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Investing Through the Ages – Investment Considerations in your 20s, 30s, and Beyond!

Learn how your investing strategies should change as you enter new decades of your life.

Posted on July 24, 2023 by Sarah Shellam

Investing ages
When is the right time to start saving? Is it when you are young or when you’re a bit older? Is there even a right time? No one’s situation is the same, and when it comes to your investment journey, each investor’s path will look different. For some, investing in a retirement vehicle like an IRA in your 20s can be a smart move for building long-term wealth and securing a comfortable retirement. For others, it might make more sense to wait until they’ve established themselves and have a solid footing with the means to be able to invest comfortably. But, for those ready to take the leap in their young years, saving early can provide more financial freedom during your retirement.  

Investing in your 20s 

Investing in your 20s can set the foundation for your financial future and starting in your 20’s provides an extended time horizon before retirement that others may not get by starting later in life. By saving in your 20s, you allow your investments more time to grow through compounding. Compounding means that your investment gains generate their gains, creating a snowball effect that can significantly increase your wealth over time. Starting early allows you to contribute smaller amounts over a more extended period to reach your retirement goals. As you have more time for your investments to grow, you can take advantage of smaller, consistent contributions rather than having to contribute larger sums later in life. Here’s a tip! Set up automatic contributions to your IRA. Regular, consistent contributions make it easier to save consistently and take advantage of dollar-cost averaging, which can help mitigate the impact of market fluctuations. Here’s what you can do with a small-dollar IRA! 
Younger individuals generally have a higher risk tolerance, which is your ability and willingness to handle fluctuations in the value of your investments, because they have more time to recover from any potential market downturns. Embracing a slightly riskier investment strategy in your 20s can potentially lead to higher returns over the long run. Assess your risk tolerance level. Since young investors have more time to recover from losses, they can afford to take on higher risk investments that have the potential for higher returns. Even if the market experiences significant downturns, you have decades to make up for those losses through subsequent growth. Of course, while having a higher risk tolerance is advantageous for young investors, it's essential to strike a balance and not be overly aggressive in investment choices. Diversification is key. 

Investing in your 30s 

As you get older, your goals may start to shift a little and you’ll begin thinking about different considerations. Investing in your 30s presents a unique set of considerations as your financial situation and responsibilities may have evolved since your 20s. Your 30s offer a pivotal time to build on the foundation set in your 20s and make significant strides towards achieving your financial goals. As you get older, life events may come into play, making it challenging to allocate funds towards retirement.  
Similar to starting in your 20s, those investing in your 30s still typically have lower financial commitments, fewer dependents, and may not have substantial liabilities like mortgages or significant debt. This financial flexibility allows them to give more of their income to investing, just as someone in their 20s. But as they turn the corner into their 30s, financial goals may have shifted. They may be thinking about buying a house, starting a family, or advancing a career. They may also be thinking more about long-term financial objectives rather than just short-term and have more flexibility to adjust their investment strategy accordingly. 
Someone in their 30s may consider increasing the rate at which they invest, aiming to save a higher percentage of income to accelerate their progress toward financial independence and retirement goals. Retirement goals might now include additional family members, like spouses and children, and thinking about the new financial responsibilities that came come along with a family to support is extremely important. They may also open education accounts for their children if they’ve started families.
But for those investing in their 30s, one of the biggest things that can hold an investor back is not ensuring that they have an adequate emergency fund to cover unexpected scenarios that might require a hefty amount of living expenses. An emergency fund can provide a safety net during unforeseen circumstances which can not only help prevent you from having to dip into long-term investments, but also the money you’ve set aside for retirement investing. 

Investing in your 40s and 50s 

Advancing to your 40s and 50s brings new considerations, such as retirement readiness and estate planning, urging investors to really think about their financial strategy if they haven’t yet. For investors that are just starting in their 40s, they might have more money to work with to allow them to invest more, and for those that have been investing for years, most are generally at a point where they are investing comfortably. These investors may be conducting regular reviews of their retirement portfolio to ensure it aligns with those goals and changing financial circumstances. For those in their 40s and 50s that are really looking to get the most of a retirement account, they should be optimizing their tax strategy – passive investing works great for those that are busy with their day to day, busy lives. 
Remember that certain IRAs have catch up contributions that allow for additional IRA contributions if you are over a certain age. They vary from account to account, but individuals aged 50 and above can make catch-up contributions to retirement accounts, taking advantage of new ways to optimize their retirement savings that weren’t possible before, like understanding the tax implications of various retirement accounts and what could be expected in the next years to come. Investing in your 40s and 50s requires careful planning, but even if you haven’t taken that leap, it's not too late to secure a comfortable retirement. 

Investing in your 60s and beyond 

Lastly, investing in your 60s once again introduces new considerations, opportunities and sometimes challenges, too. Since you are past the age of 59 1/2, you can take distributions all through your 60s! This provides a great opportunity for those who have been waiting to get their tax-deferred or tax-free money. But at this age, scammers love to come out of the woodworks and take advantage of those getting older that might not be as aware of the latest tactics used for fraud. Common tactics can include spam emails, phishing, and even just being pushy with their requests can sometimes be cause for alarm. At this time, you might be thinking about setting up your estate plan and revisiting your beneficiaries. Make sure you have exit strategies for investments in place, too! 
Investing at different stages of life is a journey that offers distinct challenges and opportunities. Starting in your 20s provides the advantage of time, enabling the power of compounding to work in your favor. As you move through your 30s, 40s, and 50s, reassessing goals, increasing contributions, and adjusting risk tolerance become crucial to stay on track for a secure retirement. Finally, in your 60s, the focus shifts to capital preservation, generating reliable income, and planning for potential healthcare expenses.
Throughout life's various stages, seeking professional guidance, staying informed, and adapting your investment approach can ensure a successful financial future, allowing you to enjoy the fruits of your diligent and strategic investing efforts in the golden years of retirement. Remember, each phase is an opportunity to build a strong financial foundation and create a legacy that will benefit you and your loved ones for generations to come. To learn more, be sure to schedule a free consultation or open your account today! 

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