Financial experts recommend tailoring 401(k) strategies to each stage of life, as the approach that works for a 20-year-old may not suit someone in their 40s or 60s. Aoifinn Devitt, managing director of global wealth at Moneta, told The Independent that younger individuals typically benefit from higher-risk strategies due to longer time horizons, allowing market volatility to even out over decades.
For those in their 20s, the most critical step is simply enrolling. Jared Porter of 401GO emphasised that time is the most powerful variable in retirement savings, and delaying enrolment has a compounding cost that is hard to recover. Devitt recommends a large equity allocation—up to 80%—with broad diversification, including high-growth equities, thematic funds, emerging markets, and real assets. Themed investments like AI or biotech can also be suitable at this age.
In their 30s, investors should consider shifting towards fewer high-risk options. Devitt suggests moving from thematic funds to more stable index funds, such as those tracking the S&P 500, to maintain growth while reducing risk. Porter advises increasing contribution rates whenever income rises, even by just 1% per year, to combat lifestyle creep and boost long-term savings.
By their 40s, retirement may be closer, prompting a move away from riskier investments. Devitt recommends a balanced portfolio with 60% equities and 40% bonds, along with diversifiers to spread risk. This is also a good time to catch up on contributions if needed.
For those in their 50s and 60s, the focus shifts to preserving capital and preparing for withdrawals. Strategies should prioritise lower-risk assets and ensure the portfolio can generate steady income in retirement. Financial advisors often suggest gradually reducing equity exposure and increasing fixed-income holdings as retirement approaches.
