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Changing Your Investment Strategy as You Age

Published September 27, 2019

3 minute read

Joshua Williams

By Joshua Williams

Your investment strategies will probably change throughout life to fit your specific needs. It’s impossible to make specific recommendations for an individual or family without going over a lot of details, but there are some general rules that you can follow.

Before you make any decisions about your investment portfolio, you should talk to a professional to make sure that you are taking advantage of every opportunity available to you.

Stocks vs. Annuities for Young Adults Without Children

With any luck, young adults have decades of investment opportunities ahead of them. Many of them also have a unique situation that they will never experience again in their lives: they don’t have any children or other dependents.

Young people without any children should typically look to invest the bulk of their money into riskier investment opportunities with the potential to reap high returns. Stocks are typically the best bet because they can buy them at low prices and wait for their prices to escalate as a company grows. Not all of these bets are going to pay off. That’s okay, though. Young people bounce back from financial loss much more easily than those who are close to retirement age or have children. After all, they have lots of time to make up the loss and they don’t have the additional expense of children.

The idea is that some of these risky investments will pay off in a big way, thus making up for those that flop.

Stocks vs. Annuities for Young Adults with Children

Once young adults have children, they should start thinking about more moderate investment strategies. This means moving some money out of risky stocks into those that are safer. You probably won’t get high returns on these, but you probably shouldn’t lose a lot either.

This is also a time for young adults to start thinking about what they can leave behind for their children. This is why some young adults consider annuities that offer death benefits. In general, annuities aren’t the best option for young adults because they’re going to end up paying insurance companies a lot of money before they get a return. In the event that you or your spouse dies, though, annuities with death benefits can make things a lot easier for your family’s financial security.

Stocks vs. Annuities for Adults Who Are Close to Retirement

You spend a lot of your working life planning for retirement, so you want to make sure that you don’t lose your money due to bad investment decisions in your later years. Older adults should have moved most of their money out of risky investments at this point so they can concentrate on stocks that consistently perform well. You might not have an income from any other source, so you really need these to come through for you.

Annuities also start making more sense as you get closer to retirement. Older people don’t have to pay into the annuity for as many years before they reap the benefits. They might, however, have to make larger payments. Remember that people live longer now than they ever have, so you can potentially draw payments from annuities for three or four decades after you retire.

Joshua Williams

Contributor

Joshua is a freelance writer with years of experience blogging about business and finance, and a whole host of other things too. When he's not writing, he enjoys camping with his dog, a golden retriever named Oakley.

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