In your twenties, retirement feels distant. By your forties, you might worry about whether you are saving enough. When you reach your 60s, the focus often shifts from growing your savings to protecting what you have built.
As you go through life, your investment plans should change, too. What works in your twenties may not suit you in your fifties. An effective investment strategy grows based on your goals, lifestyle, and responsibilities.
A recent report from The Times reveals that over 60% of people in the UK prefer saving to investing. While this caution is understandable, it can prevent people from capitalising on long-term growth opportunities.
The good news is you don’t have to figure it all out alone.
At Circadian Capital, we help you create a personalised investment plan that changes with you at every stage of life.
Whether you are starting or reviewing your current portfolio, it’s always a good time to make smarter financial choices.
Let’s discuss how your investment strategy should progress as you grow older.
How Your Investment Strategies Should Change as You Get Older
Here’s how your investment strategies should change as you age:
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Laying Your Groundwork In Your 20s
Your twenties are a time of big changes. You may have college loans, start your first job, and move into your first apartment. Money might be tight, but you still have a lot of time.
Now is the best time to take some risks. Stocks usually go up in value as time passes, and you have years to handle any ups and downs. Don’t worry about short-term market fluctuations; focus on the long term.
Focus on:
- Starting a pension early (your future self will thank you)
- Using a Lifetime ISA for saving for a home or retirement
- Making regular monthly investments, even if it’s a small amount
According to IFA Magazine, UK individuals who are in their 20s are saving an average of £721 per year in a defined contribution pension. This amounts to only 2.46% of their income. It highlights the importance of starting to save more, even in small ways.
Compound interest works in your favour. The earlier you start, the less you will need to save later on.
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Building While Balancing In Your 30s
At this stage, life becomes more complicated. You could be advancing in your career, purchasing a home, or nurturing a family. Finances may seem tight, yet it remains a vital decade for investments.
During this time, you may hear about ISAs, also known as Individual Savings Accounts. These accounts let your money grow without being taxed. Many people start to wonder if they should focus on pensions or ISAs. Both options can help build long-term wealth, but they work in different ways.
Continue growing your investments, but also think about finding a balance. Diversifying your investments can reduce risks. Don’t put all your money in one option, especially if you want to meet financial goals like paying for your children’s education or retiring from work early.
Essential actions include the following:
- Raise pension contributions as your income increases.
- Start thinking about your long-term goals like retirement age, lifestyle, etc.
- Examine your portfolio annually to ensure it stays aligned.
Make sure your investments continue to align with your goals, risk tolerance, and any life changes, such as a new job, home, or arrival of a child.
If you’re deciding whether to focus on your pension or an ISA, check out our guide on Pensions vs ISAs: Which Should You Prioritise First? It offers a clear comparison.
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Strategic Growth and Security In Your 40s
Your forties are when reality starts to set in. Retirement becomes an actual goal with a deadline.
You may be earning more money now, giving you more alternatives to invest. However, expenses can still be high. You need to balance maintaining, investing in, and protecting what you’ve built.
- Now is a good time to evaluate your pension funds and combine them.
- It might be smart to reduce risk, especially if you’re doing better than expected.
- Think carefully about tax efficiency and planning your estate.
If you haven’t consulted with a financial advisor yet, now is an ideal time to do so.
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Getting Retirement-Ready In Your 50s
Retirement is approaching, and it’s essential to make sure you are prepared. You need to know how much money you will need and how close you are to having it.
Now is the time to reduce risk. A sudden market drop right before you retire can highly impact your finances if you’re not prepared.
Focus on the following:
- Shifting some investments to lower-risk options
- Checking when and how you’ll access your pension
- Exploring other income sources like ISAs or rental income
Start imagining what your retirement will look like. Will you work part-time? Do you want to travel often? Will you downsize? Your choices will affect the amount of money you will need.
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Focus on Income and Preservation In Your 60s and Beyond
You’ve worked hard and saved a good amount of money, and now it’s time to enjoy it. But it doesn’t mean you should stop investing.
Your goal is to protect your money and make it last. You will want a steady income and to avoid surprises. This means investing your money in safer assets, such as bonds, savings accounts, or annuities.
Think about:
- Making money from your investments
- Keeping some funds available for emergencies
- Reviewing your estate plan and legal documents
Also, remember inflation. Even after you retire, your money needs to continue growing to keep pace with rising prices.
Common Mistakes to Avoid as You Age
Even careful investors can make mistakes. Here are some mistakes to watch out for:
- Not Adjusting Risk Levels: Being too aggressive with your investments in your 60s or too cautious in your 20s can have lasting effects.
- Neglecting Reviews: Life changes, and so should your investment strategies. Check them regularly to ensure they still meet your needs.
- Holding Too Much Cash: Savings accounts offer safety, but they mostly fail to keep pace with inflation. Don’t let your money lose value over time.
- Trying to Time the Market: This is tough for everyone, even the experts. Stick to your plan and focus on the future.
- Ignoring Fees: High fees can reduce your profits. Ensure you understand what you are paying for and whether it’s worth it.
Conclusion
There isn’t a perfect investment strategy for everyone, but there is one that fits your situation. As you age, your goals, needs, and willingness to take risks will likely change. Your investment plan should adapt to their needs.
Think of investing as a lifelong journey. In your twenties, you lay the foundation. In your forties, you build on that. By your sixties, you protect your assets. Each phase is critical and deserves careful planning.
If you are not sure how to begin or want expert advice, don’t hesitate to ask for help. Getting the proper support now can greatly influence your future.
The most crucial step is the one you take today, moving towards a future that is financially stable, flexible, and truly yours.