Note: This post was first published in March 2021 and updated in November 2022
Earlier this year, I updated my detailed guide on how to build wealth in your 40s.
Admittedly, I went over my skis a little bit – given that I am just north of the 40 mark myself.
That being said, the reader reaction was quite overwhelming.
In both comments and personal emails, I’ve had numerous folks reaching out to thank me for addressing an often-overlooked topic.
For some reason, wealth-building strategies for middle-aged folks don’t seem to get a lot of airtime in the personal finance space.
What gives? If anything, building wealth becomes more important as we move into our 40s and 50s, not less.
On this blog, about 20% of the readers are 50+ years old (yes, google does collect this data on you).
Every month, that adds up to more than 5,000 readers and hence, I long wanted to cover off some of the key points around building wealth in middle age.
Now, what I am not going to do here is give you cookie-cutter advice like “pay off your debt” or “start saving money”.
You already know you need to do that, don’t you?
And if you don’t, there are about a million articles on the web that cover the basics already.
Also, as I don’t like to rehash content on this blog, I will assume that you have read this and this .
The advice below will be largely incremental.
With that in mind, let’s dive in.
Eight Rules For Building Wealth In Your 50s
#1: Remember – It’s Possible
This might be the most important step of all.
What’s it like to be 50 years old?
I suppose it might be terrifying and electrifying at the same time.
Ask a thirty-year-old and they’ll tell you they would be devastated to wake up tomorrow and realize they are 50.
Ask a seventy-year-old and it would be a dream come true.
As they say, life is all about perspective.
The point is that given the ever-increasing life expectancy these days, being 50 gives you a massively long runway of at least 30+ years to build wealth and enjoy life.
And there’s a ton you can do in 30 years.
For example, you can lose your job in just 10 years – and retire well ahead of the “official” retirement age which is now pushing 70 in most countries:
And you’ve got plenty of time to become a millionaire – provided you have the right risk tolerance and earning power:
#2: Perform A Ruthless Audit
You need to take stock of where you are.
Yes, there’s the monetary aspect – your assets, liabilities, and net worth.
You should also have a good grasp on your savings rate, where your money is invested today, how quickly it is compounding, and whether investment fees are slowly killing your dreams.
More importantly, however, is the “second-order” analysis, which means answering the questions below:
- When would you like to retire?
- Once you do retire, what is your ideal retirement lifestyle? Will you stay put or move abroad?
- If you are staying put, is downsizing an option?
- What are your family dynamics? How much support (if any) do your children and parents need?
- How is your health? Any significant problems you need to be mindful of down the road?
- What are your employment prospects? Is there earnings upside you are not capturing? Perhaps even more importantly, is there downside you need to protect against? (more on this below)
These are the “big ticket” items that will really move the needle when it comes to your financial outcomes.
Thinking them through will be critical in helping you formulate a clear and effective strategy to build wealth in your 50s.
#3: Remember Your Oxygen Mask
At this point in time, you might no longer be caring for your parents (but if they are still around, count your blessings).
However, it is also likely that your children have the biggest financial needs.
Whether it’s paying for college or helping them buy their first house, large-ticket financial outlays loom large.
It’s highly intuitive to de-prioritize your own financial planning to help your kids get the best start in life.
However, if you haven’t yet sorted your own situation, it is critical that you pause and reflect.
Do they really need that expensive college education?
If so, can they finance it with some combination of loans and living at home?
And is their degree really so intense that it doesn’t allow for any part-time work?
Just how critical is it for them to get on the housing ladder right now? I mean, no one ever died from renting a place for a while, did they?
As great as our kids may be, having to foot the bill has a funny way of crystallizing the decision-making process.
Besides, you are not exactly leaving them hanging.
Chances are, you’ve made a ton of sacrifices for them already.
By looking out for yourself, you are also saving them the hassle of having to support you financially in old age.
And it’s likely they’ll get whatever is left over once we all pass on (more on this below).
#4: De-risk Your Employment
If you are in your 50s, the biggest risk to your retirement planning has nothing to do with market returns or asset allocation.
As we’ve all realised over the past year, market returns are outside of your control. And as I am 100% sure we will realize soon enough, they tend to work out well over time.
And asset allocation is pretty straightforward.
The biggest challenge for you, especially in today’s environment, is actually keeping your job over the next 10-15 years.
No one talks about it, but ageism is a sad reality. Have a look around – how many 65-year-olds do you see in your workplace?
Time and again, I’ve seen people in my social circle (including some close relatives) slowly “managed out” by their employer.
It’s a ruthless, unfair, and heartbreaking process, and you want to make sure it doesn’t happen to you.
The best way to manage this risk is to actually work for a company that doesn’t have a track record of managing out older employees and replacing them with college grads at a fraction of the “price”.
Alternatively, you may want to maneuver yourself into a role whereby getting rid of you would be very expensive, by way of a sizeable redundancy or severance payment.
This way, if you do get managed out, there will be a healthy payoff to help you land on your feet.
If you are in a front-office role, it’s all about cornering important client relationships. It’s very hard for a younger person to replicate the personal connections and trust you’ve built up over 30+ years.
If you are in the middle or back-office, it’s about being the only person to understand how critical systems/processes work, or simply knowing where all the bodies are buried.
Whatever you do, just make sure you have a plan.
If you get the boot in your late 50s / early 60s, lining up another gig (at the same pay level) might be nigh impossible.
#5: Don’t Shy Away From Risk
This one is simple.
If you are in great financial shape and will be retiring over the next 3-5 years, you may want to give your portfolio a more conservative tilt.
But if you need to build wealth aggressively, now is not the time to shy away from the stock market – and the current downturn presents a fantastic opportunity to lean in.
You still have 10-15 years before retirement. Avoiding the stock market is pretty much a guaranteed way to work into old age:
#6: Max Out Tax-Advantaged Accounts
This is the only piece of “classic” personal finance advice I will give you.
The advantage of being much closer to retirement is that the government doesn’t have nearly as much time to move the goalposts on you:
- You have full clarity on the state retirement age
- You should have a decent sense of how much of a government pension you will get
- Correspondingly, you can manage your workplace pension with a much higher degree of precision
Remember that in your 50s, you are no longer “locking” your money away for multiple decades.
Instead, you can access it in just a couple of years, allowing for a near-instant crystallization of the tax breaks.
#7: Focus On Estate Planning
Estate planning cuts both ways.
There’s minimizing the tax liability on the inheritance you will pass on to your children.
However, you may also be on the receiving end of an inheritance – and it could be a massive contributor to your own nest egg.
There’s nothing crass about it. Passing money to our children is a natural part of life.
What isn’t natural is unnecessarily losing a big chunk of it to taxes.
If you can, have “the conversation” with your parents before it’s too late.
Then, make sure you reciprocate – and have the same conversation with your children.
Fair, square, and value-maximizing to everyone involved.
#8: Go Easy On Yourself
The one recurring theme in some of the reader emails is regret.
Windfalls frittered away.
Investments gone south.
“Ahh, if only I had done [A], [B], or [C] 20 years ago.”
Now, reflection is important. It allows us to learn from our mistakes and make better decisions going forward.
Equally, show me a person who didn’t make a bad decision in their life and I’ll show you someone who hasn’t lived.
Remember, obsessing over what happened in the past isn’t productive. Focusing on the future is.
So bring on the middle age – and happy wealth-building!
About Banker On Fire
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
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27 thoughts on “Never Too Late: How To Build Wealth In Your 50s”
Really insightful article and shows it’s never too late. I’d say for someone mid 50’s with minimal savings / pensions then being at a point where mortgage is paid off, no debt and in a position to retire early (and reasonably comfortably) then that’s probably enough. And you don’t need a high salary to achieve that
Agree. Provided you are not digging yourself out of a deep hole (or making it deeper still), there are plenty of levers to pull to juice the net worth in a substantial way.
Great article as usual. From my also under 40 perspective I would say that there’s no reason for anyone in their 50s to not give themselves a serious audit.
You are likely earning a lot of money by this point in your career and even though you’ve amassed a lot of other financial obligations from kids to parents if you ruthlessly cut things out downsize etc. the ability to build wealth quickly is there.
My in-laws are a perfect example. As empty-nesters they both easily made six figures. This would’ve been a recipe for them to save up a lot of money downsize and retire within 10 years by the time they were 60. However they didn’t. They expand their lifestyle they went on more extravagant vacations and they bought a bigger house they didn’t need. Don’t be my in-laws. Do the opposite!
Yeah, I’ve seen that story play out quite a few times in my social circle as well.
Bottom line is that most folks will start their 50s in a decent financial position and plenty of earning potential. It’s what you do with it that determines the ultimate outcome…
Excellent insight, for any age!
Glad you enjoyed it!
As regards de-risking your employment goes, the key issue here was always referred to as The Gap. The person who has been managed out of their job has a respectably sized pension fund, but now has to find a way to survive financially for several years (potentially over a decade) before they can access it.
I have sufficient funds to cover the non-discretionary basics between now and age 57 (it was 55 but as you wrote, goalposts can be moved). The question then becomes, can that money be put to better use than sitting in a tracker?
