Retirement Investing Strategies by Age

Introduction

Implementing the optimal retirement investing strategy at different life stages is key to growing your nest egg sufficiently to achieve your retirement goals. When you’re younger, investing for retirement should focus primarily on growth. As you age, retirement assets should be protected by reducing risk.

This retirement guide examines investing best practices targeted to your 20s, 30s, 40s, 50s, 60s and beyond. Follow these age-based investing tips to help enable a comfortable, secure retirement funded from your investment portfolio growth over time.

Investing in Your 20s

In your 20s, retirement investing should be laser focused on growth via stocks:

Max Out Retirement Accounts

Contribute at least enough to 401(k)s and IRAs to receive full company match funds. Capture free money!

Be Aggressive

Allocate 80-90% of retirement money into stocks for maximum growth. This provides decades to ride out volatility.

Prioritize Equities

Focus on broad stock index funds. Bonds can come later when closer to retirement.

Accept Volatility

Don’t panic during market declines. Stay committed to keep contributing through ups and downs.

Exploit Company Plans

If available, utilize company offered retirement plans like 401(k)s and ESPPs for convenience and possible matching funds.

Don’t Ignore Other Goals

Balance retirement saving with shorter-term goals like an emergency fund, house downpayment, etc.

Maximize retirement contributions but ensure you have savings for other important goals you’ll face in your 20s and 30s.

Investing in Your 30s

Your 30s are prime earning years, so leverage compounded returns:

Contribute 10-15% of Income

Save at least 10-15% of your gross income for retirement. More is better.

Earn the Match

If your employer offers a 401(k) match, contribute enough to receive the full match amount. This equals free money.

Review Asset Allocation

Given the decades until retirement, most assets should remain in stocks for growth. Any bonds/cash should be under 20%.

Rebalance Regularly

Rebalance back to target allocations every quarter or annually. This forces you to sell high and buy low.

Don’t Touch Retirement Savings

Avoid tapping retirement accounts for other purposes. Goals like home downpayments accelerate other ways.

Consider Supplementing

Explore supplemental retirement options like HSAs, ESPPs, annuities, and real estate.

Leverage your peak earning years in your 30s to pile away as much as possible benefitting from compounded returns over 30+ years.

Investing in Your 40s

As you enter your 40s, start gradually reducing risk and introducing more income-producing assets:

Increase Contribution Levels

Bump retirement contribution levels above 15% if possible. Consider maxing out allowable amounts. The IRS increases limits over time.

Maintain Heavy Equity Allocation

Keep 60-70% in diversified stocks to continue benefiting from market growth in your early 40s.

Introduce Intermediate Bonds

Start building exposure to medium-term bonds paying steady interest for balance.

Assess International Exposure

Determine if retirement funds have adequate international stock and bond exposure for diversification.

Review Performance Regularly

Check investment performance against appropriate benchmarks quarterly and rebalance to targets.

Supplement Savings

Contribute consistently to supplemental retirement vehicles like IRAs, RSUs, real estate, etc. Diversity income sources.

Incrementally reduce risk while still emphasizing growth as retirement gets closer in your 40s.

Investing in Your 50s

Age 50 is a transition point where portfolio preservation should start taking priority:

Increase Fixed Income

Shift portfolio mix closer to 50/50 stocks and bonds/cash to reduce overall risk as retirement approaches.

Stress Test Withdrawal Strategy

Backtest different retirement withdrawal rates and sequences under different market return scenarios.

Consult a Financial Planner

Consider hiring a fee-only financial planner for guidance on timing retirement and sustainable withdrawal strategies.

Review Survivor Needs

Account for reduced Social Security and portfolio longevity for surviving spouses in retirement plan.

Think Total Returns

Focus on total return portfolios producing income through a mix of dividends, interest, capital gains.

Manage Tax Brackets

Be thoughtful of required minimum distributions pushing income into higher tax brackets.

Get much more conservative and income-oriented in your 50s while preserving portfolio longevity.

Investing at 60 and Beyond

At 60+, preserving capital and generating income are priorities:

Increase Bonds and Cash

Shift allocation more heavily towards high-quality bonds and cash equivalents for stability and income.

Delay Social Security

Delay claiming Social Security as long as reasonably possible to increase this fixed income source.

Move to Value Stocks

Any remaining stock exposure should favor dividend-paying value stocks over high-growth.

Stress Test Bucket Strategies

Segment savings into near-term, mid-term and longer-term buckets with appropriate asset allocations.

Include Annuities

Consider incorporating fixed annuities into portfolio to provide guaranteed income to cover essential expenses.

Focus on Income and Preservation

Focus on low-risk income generation, capital preservation, and portfolio longevity strategies.

Generating steady income and protecting savings become central goals of retirement investing in your 60s and beyond.

Key Takeaways of Retirement Investing Strategies by Age

Maximize growth aggressively in 20s and 30s using stocks
Introduce more bonds and rebalance in 40s
Focus on income, capital preservation and risk reduction in 50s
Prioritize stability and lifetime income at 60+

Follow these best practices matched to each decade to help retire comfortably and securely.

Conclusion

Shifting investment strategies over time based on your age and proximity to retirement enables building sufficient savings to meet your retirement lifestyle goals. When starting out, invest aggressively for growth. As you age, gradually reduce risk and volatility while increasing income-generating investments. Your 40s and 50s are key transition decades warranting shifts in asset allocation and focus. Consistently saving and following age-targeted investment principles makes funding 25-30 years of retirement more achievable.