How to Invest for Your Age

We’ve all heard the story of the grasshopper and the ant: the lazy grasshopper who played instead of storing up food for the winter, and the industrious ant who worked hard so he would be well-provided for once the cold weather hit. The moral of this story has definite applications to retirement.

Growing your retirement savings through investment is a long-term process, and the earlier you start it, the better off you’ll be. The important thing when getting started isn’t saving up a lot of money right out of the gate; the first step is coming up with a plan you can commit to and follow through with.

4 Decades of Retirement Tips

In the world of investment and retirement planning, you clearly do not want to be the grasshopper. Take some antlike steps today to help ensure you are comfortable and well provided for when your retirement years arrive.

20s: For many Americans, their 20s are a time for fun, play, and not a whole lot of responsible planning—but that is the approach a grasshopper would take. For a savvy ant, the 20s are the time to plan for your future.

You will likely get your first “real” job in your 20s, which means you can also begin saving for retirement. Before you do that, though, build up an emergency savings fund that will cover three to six months of living expenses should an emergency ever arise. Pulling emergency money out of a retirement account is a bad idea and may incur taxes and penalties, so don’t look at your retirement money as being available for your use in a pinch. Save it for what it’s meant for: retirement.

You can kick-start your emergency fund in various ways, such as selling trading in items with the cash for gold program at CashMax. That hideous gold locket your aunt gave you for your 18th birthday could become a nice-sized deposit to give your savings efforts a healthy start.

Once your emergency fund is squared away, start participating in a 401(k) plan if your company offers one. You can also open an IRA. If you can’t afford both, opt for the 401(k), as contributions are pretax, automatic, and subject to matching.

30s: If you choose to open an IRA while in your 20s or 30s, a Roth IRA is the best option. Even though you won’t get a tax deduction for your Roth contributions, the money you withdraw from it during retirement won’t be taxable.

Also, when allocating retirement investments, you should put at least 60 percent into stocks during your 20s and 30s. If you have a low tolerance for risk, don’t put all your eggs in the stocks basket. If you really, really don’t like taking risks, look into CDs instead.

40s: For many, the 30s and 40s are the time for making a home purchase. Remember that a house is not part of a retirement plan, so don’t buy a home so expensive that it takes away from your ability to consistently add to your retirement savings.

Family concerns can also crowd in at this age. Don’t let the immediate-term wants of your children rob your retirement piggybank. Your teen may want a sports car today, but he may not like having you move into his home in your 80s as a consequence. Even putting aside college savings for your kids shouldn’t compromise your retirement savings efforts. Tuition funds can come from many different sources if you aren’t able to save up the full amount for your child’s college expenses, so don’t sacrifice your retirement funds attempting to do it.

50s: Most people are at their peak earning capacity in their 50s, and this an important time to save. Through “catch-up provisions,” the government allows increased contributions to 401(k)s and IRAs during this time.

The 50s are also a good time for safer asset allocations. Transfer to stocks that are more conservative, and transition to having 20 to 30 percent in bonds. It’s also wise to orient your stock holdings toward blue chips that pay dividends and offer income payments and safety.

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