As you start to take your retirement more seriously, it’s important to come up with a targeted action plan based on sound strategies.
Sure – you can just let your savings pile up and hope you started early enough to build a sizable egg by the time you turn 60. But chances are, if you’re here looking for the best retirement strategies, you want to take a more detailed, structured approach. And you’re in luck. In this in-depth guide, you’ll discover the top investment strategies for retirement.
No matter your age, no matter your financial standing, you’ll find invaluable tips to help you take control of your financial future. The best part? You don’t need a financial advisor! Everything we’re going to recommend today can be done easily on your own, helping you make the most of your retirement investments. First – let’s talk about what you need to consider when pondering the various investment strategies for retirement.
What to Consider When Choosing Investment Strategies for Retirement
As you can probably imagine, the best retirement investment strategies for someone making $2,500 a month at 20 years of age will vary greatly from someone making the same amount of money at 30 years of age. Why? Simple – the compounding effects of time.
But, you also need to consider your monthly liabilities when investing – along with your risk tolerance, your goals for retirement, and more. So before we can get into the best strategies for your retirement investments, let’s talk about all these factors at play – to help you discover what’s actually possible.
Your Current Age
Perhaps the most important factor to consider when choosing investment strategies for retirement is your current age. The younger you are, the more time you have to take advantage of compounding returns. This essentially means that your money will grow at an exponentially faster rate the earlier you start saving and investing.
To put it in perspective, if you start your investment account at 25 years old – with a lump sum of $6,000. With compounding interest, just that small amount turns into $240,000 by the time you’re 62 (assuming a 10.5% return based on market average over 30 years). Meanwhile, a 35-year-old who starts investing would need to more than double their initial investment ($16,250) to reach that same lump sum at 62. This goes to show the power of investing early and letting time work for you.
Of course – this doesn’t mean that it’s impossible to catch up if you didn’t start investing in your retirement earlier in life. It just means that it becomes increasingly more difficult (and more expensive) to do so. This is why age is such an important factor when choosing investment strategies for retirement. And we haven’t even discussed a huge factor that becomes more relevant with age – liabilities that prevent you from investing more capital.
Your Monthly Income and Liabilities
Another critical factor to consider when coming up with investment strategies for retirement is your monthly income and liabilities. Simply put – the more money you have coming in each month, the more room you have to invest.
On the other hand, if you have a lot of monthly expenses and/or debt payments, you’ll need to be extra careful with your retirement investments. This is because you’ll likely need to access that money much sooner than someone without any liabilities.
For example, let’s say you want to retire at 55 years old and you have $50,000 saved up for retirement. If your only monthly expenses are a $500 car payment and a $200 student loan payment, you can afford to take more risks with your investments. However, if your monthly expenses include a $2000 mortgage payment, you’ll need to be much more conservative with how you invest that $50,000.
As you age, your income tends to increase – but so too do your liabilities. You start to have kids (one of the most expensive things you can have under your roof!), you buy a nicer home and car, you pay more for health insurance, and bills start to add up. This goes back to the advantage of starting early – when liabilities are low, you can afford to invest more towards retirement. In itself, starting early is the best retirement investment strategy you can implement!
Your Risk Tolerance
Your risk tolerance is another important factor to consider when choosing investment strategies for retirement. Simply put – the higher your risk tolerance, the more volatile (and potentially more profitable) your investments can be.
On the other hand, if you’re not comfortable with a lot of volatility in your portfolio, you’ll need to stick to safer investments. The good news is that there are plenty of options out there regardless of your risk tolerance. We’ll discuss some of them later on in this guide.
Your Retirement Goals
Last but not least, you need to have a clear understanding of your retirement goals before you can choose the right investment strategies. Do you want to retire as soon as possible? Or do you want to maintain a certain lifestyle in retirement?
