The Best Investment Strategies by Age

Your life changes in stages, and so should your approach to investing. Your financial goals shift as you move through life, which is why there are a variety of investment strategies marked off by age. What works in your younger years—aggressive growth and long-term thinking—evolves into steady preservation as you approach retirement. Building a portfolio that grows with you means staying flexible and adjusting as your priorities change.

Why age matters in investing

Age-based investing means adjusting your portfolio as your relationship with risk changes over time. The goal is to take on more risk when you can afford to and dial it back as you approach the need for your money. Age gives you 2 powerful advantages that shape this approach: time and clarity. 

When you’re younger, time lets you ride out market ups and downs. As you get older, clarity about your goals helps you protect what you’ve built. In your 20s and 30s, you can lean into aggressive growth because you have decades ahead of you. By your 50s and 60s, you should be focused on preserving wealth and generating reliable income for retirement.

Asset allocation by age

Asset allocation is how you build a diversified portfolio across categories like stocks, bonds and cash. The mix you choose determines both your growth potential and your risk exposure.

Your personal risk tolerance matters just as much as your age. Some investors stay comfortable with higher stock allocations even as they age. Others prefer more conservative approaches earlier. The key is finding a balance that works for you. As you move through each decade, you’ll gradually rebalance, shifting from growth to stability.

Example asset allocation models

What does asset allocation look like in practice? Here are 3 portfolio examples that show how different risk tolerances might shape your investments at age 40:

• Conservative portfolio (60% bonds, 30% stocks, 10% cash): You prioritize stability and preservation. Most of your money is invested in bonds and cash equivalents, with some exposure to stocks for modest growth. This approach works if you’re risk-averse or planning to retire early.
• Moderate portfolio (60% stocks, 35% bonds, 5% cash): You balance growth and stability. Stocks give you upside potential, while bonds provide a cushion during market downturns. This is a middle-ground approach that many investors find comfortable.
• Aggressive portfolio (85% stocks, 10% bonds, 5% cash): You’re focused on maximum growth and can handle volatility. Your portfolio leans heavily into stocks, accepting short-term market swings for long-term gains. This works if you have a long-time horizon and strong risk tolerance.

Investment strategies for your 20s

Goal: Build emergency savings and start investing early

Your 20s are about establishing financial foundations. For younger investors, time is your biggest advantage right now. Every dollar you invest has decades to grow through compound returns.

• Set a target savings rate. Aim to save 10-15% of your income if possible. Start with whatever you can manage, even if it’s just 3-5%, and increase it as your income grows. Automate your contributions so saving happens without you thinking about it.
• Invest in high-growth assets. You can afford to be aggressive with stocks and stock-focused mutual funds. Market downturns won’t derail your long-term plans because you have many years to recover and benefit from rebounds.
• Prioritize retirement accounts. Contribute enough to your 401(k) to capture any employer match—that’s free money. If your employer doesn’t offer a 401(k), open a traditional individual retirement account like an IRA. You’re likely in a lower tax bracket now than you will be later, making Roth IRA contributions especially valuable.
• Build your emergency fund. Before you get aggressive with investing, set aside 3-6 months of living expenses in a high-yield savings account. This safety net keeps you from dipping into investment accounts when unexpected costs pop up.

Investment strategies for your 30s

Goal: Build stability and equity

Your 30s may bring significant life changes—marriage, children, home ownership, etc. Your risk tolerance may decrease as your responsibilities grow, but you still have time for meaningful growth.

• Maximize retirement contributions. If you haven’t already, work toward maxing out your 401(k) or IRA contributions. You’re likely earning more than you did in your 20s, so dedicating a larger percentage to retirement can become more manageable. Continue capturing that full employer match.
• Start a 529 plan for college savings. If you have children, a 529 plan offers tax-advantaged growth for education expenses. Even modest monthly contributions add up over 18 years. Balance this with your retirement savings. Remember: You can borrow for college, but you can’t borrow for retirement.
• Consider home ownership as an investment. Buying a home builds equity while providing stability for your family. Your mortgage payment contributes to an asset you own rather than rent, which you’ll never see again. Just make sure you’re financially ready with a solid down payment and emergency fund intact.
• Rebalance toward stability. Don't abandon growth. Instead, consider shifting 5-10% from aggressive stocks into more balanced funds or bonds. This adjustment reflects your shorter time horizon and new financial responsibilities.

Investment strategies for your 40s and 50s

Goal: Steady growth that moves toward preservation

Your 40s and 50s mark a transition period. You’re still building wealth, but retirement is visible on the horizon. Your strategy shifts from aggressive growth to protecting what you’ve accumulated while continuing to grow.

