Investing in your 50s – four top tips

When you’re in your 50s, it’s time to get serious about your investments.

With retirement getting closer, you need to make sure your money is working as hard as it should be, so that you can enjoy your retirement on your own terms.

 
Here are four tips for investing in your 50s.

1. Clarify your goals

‘Saving enough for retirement’ has probably been on your list of financial goals for a while, but this is the time to get a bit more specific. Knowing exactly how much you need to save for retirement will give you a concrete number to work towards. That number will depend on things like when you intend to retire and what you plan to do in retirement, as well as projected investment growth and inflation.

A financial adviser can demonstrate how long your savings are likely to last in retirement, so you can understand whether you need to adjust your goals or savings habits.

2. Review your investment portfolio

When you’re in your 50s and approaching retirement, it’s important to check that your investment portfolio has the right balance between risk and reward.

The amount of investment risk that’s right for you will partly depend on how you intend to fund your retirement, and how far away your target retirement date is.

If you’re planning to buy an annuity in a few years, it’s a good idea to start moving your pension fund away from stocks into lower-risk asset classes such as cash. The last thing you want is for a stock market crash to diminish your pension pot just before you need to use it to buy an annuity.

If you intend to fund your retirement via income drawdown and/or other savings and investments, moving into cash too soon could mean your money doesn’t last as long as you need it to. Retaining some exposure to stocks will give your portfolio the opportunity for long-term growth. After all, your retirement could last for several decades – over which time, inflation will eat into the real value of your savings and reduce your money’s purchasing power.

One way to mitigate against the impact of rising prices is to remain invested in the stock market – history shows that over long periods, it performs better than cash and above the rate of inflation. Spreading your money across a range of asset classes will help your portfolio weather any stock market fluctuations.

A financial adviser can recommend the right mix of assets for your individual circumstances, taking into account your investment time horizon and attitude to investment risk.

3. Focus on your pension

Pensions are an extremely efficient way of saving for retirement when you’re in your 50s. This is because of the tax relief you receive on personal pension contributions. It means a £1,000 pension contribution costs just £800 if you’re a basic-rate taxpayer, £600 if you’re a higher-rate taxpayer, or £550 if you’re an additional-rate taxpayer. Tax relief is essentially free money from the government, and it can really help to supercharge your retirement savings.

Most people can contribute up to 100% of their UK relevant earnings or £60,000 (whichever is lower) into pensions each year while still benefiting from tax relief, right up until age 75. Bear in mind that your pension annual allowance  could be lower than this if you earn a very high income. If you want to save more than your annual allowance, it might be possible to maximise unused allowances from the previous three tax years under carry forward rules.

4. Make the most of your tax allowances

There are a whole host of other tax allowances to take advantage of as an investor. For example, you can invest up to a maximum of £20,000 a year into ISAs to benefit from tax-efficient income and growth. You can withdraw money from ISAs whenever you like without paying tax; this makes them a useful source of income for those retiring before age 55 (that’s currently the earliest age at which you can access your pension) as well as an important part of a tax-efficient retirement income portfolio. 

Other allowances to consider include the personal savings allowance, dividend allowance and capital gains tax exemption. These enable you to receive tax-free interest of up to £1,000 (depending on your marginal rate of income tax), tax-free dividends of up to £500 and tax-free investment gains of up to £3,000 in the 2024/25 tax year.

A financial adviser can help you make the most of your allowances and structure your portfolio in the most tax-efficient way possible.

Next steps

The way you invest in your 50s could make a huge difference to your quality of life in retirement. While there’s still time to boost your retirement savings, a seemingly simple mistake could knock your plans off course. That’s where getting some financial advice comes in. A financial adviser will check your portfolio suits your individual circumstances and that you’re on track for the retirement you desire.

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy.