Is it too late to buy ASX shares when you're 50 for retirement? Good question.
The short answer is a most definite 'no'. However, the long answer adds a little more complexity.
The whole reason we invest in ASX shares, for retirement or not, is to harness the high returns that ASX shares have historically delivered compared to other assets.
As our chief investment officer, Scott Phillips went through last year, Australian shares delivered an average return of 9.2% per annum between July 1993 and June 2023. That's assuming dividends are reinvested.
In contrast, cash investments (including savings accounts and term deposits) returned just 4.2% per annum over the same period.
The longer you stay invested in high-returning shares, the longer you have to benefit from the exponential power of compounding.
So I'm not going to pretend that anyone who's only getting started investing in shares at age 50 wouldn't have been ludicrously better off starting earlier.
But saying that, you've still got plenty of time before retirement to get a big boost to your wealth from ASX shares.
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ASX shares at 50? Here's how you can give your retirement a boost
Let's say you're 50 years old, and you've amassed a life savings of $150,000 over your working life outside the value of the family home and superannuation.
Let's then assume that you invested that lump sum into cash investments. And that you are able to achieve that same 4.2% that has been average over the past 30 years. Well, you can expect to have approximately $305,940 by the time you retire at age 67.
Not bad.
But let's say you instead invest that lump sum into ASX shares and enjoy a return of 9.2% per annum instead (not that that is guaranteed). You could reasonably expect to have a far more impressive $712,443 by the time you hit 67. That's despite the inherent volatility that shares come with
That's 406,503 reasons why it's not too late to buy ASX shares for your retirement at age 50.
That's an 'ideal world' scenario we've just discussed. Shares can be volatile, and there's a significant chance that the Australian share market won't continue to return an average of 9.2% over the next 17 years. It could be even higher, but it could also be lower.
But I'm a firm believer in the power of taking lessons from history. And history does tell us that ASX shares are almost always one of the best assets to invest in over long periods of time.
