Q: I’m already 39 years old with very few investments. So it’s quite late to start with your scheme of things I suppose, especially with respect to the kind of retirement targets exemplified in your guidelines. What can I do?

A: Is it too late to start investing? This is a question a lot of people who are approaching their 40s, and even some in their mid to late 30s, ask.

The short answer is – No, it’s never too late to start investing.

One of the main tenets of good investing is that even the best of investment options requires a decent length of time to show results. Good investing intends to beat inflation, and provide you with a corpus that can allow you to maintain your current lifestyle (when you are employed) even when you are retired.

Why you should start saving earlier: Compounding is your friend

Compounding is one of the biggest factors that makes sure your money grows. Your money growth rate speeds up as years pass. Where inflation reduces the value of your money, compounding increases it.

Let’s say you invested Rs. 100 in equity every year for 10 years. Assuming an annualised rate of return of 14%, you will have at the end of 10 years, Rs. 1934 in your hand.

If you are late to investing, you might end up losing on returns as well as money value (the older the money or investment is, the more valuable it will become).

Does this mean that people in their late 30s or early-to-mid 40s are too late?

We believe, it is never too late to start investing. You might not get the same amazing results you could have got, but you can still ensure a degree of financial security. You might still have a good 10-15 years of earning ahead of you which you should make the most of.

So how should you catch up when it comes to investing?

If you are late to investing, follow these 4 approaches towards your retirement goals.

#1. Save More

In your later years, you normally tend to earn more. You should capitalize on that by saving more. While there is no real thumb rule to saving, but 30% or more is a good starting point. You should aim at more, keeping in mind expenses and the fact that you are trying to make up for lost years.

#2. Postpone your retirement

If it is an option, you might want to increase your working years so you can save more. This will give you the additional investment capital required.

#3. Adopt a frugal lifestyle post-retirement

Living within one’s means is not just a good quote. It is a reality that can save you a lot of trouble. If your corpus is smaller, adopt a lifestyle that fits the corpus.

#4. Take bigger risks

Risks should match goals.

In your case, you want to save and grow more in a small amount of time. This means you don’t have a choice but to take more risks.

From an investment perspective, this means, you need to allocate a good chunk of your investments towards equity. Equity can provide the best returns, but also has the highest risk.