Investment strategies during the seasons of adulthood

Different decades of adulthood call for very different approaches — and investing is no exception. Each stage of adulthood comes with its own factors that determine what you can invest and what kind of risk you can take with your investments.

Obviously, income levels differ in every stage of adult life as well as different obligations on that income. Most people just starting their careers have a very different amount of investable income than someone nearing retirement. Their aversion to risk will be very different too.

Let’s break down the different phases of adulthood by decades with some helpful guidance on investing best practices for those years.

Your roaring 20s

Your golden years might seem too far off to worry about when you’re just starting your career, but saving and investing when you’re young will set you up to save more for retirement, especially if you incrementally increase your savings each year. In your 20s, you have the power of time on your side and can use compounding interest to your advantage.

Always max out any matching contributions your employer offers for retirement — meaning if your employer offers a 50% match up to 6% on your 401(k), make sure you’re contributing at least 6% to take full advantage of the money they’re offering. For example, if your annual salary is $40,000, and your employer offers the above-mentioned match, you’d be missing out on $1,200 in 401(k) deposits from your employer that year if you don’t contribute 6% of your salary. Plus, you’ll have saved about $2,400 of your own money too!



It’s also wise to take advantage of a Roth IRA during your younger years. Since it can be assumed that tax rates will continue to rise as they have done historically, paying tax up front on the money when you’re young can save you a lot of money during retirement.

Learn to accept risk at this age and don’t try to avoid it. You may consider being more aggressive with your investments during your 20s and hold more stocks — in fact, some experts say you should have 90% of your portfolio in stocks or equity. And your best bet? Keeping it simple with Online Investing.

Your thrifty 30s

During your 30s, your career should be taking off, you’ll have experienced or considered the joys of home ownership, and you might be thinking about starting a family of your own or have already welcomed kids to the fray. A good goal to set is to have your annual salary saved by the time you celebrate your 30th birthday. 

At this age, it’s wise to sock away about 15% of your income, especially if you don’t yet have a family proverbially raiding your wallet for all their assorted needs. Continue contributing to your 401(k) and Roth IRA. If you haven’t started saving for retirement, it’s not too late! Saving for retirement isn’t your only priority, however. Part of the 15% you’re saving should go toward college, a down payment on a home, automobiles, and vacations — not to mention an emergency fund for those urgent situations that arise.

Now is a good time to think about diversifying your holdings into additional asset classes like large-, mid-, and small-cap stocks. Think about how much risk you feel comfortable taking on and consider keeping the equity allocation above 90%.

Your fantastic 40s

The 40-49 age range is a great time to do a thorough financial check to make sure you’re right on track with all your savings goals. A great goal for this stage in life is to have three times your annual salary saved by the time you turn 40. It’s also a great time to start thinking about your retirement age goal. Share your financial goals with your family so they can be on the same page.

If you haven’t started investing yet, it’s still not too late. At this point, you’ll need to contribute more and be more aggressive to make up for lost time — but not all is lost, so start now!

As far as your investments go, experts recommend you keep your stocks and equity holdings above 80% because you still have a lot of time to weather the ups and downs of the stock market. It’s also smart to keep diversifying your asset allocations. And if you’re not sure what the right move is for you, don’t be afraid to meet with a financial advisor; after all, investing isn’t one-size-fits-all, and what works for someone else might not make sense for you.

Your nifty 50s

As your 50s roll around, your mantra should be “diversify, diversify, diversify.” A truly diversified portfolio has all the asset classes covered — large-, mid-, and small-cap stocks, along with some international exposure. Our handy Online Investing platform can complete this allocation update for you. Experts advise you keep investing in stocks but lower your equity portfolio to about 70%. Your goal by age 50 is to have six times your annual salary saved for retirement.

In your 50s, you’ll have the opportunity to use catch-up contributions, so you can contribute $1,000 more than the annual maximum to an IRA and an extra $7,500 into your 401(k). Keep adding to all your different investment buckets, including your 401(k), Roth IRA, traditional IRA, and taxable investment accounts. Start investing your HSA funds as well.

Your settling-down 60s

Retirement is getting closer all the time! A good goal for this stage in life is to have eight times your annual salary saved by age 60, and 10 times your salary saved by age 67. Max out all your retirement account options every year and diversify your portfolio. Don’t forget the growth of stock, but add more bonds to your allocation. Experts recommend you have a portfolio that’s at least 60% in equity.

Prepare for market downturns and have two years of expenses in cash equivalents ready to use if needed by the time you retire. And when the time comes, all that’s left is to enjoy retirement!

We hope we’ve given you some helpful information to consider. Remember that not every approach is right for every person, so you’ll want to be sure to speak with a financial advisor and/or tax professional to ensure you’re making smart moves. Our experts are always here to help, and don’t forget to make the most of your Online Investing account. Happy saving!