Special to the Financial Independence Hub
Investing is a vital part of a person’s financial life. Whether you’re trying to aggressively grow your assets or prepare for retirement, investing is crucial for reaching your goals. There are several different types of investments that you can make throughout your lifetime, depending on your financial situation and what age demographic you’re in. Investment strategy can and should change as you get older, as your focus begins to shift from your career, to retirement, and beyond. Let’s take a look at three different age demographics and some investment tips for each.
20s –30s: Career Focused
At this age, you may be fresh out of college with a heavy amount of loans to pay off while starting at an entry level position with low income. In this situation, your first thought may not be to start investing your money and saving for retirement. This is understandable, but it’s also a mistake. Investing at a young age will better set you up for the future. Start to put some of your money into a retirement account like a Roth IRA. The IRS allows you to put up to $6,000 a year into your Roth IRA. If your company has a 401(k) plan, that’s another easy way to start saving for retirement especially if they’ll match a certain percentage of your paycheck.
Another popular way of investing is in real estate. Unlike stocks, you can assess its value and what profit it will bring you prior to investing. Especially at this young age you can begin to work on improving your credit score so that you’re able to buy homes and earn passive income. If you get lucky enough to find a home or apartment for a low selling price, you can resell or rent it out to make a large profit. Looking for investments that are low risk and high reward may be best for this age, especially when you don’t have a high amount of income.
40s –50s: Retirement Focused
You’re heading toward retirement age, most likely deep into your career, and have a significant increase in your income. Investing in more stocks and bonds is a great way to earn extra cash to prepare for your coming retirement. Along with that, your Roth IRA and/or 401(k) account most likely have a hefty amount accumulated. It’s suggested that you prioritize saving over spending at this age as it can benefit you immensely once you retire.
Putting your money in more stocks with dividends, adding more into your retirement accounts, buying bonds, and continuing to invest in real estate are all ways to continue to save and earn more money. Investing more in dividend-paying stocks is beneficial because they generate a regular income stream which can help pay for things like living expenses. Once retired all you are doing is spending so it is essential that you find a way to continue your cash flow.
60+: Retirement Age
Most people in this age group are either retired or preparing to retire. Thankfully, your social security benefits will have taken effect along with the ability to use money in your retirement accounts. This is a great time to put your money in stocks that give high dividends to help cover living expenses. Focusing on low-risk income rather than huge growth in risky stocks is a great way to continue to make money when retired. Investing in high-risk, possibly high-reward, stocks at an early age is common since you have that time in your life to earn that money back. Once you are retired you don’t have as much wiggle room to make a mistake in investing. Finding the right stocks that give large dividends is vital for increasing your earnings while being retired.
There are so many ways to invest at each point in your life. Keep in mind that what is working for you now, may not work for you in the future. Taking your professional and personal life into consideration when investing can help you determine where you need to be. Keep an eye on the market and its trends, along with new popular ways of earning that passive income. If you do research and are smart with your money you can put yourself in a good position financially for when you retire.