Am I Too Late to Invest for Retirement at 65? I Own My Home but Only Have $85k in Savings

While 65 is later than most people begin investing for retirement, it is certainly not too late. The question is not whether to invest but how to invest in order to increase your chances of achieving your financial retirement goals. To decide, there are several factors to consider, including your overall health, life expectancy, employment status, retirement expenses and any income sources, such as Social Security benefits. From there, you can create the right retirement budget and investment strategy to help you achieve a comfortable and secure retirement.

A financial advisor can help you pull together a retirement strategy appropriate for your circumstances and goals. Use this free tool to match with an advisor.

Initial Steps to Investing

The first step when starting to invest for retirement at any age is to assess your situation. Begin by calculating your income and expenses in retirement. Owning your home helps limit expenses, because housing is the largest single cost for most retirees.

Start there and make a retirement budget, as this will guide your investment strategy. Do not neglect costs for Medicare premiums now that you are 65, and consider whether you will need long-term care insurance.

Another key question is how long you expect to live, since that will determine how long your money needs to last. Planners may use the same maximum age, typically 90 or even 100, for all clients. Your own life expectancy may vary, depending on your family and personal health history.

As an example, Social Security’s lifespan calculator indicates a typical 65-year-old man can expect to live about 19 more years. A woman of the same age can expect to live about 21 years.

You can also shrink the number of years your savings have to support you if you keep working past the usual retirement age. In addition to reducing the amount you will have to take from savings for retirement expenses, this can allow you to delay claiming Social Security benefits. Unclaimed benefits increase by as much as 32% when claiming at age 70 compared to claiming at age 62. A higher Social Security benefit can have a sizable impact on your comfort in retirement.

First, set up an account at Social Security’s website so you can calculate how much your Social Security will be. Then, evaluate other sources of income, such as pensions. Between maximizing government benefits and extending your working years, you can improve your chances of having a financially secure retirement.

Late Retirement Investing Strategy

Once you know your projected retirement length, estimated expenses and non-investment income sources, it is time to plan your investment strategy.

Standard savings accounts are suited for an emergency fund , typically holding three to six months’ worth of basic living expenses. However, most of your assets will likely be redeployed to some combination of stocks, bonds and other fixed-income investments that have greater earning potential.

Deciding how to allocate your portfolio between stocks and bonds depends on your risk tolerance and investment horizon. Stocks have higher growth prospects, but they can be riskier. In comparison, bonds can produce income and provide a stabilizing influence for your higher-risk stocks. Typically, the older you get, the less emphasis you put on stocks, but most investors have at least some in their portfolios.

A typical 65-year-old has several options available:

Diversified mix. You might invest 60% of their investment fund in a diversified mix of stocks and 30% in a similarly diversified selection of bonds, allocating the remainder to high-yield savings, certificates of deposit or other forms of cash.
Mutual funds and ETFs. You can purchase individual securities, but shares of a mutual fund or exchange-traded fund (ETF) with the desired asset mix will likely be more convenient and offer greater diversification.
Annuities. You may also want to consider annuities, which can generate guaranteed income.

Late Retirement Investing in Action

If you continue working for five more years without claiming Social Security, those benefits will be at their maximum. By that time, assuming a steady 7% annual rate of return, your $85,000 will have grown to $120,619. Simulations indicate you will be able to withdraw funds at the safe withdrawal rate of 4% of the balance adjusted annually for inflation. equal to $4,825 the first year. Therefore, there is little chance of running out of money in your lifetime.

When your retirement budget falls short, investing more aggressively could help boost growth, though it also increases risk. You could extend the years you plan to work for income for a few additional years to allow your investment fund to grow more. You could also relocate to a less expensive location to reduce your living expenses. Consider speaking with a financial advisor if you have questions or want a professional opinion on your retirement investment strategy.

How to Manage Risk and Income After Age 65

Once you reach age 65, the main goal shifts from building wealth to protecting your portfolio and creating reliable income.

Keeping all your savings in one type of investment can expose you to unnecessary risk but a balanced mix of investments can help manage that risk. Many retirees hold a portion in stocks for long-term growth, some in bonds for steady income and others in cash or savings accounts for short-term needs.

Market declines can happen at any time, so it helps to plan your withdrawals carefully. If you take money out during a downturn, you may need to sell investments at a loss, which can reduce how long your savings last. Keeping enough cash or short-term bonds to cover one or two years of expenses allows you to avoid selling long-term investments when the market is lower. This can help your overall portfolio recover over time.

Reliable income sources can make your plan more stable. Social Security, pensions and annuities can cover essential expenses like housing, food and healthcare. Investment income, such as dividends or bond interest, can supplement that base. Coordinating these income sources with planned withdrawals can help you manage taxes and make your savings last longer.

Bottom Line

Starting to invest for retirement at age 65 with $85,000 will limit your ability to take advantage of long-term investment growth, but you can make significant progress in the years you have left before leaving the workforce. You can start by carefully assessing your financial and health situation, then starting to invest in a manner that suits your risk tolerance and time horizon. It’s not too late to make progress toward a more secure retirement by investing the funds you have available.

Retirement Planning Tips

Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
While future returns are necessarily uncertain with most investments, that doesn’t apply to a certificate of deposit. With SmartAsset’s CD calculator you can predict with confidence how much your CD will have earned when it matures.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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