Video Transcript

One of the most common questions I hear from clients is, “Now that I have a 401(k) or IRA set up, how should I invest it?”

Choosing investments can seem like a daunting task if you don’t know where to begin, but if you consider your age and investment time horizon, the decision-making process becomes a lot more logical and a lot less scary. Let’s talk this through:

How old are you today?

  • The younger you are, the more years you have ahead of you in the workforce before retiring. Generally, it makes sense for younger investors to have a portfolio weighted toward equities because they offer historically superior investment returns over a long period of time. And time is something a young investor should take advantage of.
  • On the flip side, as you get closer to retirement age, it makes sense to have a portfolio weighted toward fixed income because they are less likely to decline in market value if the equity markets fall. In a market downturn, investors near retirement may not have enough time for an equity portfolio to recover by the time they need to start using the account.

Additionally, fixed income securities often pay interest, which retirees may need to cover living expenses after they are no longer collecting a paycheck from work.

Age and time horizon aren’t the only important factors when making an investment decision, but it can be a helpful starting point. You’ll also want to consider other factors like your risk tolerance and your expected cash needs in retirement.

Next steps:

  1. If you’re ready to create your own customized investment plan, we’re ready to help.
  2. While we’ve only skimmed the surface today, I encourage you to follow along with our Retirement and Investing articles.
  3. Subscribe to the Education Center to receive email updates.