Investing by age: A guide to every stage of life
Investing can seem daunting if you don’t know where to start, but it’s an important step towards building a secure financial future.
One of the most important principles to understand is how your age can and should influence your investment strategy.
For example, a 20-year-old just starting their career is likely to make very different choices compared to someone in their 50s who is nearing retirement.
Understanding these differences, while also appreciating a few universal truths about investing, could be key to building a robust and long-term financial plan.
Here’s what you need to know about investing at every stage of life. And remember, it’s never too late, or too early, to get started.
Younger investors should focus on building good habits and instilling a philosophy of growth
When you’re in your 20s and 30s, time is often your greatest resource. You have a long investment horizon stretching out before you, perhaps even spanning decades. This means you can nurture lifelong habits and build a strong financial foundation to support your later years.
While you may not be earning as much as you might be in your 40s and 50s, the effects of compound interest could help you grow your wealth, especially if you’re saving small amounts. The frequency is often what adds up with long-term investing.
Here are a few strategies to keep in mind.
Focus on growth
This could be the ideal time to focus on growth-oriented investments, such as stocks and equity-based funds. These could offer greater capital appreciation over time, so you might see noticeable long-term growth in your investments.
It may also be worth discussing your pension and retirement plans with your financial planner now. While it may seem like retirement is a long way off, early contributions could help support long-term growth.
Embrace compound interest
The power of compound interest is particularly potent over long periods. Even small, regular contributions made early in your career could snowball into substantial sums.
Here, the sooner you start, the more time your money has to work for you.
In the example below, assume you put aside an initial amount of £10,000, with monthly contributions of £250. For this calculation, the interest rate is 3.5%.
| Time invested | Total deposit | Interest earned |
| 10 years | £40,000 | £9,970 |
| 20 years | £70,000 | £36,350 |
| 30 years | £100,000 | £85,890 |
Source: Aviva
As you can see, the longer you stay invested, the more interest you could earn as a result of compounding. Indeed, by Aviva’s calculations, if you were to save for 40 years, the interest earned on your money would exceed your total contributions.
If you were to increase your monthly contributions as your salary increased, you could save exponentially more.
Don’t forget about debt
No matter your life stage, managing your debt effectively is key. It could help to prioritise paying off high-interest debt, such as credit cards. However, don’t be afraid of “good debt”, such as a mortgage or education. This can form a crucial part of your long-term financial plan.
The mid-career investor might focus on balancing growth with stability
As you move into your 40s and 50s, your financial goals may start to shift. While growth remains important, you’ll likely begin to think more seriously about preserving your capital, particularly as retirement draws closer.
You may also have more responsibilities, such as mortgages, family expenses, or saving for your children’s education. This might mean you’re less interested in taking big risks. Using what you’ve built in your 20s and 30s, you can put your mind to finding stability while maintaining an upward trajectory.
Adjust your portfolio as required
This time of your life might call for rebalancing your portfolio. While you can still put a significant portion into growth assets such as stocks, you may want to consider introducing more stable assets, such as bonds.
Bonds typically offer lower returns than stocks, but they’re less volatile, often making them a good cushion against market downturns.
At this stage, diversifying across various asset classes could become more critical.
Compound interest will still be your friend here, so be sure to keep it in mind as you plan your financial journey. This is something I can help you with.
Power up your pension
While you may have already been contributing to a pension in your 20s and 30s, this time of your life could be the prime time to increase your pension contributions. Many employers offer generous matching contributions to workplace pensions, which can help to significantly boost your retirement pot.
If you don’t have a robust strategy in place, now might be the time to lay down a solid plan. Consider the type of lifestyle you want to lead in retirement and work backwards from there.
As of 2025, the Retirement Living Standards report notes that a single person would need around £43,900 a year to live comfortably. A couple would need £60,600. While some of this may be covered by your State Pension, you will likely need to cover any shortfall.
If your current savings strategy isn’t going to be enough to support this, you may need to reconsider your options.
Keep in mind that the cost required to lead a comfortable life is likely to increase over the years as a result of inflation.
Review and rebalance regularly
Regularly reviewing your portfolio means you can ensure that your risk tolerance matches your evolving financial goals. As you get closer to retirement, you may want to consider gradually de-risking your portfolio, even if it means talking to your financial planner about adjusting the proportions within your portfolio.
The pre-retiree and retiree could focus on capital preservation and income generation
As you approach and enter your retirement, likely after the age of 60, your investment focus may shift dramatically. For most people in retirement, the primary goal becomes about preserving capital, generating a reliable income stream, and managing risk.
You might be drawing on your investments and pensions, so it’s important to protect your nest egg.
You can approach this in several ways.
Generate an income
Investments that provide a steady income can become an attractive option in retirement. This could include dividend-paying stocks, bond funds, annuities, and even property investments. The aim here is to create an income stream that can support your lifestyle without relying on your capital.
Preserve your capital
While some growth is important to fight inflation, your focus will likely remain on protecting your capital. Your portfolio might now weigh more heavily towards lower-risk assets. This might include a larger portion of cash and cash equivalents, which can make tending to your immediate needs easier.
Navigate withdrawals carefully
Planning how you’ll draw down your pension and other investments ahead of time is key. Here, it might be valuable to learn about the different options that could suit you. It’s also important to understand the tax implications of options such as drawdown or annuities.
Seeking professional advice can help ensure that your withdrawal strategy is not only tax-efficient but also sustainable for your long-term comfort and security.
The universal role of a financial planner
While your age may contribute to how you manage your financial strategy, several principles remain consistent throughout your journey.
Diversifying your investments, navigating obstacles with patience and discipline, and seeking the help of professionals could be key to a successful financial plan.
In terms of financial planning support, I can help you:
- Assess your current financial situation and goals
- Determine your risk tolerance
- Develop a personalised investment strategy tailored to your circumstances
- Navigate complex tax rules and regulations
- Provide ongoing advice and support as your needs change.
In an ever-evolving landscape, the value of expert advice could be priceless. Get in touch with me today to find out more about how we can work together and what I can do to support your financial goals.
Email Marnel.Stafford@fosterdenovo.com or call 07305 970959 or 0207 469 2800 to learn more.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Workplace pensions are regulated by The Pension Regulator.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means-tested benefits. You should seek advice to understand your options at retirement.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
A future performance forecast/indicator is not a reliable indicator or guide to future performance and may not be repeated.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
The Financial Conduct Authority does not regulate tax planning, buy-to-let (pure), commercial mortgages, and some aspects of unsecured loans.