• Rebalance to reduce risk exposure. Review your portfolio annually and shift gradually toward more conservative asset classes. You might move from 70% stocks to 60%, then to 50% as you approach 60. The goal is to reduce volatility without sacrificing all growth potential.
• Explore fixed income investments. Consider dividend-paying stocks, bonds or real estate investment trusts (REITs) that provide regular income. These assets can supplement your salary now and provide cash flow in retirement.
• Review and update your plan. Your 40s and 50s are the time to get serious about retirement projections. Calculate whether you’re on track to meet your goals and adjust your savings rate or retirement timeline if needed.
• Maximize retirement savings. If you’re 50 or older, take advantage of catch-up contributions. These final working years are your chance to accelerate retirement savings.

Investment strategies for your 60s and beyond

Goal: Transition into retirement and preserve your wealth

Your 60s mark the shift from accumulation to distribution. You’re moving from building your nest egg to making it last, all while managing taxes and keeping pace with inflation.

• Develop a personalized withdrawal strategy. The 4% rule (withdrawing 4% of your portfolio annually) offers a starting point, but your situation might call for something different. Consider your health, life expectancy, other income sources and spending. Some retirees withdraw more in early retirement for travel and activities, then scale back later.
• Reduce your tax burden. Coordinate withdrawals from taxable accounts, tax-deferred accounts like traditional IRAs and tax-free accounts like Roth IRAs. The order matters—strategic withdrawals can significantly reduce your lifetime tax bill. Consider Roth conversions in lower-income years before required minimum distributions kick in at age 73.
• Plan your estate. Update beneficiaries on all accounts. Consider trusts, gifting strategies and how you want assets distributed to children and grandchildren. Estate planning can help make sure your wealth transfers according to your wishes. It can also lower tax implications for your heirs.
• Stay ahead of inflation. Don’t abandon stocks entirely. Keeping 30-40% in equities helps your portfolio grow enough to maintain purchasing power over a 20-30-year retirement. Balance this with bonds and cash for near-term expenses.

Risk tolerance vs. time horizon

Age-based guidelines give you a starting point, but the right investment strategy comes from balancing your risk tolerance with your time horizon.

• Risk tolerance is your ability to handle market volatility. Some investors stay calm during downturns, while others prefer stability and predictable returns. Your tolerance depends on your personality, financial cushion and comfort with market fluctuations.
• Time horizon is how long until you need your money. A 35-year-old planning to work until 70 has a longer time horizon than a 35-year-old retiring at 62. Time horizon also varies by goal. Money for a down payment on a house you want to buy in 3 years needs different treatment than retirement funds you won’t touch for decades.

Key considerations for military Servicemembers

Military life adds unique dimensions to investment planning and asset allocation. Deployment cycles and military-specific benefits can create opportunities and considerations for building wealth.

• Take advantage of the Thrift Savings Plan (TSP). The TSP offers incredibly low fees and automatic payroll deductions. If you’re eligible for the Blended Retirement System, capture the full 5% government match. Consider the Roth TSP option if you’re early in your career and in a lower tax bracket.
• Plan around deployments. Combat zone tax exclusions let you max out Roth accounts with tax-free income during deployment. This can create a foundation for tax-free retirement withdrawals in the future.
• Account for housing benefits. Basic Allowance for Housing (BAH) doesn’t count toward TSP contribution limits, but it factors into your financial picture. Some Servicemembers bank their entire BAH when living in base housing, directing it toward investments.
• Consider Survivors Benefit Plan (SBP) decisions. As you approach retirement, consider whether SBP makes sense for your family. It can protect your pension for surviving beneficiaries, but it comes with premiums.

FAQs about asset allocation by age

What is the 4% rule?

The 4% rule suggests you can safely withdraw 4% of your portfolio in your first year of retirement, then adjust that amount for inflation each year. It’s designed to make your money last 30 years.

What is the 70/30 rule?

The 70/30 rule refers to holding 70% stocks and 30% bonds in your portfolio. This moderate allocation balances growth potential with stability and isn’t tied to a specific age—it’s more about risk tolerance.

What is the 10/5/3 rule?

The 10/5/3 rule estimates average annual returns: 10% for stocks, 5% for bonds and 3% for cash or savings accounts. These are historical averages used for planning, not guarantees of future performance.

Take full advantage of a financial professional

Investment strategies by age give you a roadmap, but you don’t have to navigate these decisions alone. A Navy Federal Credit Union investment professional can help you build a strategy that reflects your goals, timeline and risk tolerance. Whether you’re just starting out or fine-tuning your approach to retirement, expert guidance can give you confidence in your plan.

Ready to take the next step? Contact a Navy Federal financial advisor for a consultation and get personalized advice tailored to your financial goals. We also invite you to check out our Digital Investor tool to explore investment options.