Your answer to these questions will have a big impact on what types of investments you should be focused on. For example, if you’re looking to retire ASAP, you’ll likely want to focus on investments with higher returns. On the other hand, if you’re more concerned about the preservation of capital, you might be better off investing in bonds or other fixed-income securities.
Of course – there’s no right or wrong answer here. It all comes down to what’s most important to YOU when it comes to retirement.
Now that we’ve discussed some of the most important factors to consider when choosing investment strategies for retirement, let’s take a look at some specific strategy recommendations.
The Best Retirement Investment Strategies by Age: Recommendations for Your Unique Situation
Ready to discover the best retirement investment strategies by age? Below, we’ll provide our top investment strategy recommendations for retirement based on your age group. After that, we’re going to provide three essential investment strategies for retirement – regardless of age. Let’s start with young adults aged 20-30.
Age 20-30: The Best Retirement Investment Strategies for Young Adults
If you’re in your 20s or early 30s, you have two things working in your favor – time and the ability to take on more risk. This combination makes it possible to pursue investment strategies with higher returns. However, that doesn’t mean you should go all-in on stocks (although they should make up a good portion of your portfolio).
We still recommend following a diversified investment approach. This could include investing in a mix of stocks, bonds, and other assets like real estate or precious metals. Or, if you just want to play things safe, maybe you contribute a chunk of your income to a savings account – like an IRA or ROTH.
For example, you might allocate 50% of your retirement savings to stocks, 20% to a savings account, and 20% to real estate, and other 10% to bonds. Or, you might choose a more aggressive strategy and invest 70% in stocks and 30% in bonds. It all comes down to your personal preferences and risk tolerance.
Age 30-40: The Best Retirement Investment Strategies for Middle-Aged Adults
If you’re in your 30s or 40s, you’re probably starting to think about retirement more seriously. And rightfully so! The closer you get to retirement age, the less time you have to recover from any major market downturns. And now, you may be making more money. Perhaps you have a chunk of money saved up and you can start investing in real estate properties (or REITs, for a more liquid, accessible real estate investment).
For this age group, we recommend taking a more conservative approach to investing as you get closer to retirement. This could mean allocating a larger portion of your portfolio to bonds and other fixed-income securities. For example, you might choose to invest 30% of your retirement savings in stocks, 40% in bonds, and the remaining 30% in real estate. If you’re more risk adverse, you may allocate more of that capital from stocks towards a savings account.
Of course – this is just a general guideline. You’ll need to consider your own unique circumstances (including your risk tolerance) before making any final decisions.
Age 50+: The Best Retirement Investment Strategies for Seniors
If you’re 50 years old or older, retirement is likely right around the corner. And that means it’s time to start thinking about the preservation of capital.
At this stage in your life, you should be focused on protecting the money you’ve already saved. This means investing in a mix of safe investments like bonds, cash, and annuities. While it would be ideal to get your investments producing additional income – through the stock market or real estate – you don’t want to risk volatility dissipating your retirement funds this close to retirement. As such, you’ll go with safer investments.
For example, you might allocate 60% of your retirement savings to bonds, 30% to cash, and just 20% to stocks. Or, you could choose to invest 70% in bonds and 30% in cash. Again – it all comes down to your unique circumstances and risk tolerance.
Investment Strategies for Retirement at Any Age
We’ve provided some of the best retirement investment strategies by age above. But now, we want to provide some investment strategies for retirement at any age. Down below, you’ll find sound advice to help you prepare for the retirement you’ve been dreaming of.
Save Early and Often
One of the best retirement investment strategies is to start saving early and often. The sooner you start saving, the more time your money has to grow. And that can make a BIG difference when it comes time to retire. In fact, we wrote a complete guide on the advantage of investing early for retirement.
Let’s say you start investing $500 per month at age 25. If you continue investing that same amount each month and earn an annual return of just eight percent, you’ll have nearly $900,000 saved by the time you’re 65 years old.