It’s a tough one. Even a tracker exposes you to a sequence of returns risk that needs to be mitigated.
Flipside is that the gap is actually a high quality problem to have compared to folks who don’t have a decently sized pension fund.
Thank you for the article. Interesting as always.
On investments, would you be able to write about tax-efficient vehicles for high-income earners who only has £4k pension allowance? I have a pretty high savings rate (80%) and am at a loss of where to invest without incurring more tax! Many thanks.
I can give it some thought.
What me and my wife were doing for a while is topping up her pension contributions by a silly amount (close to 25% of her salary) to offset for the pension room lost in mine.
Challenge is that beyond pensions and ISAs, it’s tough to find good wrappers. SAYE and SIPP schemes typically cap out at pretty low absolute quantums.
You could also think about JISAs and pensions for children but locking money up for such long periods of time just doesn’t sit well with me (especially for pensions).
As I am nearing 40 years old, my biggest regret is not understanding the power of these tax wrappers early enough. I wish I have been putting money into ISA, and pension when my previous jobs had really good matching programme and when I didn’t have this allowance cap.
O well, better late than never!
You’re spot on but as you say, no point beating yourself up over it.
We all make mistakes, the good news is that this one isn’t terminal 🙂
thanks for the article as usual. My pension fund is very poor and I am doing my best build a platform to have some sort of security in the future. There are risks in anything we do, worst is ignorance of the possible futures/opportunities. Due diligence is important.
Glad you enjoyed it Cleophas!
Great post and some good insights that I found worth picking out. For a start, ageism is an absolute reality in my experience and partly why I was attracted to FIRE. I always felt that losing my job in my fifties was a big possibility and, when it happened, I’d a financial buffer in place to cope with it. Plus being open in finances with your family would be a big thing I’d encourage. My parents never really discussed money with us as kids, and I’m sure we’d have benefited from doing so (not just financially!) I look back over the years that I saved and invested and sometimes feel I could have been a bit cuter with some decisions I made, but I can live with it. For me, the single biggest piece of good advice would be to invest 10% of your income from every pay cheque (after all other deductions) and just keep doing it from your first day of employment. That, thirty years later, will be transformational, and I wish I’d known that aged 20!
That’s probably one of my biggest regrets also. I started investing in the stock market in my mid-20s but didn’t really get into it until my early 30s.
Not a massive time difference but I did miss out on buying in the aftermath of the financial crisis, which would have moved the needle quite a bit.
The other big regret is not getting into real estate earlier. It’s not easy to find good deals, but when you do, good properties just print money year in and year out.
If your employer offers salary sacrifice on pension contributions then maximise its benefits, if they don’t then perhaps consider putting together a proposal to present to them.
It will turbo boost your pension savings, and if in your 50s is a great way to get your savings ratio up. My pension gets paid more than me!?
Being in your early 50s is practically having your cake and eating it too – as far as the pension goes.
You get a fantastic top-up on your contributions but aren’t really locking the money away for a long period of time.
Great article. Your monthly contribution of £100 @ month giving a sizeable stash is also a timely reminder that if you have been fortunate enough to build wealth earlier that its ok to take some risk as you get older despite the challenges above .
Case in point I left a well paid and cast iron job last year due to burn out ( I must habe been crazy and probably was covid really did a number on me).
I’ve tactically moved to an employer who matched my salary (high for what I do but they really wanted me ) and have maxed my pension Contributions since . It’s a job thats very all or nothing.
If I do what’s required I’m looking at an after tax payout of 200k to 400k in the next 5 years . Equally if it doesn’t go well I could be out of a job next year and the best I can hope for is a 20 to 30% pay cut . Still high 5 figures but not what I’m on now
But having just joined the double Comma club at 42 with a low cost of living I know I can save ‘enough’ to retire decades early even with a lower salary. The job becomes less important than just earning ‘enough’ to pay my bills which is very doable and more important to find a job I enjoy.
My investments now make more than I do on a net basis in a good year. No bragging intended Its a lovely and very fortunate feeling (though the result of decades of hard work predominantly) to know I could take the risk and challenge myself (as well as leave a high stress environment) to build something from scratch knowing I’ll be OK whatever happens
I think that’s right. Oftentimes the way people think about finances is that it’s “FIRE or nothing”
But there is a very nice middle ground there where you have enough to pursue more enjoyable and rewarding options without necessarily being in a position to fully retire (yet)
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I think the number one focus for me is capital preservation once I hit my 50s in five years. If 2022 provided any lessons, it’s the importance of capital preservation.
The worst thing also would be to retire before 50 and then have to go back to work because of a collapse!