- 20s & 30s – Time is on your side and generally you can be more aggressive with your investment approach because you have many years to weather market fluctuations.
- 40s & 50s – Consider using a growth and income investment approach to help balance retirement planning and other larger financial commitments
- 60s & 70s – As you approach retirement reduce risk in your portfolio, there is little time to recover the losses.
- 70s & Beyond – Ensure your accumulated assets continue to work for you through retirement.
Retirement: It's a happy eventuality for every working individual. While the true joy is in the destination, ensuring your visions are fulfilled requires proper planning and investing through each leg of the journey.
Ideally, saving and investing for retirement should begin the moment you start working — if not before — and continue well into your golden years. That said, your investment strategy is not static. It will necessarily be different on Day 1 than it is on D-day, and at every life stage in between. Following are general guidelines for each phase of the journey. Of course, you should discuss your particular situation with your financial professional, who is attuned to your individual goals and tolerance for risk, and can help identify the best strategies for you.
20s and 30s.
When in your 20s and 30s, time is on your side. Because you have many years to weather market fluctuations, you generally can be more aggressive in your investment approach. Equities, which historically have provided greater long-term growth potential than bonds and cash instruments, are a popular choice early on — when laying a solid foundation for your retirement portfolio (one that can compound over time) is the chief objective.
40s and 50s.
In your 40s and 50s, you may need to balance retirement planning with other large financial commitments, such as a child's college education. You still have time to grow your nest egg, but may require occasional capital outlays to meet more imminent obligations. A growth and income investment approach, with an allocation still favoring equities for capital appreciation, can be prudent at this stage. Investing in dividend-paying stocks can serve both purposes.
60s and 70s.
As you approach retirement, you will want to consider reducing risk in your portfolio. At this stage, there is limited time to recover from losses. Investors will generally allocate more of their assets to fixed income investments, which tend to be less volatile but historically have offered lower returns than stocks. Bonds and dividend-paying stocks are popular choices here because they offer the income needed once a regular paycheck is forgone.
70s and Beyond
With increasing life expectancies, you could conceivably spend 20 to 30 years in retirement. You want to ensure your accumulated assets continue to work for you, providing a regular stream of income. Your portfolio will likely be more conservative than ever. While this typically means a heavy weighting in bonds, you do not want to abandon equities, which provide the best means to keep your portfolio growing ahead of inflation. Being too conservative, particularly in today's low-interest-rate environment, can be as risky as being too aggressive.