is not 10 years it's more like 50. people also ask whether there's any point paying into a pension if you're in your 50s or 60s and the answer is again yes pensions should be your main tool for building wealth later on in life you get tax relief on the money that you put into a pension it then grows free of income and capital gains tax you can then draw 25 of that out tax-free and the rest will be taxed at your marginal income tax rate in retirement which is likely to be less than you're paying now the only downside literally the only downside to a pension is that you can't access them until you're 55 but you're already there so that's not a problem at all on that original video that i made talking about how you should be investing in your 20s and 30s i got a lot of comments from people asking for specific content about how they should be investing in their 40s and 50s and to be honest guys there's not much difference at all the strategies that you should be following in your 20s and 30s are exactly the same as you should be following in your 40s and 50s it's really not as different as you might think now i know you're probably sitting there watching this video on your own perhaps feeling a little isolated you're thinking about this uphill battle that you're going to have to fight on your own but you need to remember that you are not alone this is the demographic of my viewers and as you can see it's quite a bit older than you might expect almost half of you are over 45 and as you can see from the results of a recent poll i did over 50 percent of you that are in your 40s or 50s only started investing in the last five years you are not alone but i know that seeing stats on a screen like this does not bring to life the fact that there are literally hundreds of people just like you watching this video right now so to bring this community to life if you do have a question or perhaps you have a story to tell i would love to hear about your journey so please do leave a comment down below because it's your comments that make other people realize that they are not alone and that we're actually all in this together now as i said before when you do finally retire your investing journey does not stop there in fact you're probably only about halfway through you now need to keep your money invested and try and maximize the income that you can draw from it which is why you should now watch this video here where i talk you through the three simple steps that you need to follow to maximize your income in retirement i'll see you there

Channel: James Shack

Views: 111,209

Keywords: retirement planning, retirement income, how much do i need to retire, investing for beginners, retirement uk, pensions explained

Id: 60qB-CFiE_w

Length: 9min 43sec (583 seconds)

Published: Sun Feb 06 2022