Investing for retirement is important at any age, but the same strategy should not be used for every stage of your life. Those who are younger can tolerate more risk and/or can contribute small amounts, if that's all they can afford. Those who are older should take advantage of higher salaries and lower expenses to make the most of their peak years.
Starting Out: Your 20s
Even though you may have recently graduated from college and are likely to have started buying smart gadgets please also use this time to start investing. Whether it’s in a company EPF account or a PPF account you set up yourself, invest what you can as a twenty-something, even if you can contribute the 15% of your salary.
You have the biggest advantage over everyone in investing right now: time. Because of compound interest, what you invest during this decade has the greatest possible growth. Since you have more time to absorb changes in the market, you should also invest aggressively in Equity Mutual funds and avoid slow-growing assets like bonds.
Remember to stay away from unnecessary borrowing or over spending on your credit cards and personal loans.
Career-Focused: Your 30s
If you put off investing in your twenties due to enjoying earlier carrier year or paying off student loans or the fits and starts of establishing your career, age 30's is when you need to start putting money away. You’re still young enough to reap the rewards of compound interest, but old enough to be investing 20-25% of your income. Also read:
Even if you’re now paying for a mortgage or starting a family, contributing to your retirement should be a top priority. You still have 30-40 active working years left, so this is when you need to maximize that contribution. Make sure to start an PPF account if your are not having an employee and having EPF account towards safer allocation.
Still you can invest majority of your investments for longer term needs like childs education, marriage or retirement in a diversified equity fund.
Retirement-Minded: Your 40s
If you’ve procrastinated saving for retirement until your forties, or if you were in a low-paying career and switched to something better, now is the time to buckle down and get serious. You’re at the midpoint of your career and you're probably reaching your peak earning potential.
Even if you’re saving for your kids’ college funds or continuing to pay your mortgage, retirement savings should be the forefront of every financial decision. You have enough time to play catch up if you’re careful, but not enough time to mess around. Meet with a financial advisor if you’re not sure about which funds to choose. You’ll need to save in aggressive assets like equity mutual fund so your funds beat inflation.
Do remember to start parking funds out of Child education, marriage goals to Bonds or FD's any need which is due in next 3-5 years should not go to equities at all.
Closing In: Your 50s and 60s
Since you’re getting closer to retirement age, now is not the time to lose focus. If you spent your younger years putting money in the latest hot stocks, you need to be more conservative the closer you get to actually needing your retirement savings.
Switching your investments to more stable, low-earning funds like bonds and money markets can be a good choice if you don’t want to risk having all your money on the table.
Now is also the time to take note of what you have and when might be a good time for you to actually retire.
The Bottom Line
A Chinese proverb says: “The best time to plant a tree was 20 years ago. The second best time is now.” That attitude is at the heart of investing. No matter how old you are, the best time to start investing was 20 years ago. The second-best time is now. It’s never too late to do something, though. Just make sure the decisions you make are the right ones for your age group — your investment approach should age with you.
It's also a good idea to meet with a qualified professional who can tell you where you stand and where you need to go. Professional help always pay in long run.
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