On the other hand, if you wait until age 35 to start saving, you’ll have to invest $800 per month to end up with the same amount of money at retirement. That’s an extra $300 per month – or $36,000 per year!
The moral of the story is to start saving and investing as early as possible. The total amount you need to invest to reach your retirement goals will be lower this way.
Diversify Your Portfolio
Another one of the best retirement investment strategies is to diversify your portfolio. This means investing in a mix of assets, including stocks, bonds, cash, and more.
The goal is to spread out your risk so that you’re not too exposed to any one particular asset class. For example, if a recession causes the stock market to crash and take a nosedive, you don’t want all of your retirement savings tied up in stocks. That could be a recipe for disaster. By having a few real estate investment properties, you still have an income you can continue putting towards your retirement.
Or, say you’re getting options as part of your compensation package – you’d want to learn how to manage risk for stock options. At the same time, you can put a chunk of change into a cash savings account generating a low yield – as these are low risk. It’s just important to remember to hedge against inflation.
The point is, you need to ensure you’re not putting all your eggs in one basket – no matter your age, no matter your retirement goals, no matter your income level. By diversifying your portfolio, you’ll be able to weather any market conditions – good or bad. And that will give you a much better chance of achieving your retirement goals in a timely manner.
Pick the Right Retirement Stocks Without Emotion or Guesswork
If we could only provide one retirement investment strategy, it would be this one. One of the best ways to grow your retirement savings is to carefully pick retirement stocks. But picking stocks can be a daunting task – especially if you don’t have a lot of experience with investing. So many individuals have watched their retirement accounts dwindle down as they’ve made poor stock choices.
Fortunately, it doesn’t have to be this way. We can help you effortlessly identify the best stocks for retirement – without spending all day filtering through charts and tracking technical trading indicators. Without any guesswork, without any emotion. Just tried and true investing principles with decades of results to back them up.
VectorVest is stock forecasting software that simplifies investing and eliminates emotion or guesswork from your strategy. Instead of getting overwhelmed by how complex and time-consuming technical analysis is, you just rely on three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). These ratings contribute to a clear buy, sell, or hold recommendation for any given stock, at any given time.
This alone is powerful. But it gets even better – as we don’t make you find these stocks on your own, we bring them to you with our pre-built stock screeners. We have stocks picked out specifically for retirement, too. You can literally just pick our “top retirement stocks” and set yourself up for a comfortable, lucrative retirement.
Of course, there are other investment strategies you can use to help you earn supplemental income along the way – such as the basic swing trading strategies for beginners, swing trading options, scalp trading, shorting ETFs, day trading – and many others. However, when it comes to investing long term, you can just pick the safest stocks with good long-term price appreciation potential.
Once you’ve entered your positions, you can let time do its thing as you sit back, relax, and await a comfortable, enjoyable retirement down the road! You can even get by with our simple stock advisory app. And if you want to see it in action before taking a chance, you can get a taste of our stock analysis free here.
Final Thoughts on The Best Retirement Investment Strategies
As you can see, there’s no “one size fits all” approach when it comes to choosing the best retirement investment strategies. The key is to tailor your strategy to your own unique circumstances – including your age, investment goals, risk tolerance, and more.
And while there are many different retirement investment strategies out there, we believe that one of the best ways to grow your retirement savings is to carefully pick stocks with the help of VectorVest. Our stock analysis software simplifies investing and eliminates emotion or guesswork from the equation. You can literally just pick our “top retirement stocks” and set yourself up for a comfortable, lucrative retirement!
Of course, you’ll want to diversify your portfolio as well – but this can be a great foundation for your strategy. While investment stocks are a great retirement investment strategy, you should also pair them with other investment vehicles such as an IRA or 401K. You can also consider other types of investments for retirement like real estate, bonds, commodities, etc.
In summary, start by determining what makes the most sense for you based on your age, income/liabilities, risk tolerance, and retirement goals. Then, come up with a retirement investment strategy that aligns with those values – and execute it!