Michael D'Angelo- October 2019                                                                                                                                  

As you evolve throughout your career and into retirement, your investment decisions should as well. If you’re taking the same risky investment approach at age 50 as you did at 25, it’s time to pump the breaks. And for those who are too conservative with decades left until retirement, you could easily be leaving money on the table. As you age, it’s important to remember how your age should impact your investment decisions.

Why Age Affects Investments

Generally speaking, the younger you are, the riskier your investment portfolio can be. The reason being, that the younger a person is, the more time they have to recover and recoup any losses from things like a sudden market downturn. Someone who's a few years away from retirement, however, won’t have the necessary time it often takes to recover from a plunge in the markets. Instead, if their portfolio relied too heavily on stocks, their entire retirement strategy could be jeopardized.

Investing At Various Ages

Along with risk tolerance, your age should be a large deciding factor in what and how much you decide to invest in. For example, the higher the percentage of stocks you invest in, the more volatile your portfolio is going to be. In general, you’ll want to dial down the risk and focus on more steady sources of income as you get closer and closer to retirement.

Investing In Your 20s and 30s

After gaining some stability in your life and career, you may be ready to move your money out of a savings account and into a more active role through investments. With 30-plus years ahead of you before retirement, now’s the time to focus aggressively on growth. For those planning on retiring at least 30 years out (past your 50s), it’s common to have between 70 and 80 percent of your portfolio in equities. For ambitious savers who are interested in retiring early (age 50 or sooner), it’s important to keep that percentage a bit lower to make room for more steady and conservative options.

Investing In Your 40s and 50s

As you’re inching closer to those peak earning years, your 40s can be an opportune time to double down on steadier investment options. In general, how you invest in your 40s will vary greatly on the types of investment options (if any) were made in your younger years, how close you are to retiring and your risk tolerance. In general, most people begin shifting their asset allocation to a more conservative strategy in their forties, with equity allocations closer to 60 or 70 percent. 

How you choose to invest in your fifties will greatly depend on how your current financial picture aligns with your upcoming retirement goals. Take a look at your current income level, nest egg, taxes and projected retirement income. This could help you determine how aggressive your portfolio should remain throughout your 50s. Why? Because now’s the time to focus on creating income for you and your spouse throughout retirement. Incorporating an appropriate amount of risk into your portfolio can help you and your spouse prepare for these upcoming years without income. 

How you should invest throughout your career can be based on a number of factors, it’s always important to take your age and duration to retirement into account. Remember to diversify and protect your future retirement income from untimely market downturns. Doing so can create peace of mind for you and your spouse as you get nearer and nearer to retirement age.