Is It Ever Too Late to Invest in the Stock Market?
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I’ve shared before about how I got to speak with people at various stages of their investing lives. Many of those situations were unique and would often require specific action, though the ones that always seemed to be more difficult were those who believed it was too late to invest in the stock market.
As an aside, by too late to invest, I am not meaning in terms of where the stock market is at a certain point in time, but in terms of if it’s too late to invest for the specific individual. Additionally, investing goes beyond just being in the stock market, so it’s certainly possible that you’re fine and not in the stock market much, but many individuals I spoke with had put investing off for one reason or another and coming to grips with the fact that retirement was a comin’ and they needed to get serious about it.
With that in mind, I thought this was a perfect topic for my How to Invest in Stocks series. If you’re looking for more posts in the series, you can check a few of them out below:
- How to Invest in the Stock Market with Little Money
- Is Investing in the Stock Market Really That Easy?
- How to Invest in Stocks When You Don’t Know Where to Start
- Putting Time on Your Side: How to Start Investing in Your 20s
- Investing in Stocks: Are You a Trader or Investor?
You’ll get Nowhere Quick By not Starting
Many that I got to speak with felt that time had simply passed them by and that it was too late for them to invest in the stock market. Truthfully, it is better to start investing the younger you are as time is one of the biggest, if not THE biggest, tools to grow your investments. However, that does not mean that because you may be in your 40s or early 50s that it’s too late to start investing in the stock market.
That said, don’t allow this feeling to hold you back, but get started as we all have to start somewhere. Hopefully you at least have something built up in your 401k as many I spoke with did, and if so then you’re off to a somewhat decent start.
With that in mind, what are some things you should do if you see the need to start investing?
Start with a 401k if You have one: This is generally the best place to start as you begin to ramp up your investing. For 2013 and 2014 the contribution limits are $17,500 and if you’re over 50 you’re eligible for a catch up contribution of $5,500. The employer contribution doesn’t count towards that limit, so take advantage of all the free money you can. Keep in mind though, that the combined contribution limit is $51,000. That said, start with your 401k and look for the lowest funds possible.
Open an IRA: After you hammer out your plan for your 401k, opening an IRA should generally be your next step. It is important to point out that you may be limited in your ability to make a tax-deferred contribution. That said, you should speak with a tax advisor to see what your options are for funding an IRA and get started on it. Don’t allow the possibilities to hold you back, but simply get started investing.
Educate yourself and keep it simple: This, perhaps, should be at the top. Many that I spoke with felt that it was too late to invest because they did not know what they were doing. Investing can be overwhelming. Don’t allow that to hold you back.
There are many free educations options out there, you just have to look for them. Many 401k plans and online brokerages offer free education. Take advantage of it and you’ll likely find something as simple as investing in solid index funds are among your best bets.
If you’re looking for a quality online brokerage, check out my Etrade review of why they may be a great fit for you.
What Else is on Your Plate?
Many of those I spoke with felt like it was too late to invest as they had things like debt and children going to college that were holding them back. That is perfectly understandable and I’m not criticizing any of those situations as we all have different things on our plates that throw a wrench at life.
That said, there does come a point in time where it’s important to take stock of where you’re at and analyze your priorities. There is an ongoing debate over paying off debt vs. investing in the stock market and the key takeaway is that each situation is different and you have to do what’s best for you. If you’re dealing with debt, my encouragement to you is to get that knocked out as soon as possible and throw all that money towards saving for retirement.
There is also the saving for college and retirement planning debate, which is largely a personal decision. While it can be argued that you do have a responsibility to your children, you also have to remember that there are no loans for retirement.
The final big issue I often counseled individuals with was what does your financial life look like in terms of spending? What kind of lifestyle are you living? What is going on financially each month? More than a few people I spoke with were saddened to confess it was too late to invest because they had gotten use to a certain lifestyle and were frittering away their hard earned money on stuff as opposed to investing it for the long run.
Don’t Hold Yourself Back – It’s Never Too Late to Invest
Going back to the beginning, time is generally the greatest ally to your investing and growing wealth. With that in mind, it is also never too late to invest regardless of the age you are. Yes, you generally don’t have the benefit of many decades to grow your wealth, but you can still do some positive things that’ll help you in retirement.
Let’s face it, we all make mistakes. I know for certain that I am guilty of making them in my personal life and still kick myself for waiting so long to begin investing in the stock market, but don’t allow those mistakes to compound and become bigger. If you feel that it’s too late to invest in the stock market, then it could be argued that’s the perfect time to get started as you see something is amiss. With that in mind, take a look at what you’re wanting in retirement, establish an investment plan for yourself and start working towards your goal.
Do you ever think it’s too late to invest in the stock market, or investing period? What one tip would you give to someone who has waited too long to start investing? For those wondering about our trip to Vegas last week…it was a blast! I’ll have a post on Friday sharing some of the fun details. 🙂
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.