How to invest in your 50s: 6 smart strategies for retirement

By the time you hit your 50s, you should have a good idea of where you stand financially, and hopefully have a decent-sized pension pot. 

But your 50s can also be a time when your expenses start rising. You might be paying for children to go to university or taking time out of work to care for an older relative.

These responsibilities, along with the need to save for retirement, can feel daunting.

We’ll reveal some tips for how to make the most of your money when you invest in your 50s. 

1. Figure out your financial priorities 

Before you decide how to invest your savings, it’s worth thinking about your immediate financial priorities. 

First, look at any debt you may have and consider clearing that first.

The quicker you clear your debt, the less you’ll pay in interest.

If the interest you’re paying on your debt exceeds the return on savings or investments, clearing your debt off first is a no-brainer.  

If you’ve got the option to make overpayments on your mortgage without incurring a penalty, that’s also worth considering. 

Many mortgages will now let you pay 10% of your outstanding loan off each year, without charging a fee.

2. Build a ‘rainy-day’ fund 

It’s generally recommended you set aside three to six months’ worth of expenses in case of emergencies.

This can help cover the cost of surprise bills or a change of circumstances, whether that’s redundancy or a period of ill health.

Look for an easy access savings account without withdrawal restrictions and shop around for the highest rate possible.

3. Don’t neglect your pension 

If you’re in your late 50s, you’ll no doubt be starting to think about retirement.

This means it’s important to review your pensions and work out whether you’re likely to have saved enough for the retirement you want.

If it’s looking like you won’t have enough for your ideal retirement, you should prioritise paying into your pension. 

Pensions are a great way to invest, thanks to generous tax relief which gives your pension a free boost from the government. 

This is equivalent to the rate of income tax that you pay.

So, if you’re a basic rate taxpayer, you will receive £25 on top for every £100 you contribute. It’s an even better deal for higher-rate taxpayers who receive £67 on top for a £100 contribution.

Using a pension will also protect your wealth from capital gains tax (CGT), which is charged on investments held outside a pension or ISA.

You might also want to consider a Self-Invested Personal Pension (SIPP), so you have more control as you approach  and enter retirement. 

If you contribute to a SIPP, you’ll get a choice between thousands of investments, which can feel overwhelming, but many providers offer ready-start funds which are based on your risk appetite and financial circumstances.

You should also get access to the full range of retirement income options which may not be available with some pensions.

You can access a SIPP from the age of 55 (rising to 57 from 2028).

If you wish, you can also use a SIPP to consolidate other pensions you might have. 

However, it’s important to keep your current workplace pension, to make the most of contributions from your employer.

4. Limiting risk 

You might already be a seasoned investor with a healthy investment portfolio, but it’s worth reviewing your investments to make sure that they still align with your financial goals. 

Maintaining a diverse investment portfolio should remain a priority as you approach retirement to limit your exposure to risk.

That means spreading your investments across asset classes, varying the size of companies you invest in and choosing a mix of companies across established and emerging markets.  

As you get closer to retirement, you can move some of your portfolio to lower-risk investments, if you wish.

For example, by increasing your exposure to bonds, you can protect your capital and receive an income.

However, the degree of de-risking you use, should depend on whether you plan to use your pension to buy an annuity or use drawdown (where your funds will remain invested).

If you want an annuity it makes sense to safeguard your pot and shield it from stock market shocks in the run up to retirement.

But if you decide to remain invested, you may benefit from further growth and may not want to take all risk off the table.

A financial adviser can help you strike the right balance.

5. Prioritise income over growth 

While a diverse portfolio is essential, a general rule of thumb is to choose investments that prioritise income rather than capital growth.  

Income-focused funds and exchange-traded funds (ETFs) are designed to generate an income by investing in companies that pay regular dividends.

These dividends can then be reinvested (for growth) or used to provide a regular income in retirement.

6. Consider an index or exchange-traded fund (ETF) 

Index-funds or index ETFs can be a simple way to diversify your portfolio. They invest in a wide range of shares and aim to match the performance of a whole stock-market index.

This is more cost-effective, lower risk and less time-consuming than building a portfolio of shares yourself.

Index-linked funds will never beat the index, but they are cheaper and often achieve better or equivalent returns to actively managed options.

An experienced financial adviser can advise you on the best funds to choose from.

Learn more: what's the difference between ETFs and index funds?

Get expert investment advice 

It makes sense to keep reassessing your risk profile and financial needs as you approach retirement.

Depending on your situation, that might mean moving your investments into bonds, prioritising your pension or boosting your rainy-day fund. 

For tailored advice on getting more from your money in your 50s, Unbiased can connect you with a qualified financial adviser near you.

Tell us more about your current situation and financial goals, and we’ll match you with an adviser who can help.