Ideas & Insights

Investing for the Future at Every Age

Banking Education 1/27/2022 10:29:25 AM
Investing at Every Age (Detail)

It’s never too early, or too late, to start planning for retirement. Since investing for retirement can seem complicated, it may be tempting to go with a “set it and forget it” strategy. In reality, periodically adjusting your retirement strategy as you age can help you maximize your retirement while enjoying the fruits of your labor today.

 To help you on your path towards retirement, we’re breaking down tips and strategies for maximizing your 401(k) and/or IRA contributions in your 20s, 30s/40s and 50s/60s.

Investing in your 20s:
Aggression early can pay off later in life.

When you first enter the workforce, you may be tempted to put retirement on the back burner. Perhaps you have student loans to pay off, housing to afford, and your entry-level paycheck is not as large as you’d like it to be. And besides, retirement is barely a speck on the horizon … right?
 
However true those statements may be depending on your situation and perception, the fact is that starting your retirement planning early can lead to greater gains long term. If your employer offers a 401(k), now is the time to start contributing. Better yet, if they offer a percentage match, contribute as much as needed to gain this match. It’s “free” money going toward your retirement.
 
Because you have a long road of investing ahead of you, you can afford to be a little more aggressive in your retirement investments at this age. One popular asset allocation strategy for investors in their 20s is to place 80-90% of their contribution in stocks, and the remaining 10-20% in bonds. Stocks can generate higher returns but are also more volatile. Bonds are fixed-income securities and tend to be more secure. Because you’re young, and presumably just beginning to invest in your retirement, you can likely withstand an occasional dip at this stage, especially considering the possibility of a substantial gain.

 
Investing in your 30s and 40s:
Career and income growth create prime investment opportunities.

 
Your 30s and 40s are especially ripe times to build a firm, strong base for your retirement. It’s during this time frame that you’re likely experiencing career growth, increasing your earning potential and establishing yourself financially. As you get promoted, earn pay raises and find yourself with more financial security, you should also increase the amount of money you invest and take advantage of having time on your side.
 
At this stage, you need a higher potential for a return to account for inflation, but you also have more to lose. Therefore, you may see your asset allocation shift closer to 60 or 80% stocks and 20 to 40% bonds. It is also important not to view your portfolio based on the appropriate mix of investment products alone but also the cost-effectiveness and tax implications of your investments.
 
If you neglected your retirement savings in your 20s, don’t fret. Now is the time to get started. However, you may need a more aggressive portfolio if you’re playing catch-up. Consider seeking the help of a knowledgeable financial advisor to help you structure a retirement plan and portfolio that will maximize your retirement.

 
Investing in your 50s and 60s:
Secure your future as you near retirement age.
 

Your risk-tolerance decreases as you near retirement age. Now is the time to buckle down and secure your future. Hopefully, you’ve set yourself up well with focused investment strategies throughout your 20s, 30s and 40s. If so, you can keep shifting your investments to more conservative, stable funds, such as bonds and money markets.
 
If you haven’t engaged a financial advisor already, now is a good time to do so. With retirement on the horizon, you’re likely determining when exactly you’d like to exit the workforce. Consulting with your financial advisor can help you determine what your finances will look like based on your various exit points — whether you decide to retire early, at age 67, or to work into your 70s.
 
If you’re entering your 50s or 60s with a large amount of uncertainty around your ability to retire, consult a financial advisor quickly. It may not be too late to catch up. After you turn 50, your maximum contributions to 401(k)s and Roth IRAs increase, giving you a chance to make up for lost time.
 
Investing in your future can happen at any age. While there will always be pressing expenses — school loans, mortgage payments, kid’s college tuition, etc. — investing a portion of your income in retirement savings will help secure your future. The best time to start investing in your retirement is now. However, you don’t want to do so recklessly, especially if you have a lot to lose and little time to make it up. The key is planning accordingly. The most important thing to remember is that you have more room for risk when you’re younger. You can gradually shift to a more conservative approach as you get closer to retirement.

For personalized retirement information, reach out to a Sunflower Bank professional. Our Wealth Management team will work with you to determine your current and future financial goals, and develop a retirement plan to meet your needs.

This article contains general information only. Sunflower Bank and First National 1870 are not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. We suggest you consult your personal tax or legal advisor before making tax or legal-related investment decisions.

Investment and insurance products are not FDIC-insured, are not a deposit or other obligation of, or guaranteed by the bank or an affiliate of the bank, are not insured by any federal government agency and are subject to investment risks, including possible loss of the principal amount invested.​