Changing Investment Strategies Through Life

Investment needs and strategies change through each stage of your life and career. No matter where you are in your career, there are key priorities to consider.

What are the differences in investment strategies and considerations for mid-career professions versus those of younger and older investors?

If you were like many people in their 20s, you may have started a retirement account via an employer-sponsored plan, picking a fund that aligns with your target retirement date. You set it and forgot about it. Your financial life tended to be fairly straightforward: you lived slightly below your means as you built emergency savings, paid off debts, and dipped your toe into investing.

In your 30s and 40s, your financial picture is more complex, but it’s the perfect time to reevaluate overall financial strategies to ensure that assets are aligned with goals and values. Your financial situation often changes as life circumstances – a house, spouse, children, aging parents – change. As new priorities emerge, it’s important to create an investment strategy that’s right for your unique needs and adjust as needed.

• Marriage and family: It’s important to have open and honest discussions with your spouse about finances. Establishing savings and investment goals helps a new couple make educated financial decisions. Common topics include saving towards a down payment and how much to spend on a home and saving for a child’s education expenses. It’s also a good time to review beneficiaries on retirement accounts and set up an estate plan.
• Investments: As earnings increase, the complexity of your overall investments often does, too. It’s important to ensure your investments align with your financial goals. If you’ve changed jobs, moving your 401(k) into an IRA could give you more investment options. It’s important to align your goals and portfolio and not take on unnecessary risks.
• Career path: Thinking of changing jobs, or recently made a switch? You’re not alone. The pandemic brought many changes, including rethinking a job or career. If you’re contemplating a change, understand how your benefits may differ from your current employer. Also, be aware of the consequences of leaving if you have unvested money in a profit-sharing plan or company stock.
• Aging Parents: Many people in their 30s and 40s are part of the “Sandwich Generation” – those caring for both aging parents and children simultaneously. This can be extremely stressful; you need to figure out how to budget for yourself and a family that spans three generations. A financial plan will help you understand what levers you can pull, and how that will affect your future.

As you get closer to retirement, you should begin to focus on what your life in retirement will look like. By envisioning your ideal retirement, you’ll have a clearer understanding of how your assets will cover expenses so you can adjust your portfolio from the accumulation stage to preservation. Hopefully, you’ve worked with a financial advisor to create a vision and financial plan for this next chapter in your life. If you haven’t, don’t worry – it’s not too late.

What’s most important, no matter what stage of life you’re in, is to find an advisor who understands the crucial needs for every stage of life, can help you build a plan that’s right for you, and work with you through the years as life continues to change.

This article originally appeared in the Talking Wealth Column of Crain's Chicago Business.