How to invest in your 60s

Even if you’ve spent your working life saving for retirement, investing into your 60s can still be an excellent way to shore up  your later life finances.

It can help grow your retirement savings, allowing you to pay off debt or boost your living standards in later life.

But what should you be investing in, and what should your financial priorities be?  

Here’s our guide to everything you need to know about investing in your 60s. 

Why should you invest in your 60s?

Is it worth investing if you’re nearing retirement? The answer is yes!

Whether you’ve already planned out your retirement funds or are still building them, making the right investments can really boost your long-term retirement finances.

Both before and during retirement, you need your pension to keep pace with inflation, and that’s where investing comes in.

Although investments can fluctuate in value, they tend to grow more than cash and beat inflation over time. 

Although stock market performance is never guaranteed, over longer time periods your investments should grow.

There is a snowball effect over time, known as investment compounding (where your returns are reinvested and start earning their own returns). This means that the sooner you are able to invest, the more time you have for your investments to grow.  

It’s also worth thinking about your attitude towards investment risk, as this may affect your  decisions.

A financial adviser can really help here - they can analyse your circumstances and risk profile to help you plan your investments.

Deciding your financial priorities 

Although investing in your 60s can make sense, it’s important to look at the bigger picture and think about your overall financial priorities. 

1. Clear outstanding debt 

It’s a good idea to pay off any outstanding debts, before you pay more into investments.

Start with the debts with the highest interest rates, like credit cards.

By clearing these debts, you’ll no longer need to budget for repayments and will have more disposable income. 

2. Achieve your financial goals 

If you have financial goals, such as paying off a mortgage, now is the time to prioritise them.  

Whatever your plans are for retirement, your pension income is unlikely to match your working income, so it will be harder to achieve any outstanding financial goals once you’re no longer earning.

3. Top up your savings

If you don’t have a dedicated rainy-day fund, now is the time to get started. 

Having an emergency savings pot will make it easier to manage your pension income in retirement as you won’t need to dip into your pot to cover extra emergencies.

Don’t forget that interest rates vary significantly between providers, so it’s worth shopping around for the best rates.

4. Top up your pension pots 

Finally, one of the most important things you can do is to pay more into your pension.

This is a really sensible way of investing at this stage of life because you’ll get tax-relief on contributions (equivalent to the rate of tax that you pay).

With not long to go until you can access your state pension, a shortfall in your pension income can impact your retirement planning, and it’s never too late to top up or start your pension.  

Although strictly speaking, pensions are a type of investment, we’ve counted them separately here. They’re often slightly easier to manage than stand-alone investments. Most workplace schemes have a default fund where you won’t have to make your own investment decisions.

If you have spare cash - for example you have received a windfall like a bonus or an inheritance -  then you may decide to max out your pension contributions.

Most people can pay 100% of their earnings into their pension and get tax relief on contributions, up to a maximum of £60,000 a year.

If you’re lucky enough to be able to contribute more than £60,000, you may be able to pay in more as you can carry forward any unused pension allowance in the last three years, using carry forward rules.

Just note that if you have already made a taxable withdrawal from your pension, which you can do at any time from age 55 (rising to 57 in 2028), your allowance will be reduced to £10,000 a year. This is the Money Purchase Annual Allowance.

Try our pension calculator to see how much extra you could enjoy in retirement by increasing your contributions.

What should you invest in? 

If you’re finding that you don’t quite have the savings you hoped for, it may be worth considering investing in a stocks and shares ISA alongside your pension.

As ISA withdrawals are tax-free this could be a great way of topping up your taxable income in retirement.

As you approach or enter retirement, it’s especially important to think about your investment risk.

In general, riskier assets fluctuate more in value over time, which can cause problems if you need to cash them in at a low point.

If you’re looking to make investments and are worried about losses, consider lower-risk options, such as: 

1. Bonds 

As you get older, it’s important to ensure you have a steady income.

Bonds or gilts are among the safest investments you can make, and though they won’t create significant returns, they will return your principal investment with some interest. 

You have a couple of options. One of the simplest ways to buy a bond is through a bond fund, or you can buy an individual bond or gilt.

Or you could choose a money market fund that invests in a range of short-term gilts. Money market funds tend to fluctuate less than other bond funds and can offer returns similar to a high-interest savings account.

There are many different types of bonds, including corporate bonds and government bonds, known as gilts.

2. Equity funds of ETFs 

Investing some money into a fund or an exchange-traded fund (ETF) could be an easy way of adding passive income to your portfolio. 

Although index funds aren’t necessarily low risk, they can be a great option as part of a balanced portfolio. 

An index fund invests in a range of shares - it aims to match the performance of a whole index like the FTSE 100.

This means your investment is more diversified than buying individual shares - if one company underperforms, this is often offset by the performance of other companies.

Some funds and ETFs will be riskier than others, so it’s important to choose ones that match your attitude to risk.

3. Multi-asset fund

Multi-asset funds are another easy option for older investors. They allow you to blend different types of investments within one fund, giving you a ready-made portfolio to match your investing risk.

For example, a 60:40 fund invests 60% in equities and 40% in bonds. Higher risk funds might invest 80% in equities and just 20% in bonds.

Keeping a balance of equities and bonds in your portfolio can give you the best of both worlds - the growth potential of equities alongside the slow and steady growth of bonds.

Consider an investment platform 

If you’re looking to invest, there are various online platforms that offer access to a broad range of UK and overseas investments (like shares, funds and ETFs)  from as little as £25 a month.

You can choose to hold your investments stocks and shares ISAs or SIPPs.

You can also consider general investment accounts if you have used up your ISA allowance and don’t want to tie money up in a pension, just note that if you do, your investments could become subject to tax.

Investing before retirement 

Investing as you approach retirement can be tricky, as you will need to plan to start withdrawing money from your pension soon.

Making the right decisions now will maximise your returns in retirement - helping set you up for a comfortable retirement.

To get advice based on your personal circumstances, speak to a qualified financial adviser via Unbiased.