401(k) Investment Strategies by Age

October 12, 2021

Your 401(k) is a dynamic investment vehicle, and your strategies should reflect that. Here’s an overview of the best 401(k) investment strategies by age.

For most of us, the single most familiar investment vehicle is our 401(k) plan. It’s one of the most common retirement accounts out there.

There’s just one problem—while all of us have strong ambitions toward a comfortable retirement, we also don’t know how to leverage our 401(k)s successfully.

While there are plenty of great strategies out there, many of them rest on your age. After all, your 401(k) is ultimately a time-sensitive investment. Here’s a look at the best 401(k) investment strategies by age.

Why You Need an Age-Based Strategy

Technically, you could invest the same way throughout your life. You shouldn’t. Your life changes as you age, and your investment strategies should too.

Remember, a 401(k) plan is ultimately a time-sensitive account. You’re going to need that money when you retire, which for most people means age 65 and up. This means two things:

  1. You need to have enough saved by your target retirement age in order to afford retirement
  2. You have to preserve capital as much as possible the closer you get to retirement

In other words, your 401(k) investment strategy has to age with you.

Rule of Thumb for Strategies

In theory, you could apply any investment strategy you like. However, for most people, your 401(k) strategy should match your investment strategies elsewhere. This is most likely to give you an investment strategy that you’re comfortable with long-term, since you retain the same degree of risk exposure and roughly the same growth level.

The only exception is if the goals are dramatically different between the accounts.

For example, your 401(k) plan is designed for a future retirement date decades into the future—a long-term investment, in other words. This gives you plenty of time to take risks and recoup losses early on. It’s also a very different strategy from an investment account you’ll withdraw money from in the next five to ten years, such as an investment account created to save for a down payment on a house.

401(k) Investment Strategies by Age

With that in mind, here’s a breakdown of the best 401(k) investment strategies by age. The easiest way to approach this is by decades.


In your 20s, the world is your oyster. You have at least four decades until you retire, which is plenty of time to recover from risky investments that don’t pay off. Plus, you don’t have many life commitments yet (like kids or a mortgage) so you can afford to throw more of your income at your 401(k).

In simple terms? Your 20s is the time to take risks—as much risk as you can stomach—and put as much of your income toward retirement as you can afford.

In terms of your 401(k), that means putting most of your portfolio toward stocks. Think something in the family of 80% (if you can stomach going that high). This will make your portfolio more volatile, but remember, you have decades to recover any losses. Take a critical look at the funds offered in your 401(k) and choose the option with as much risk as you can tolerate.

This is also the time to try new things in investing. For example, this is the time to invest in things you love in pursuit of a payoff down the road—for example, Millennials are the keenest art investors on the market right now. Just make sure you do your homework about what can be held in your 401(k).


In your 30s, you still have at least three decades and change to recover losses. The difference is that you may have other life commitments come into play—kids, a mortgage, car payments, or debt for an advanced degree, to name a few. That means you probably have less income to throw at retirement.

You should still keep the same risk distribution (mostly stocks) but take the time to do an assessment of your financial goals. Are you hoping to send a kid to college? Pay off a house? Start a business? These will affect your income distribution, which will affect how much you can realistically afford to invest in retirement each year.


In your 40s, this is when you start to get more retirement minded. You’re now about twenty years away from the minimum retirement age, roughly the midpoint of your life.

If you didn’t do much retirement planning earlier in your life or switched to a more lucrative career, you can still make up the difference, but you’ll have to buckle down and make some sacrifices. If you’re on track, this is the decade to buckle down on portfolio building. Either way, retirement should be at the forefront of your financial planning, even if you’re paying down a mortgage or preparing to send kids to college.

At this stage, most investors should still have about 60% to 70% stocks in their 401(k), and you should still be maxing out your 401(k) contributions.

50s and 60s

At this stage, you’re getting closer to retirement every year. You should still be just as serious about retirement as you were in your 20s, but you’re also going to have to adapt to a more conservative strategy.

At this stage, stocks should be around half of your portfolio, with bonds making up most of the remainder. Gradually taper into majority bonds as you get older, as this will help preserve the capital you already have.

Invest in What You Love While Diversifying Your Portfolio

Like any other investment, your 401(k) plan is a dynamic investment vehicle. 401(k) investment strategies by age reflect this, evolving to help you invest as you move toward your retirement goal.

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