Best Investments by EVERY Age | How To Invest

This article is all about what priorities and investments should we be making by age bracket. As you age, your investments and your priorities are going to change over time. That’s what I’ve summarized in this article, no matter if you’re 18, 35, 45, or even 55, there are going to be some nuggets of wisdom for you in this article.

As you’re going through this article, please remember that not everybody is in the exact same situation as you are, and a lot of financial situation really depends on a lot of different factors such as your family life, your upbringing, your environment, and the opportunities presented to you.

I’m also going to be making some assumptions about the age brackets today, and I’m assuming that you guys are going to work, you’re earning an income, and you’ve had some sort of schooling or education in the past.

When it comes to the type of investments that we should be considering as we age throughout our lives, I think one of the most important things that we really need to pay attention to is the resource of time. Time is the most important resource that I think is often overlooked because it’s not really talked about, but especially when you’re younger you feel like you have all the time in the world.

Personally, when I was in my early 20s, I didn’t really care too much about income appreciation or investment income at all. All I was really concerned about was hitting diamond rank in league of legends and trying to wake up before 8 am every day. With that being said, let’s go through the first bracket that we’re going to talk about, and we’re going to start at the beginning which is

1. Ages 18 to 24

This is the age bracket you’re in, and you’re probably still in school, or you’re just out of school, and you’re starting to build your own little bit of income. Basically, what you want to do is prioritize just a few things during this age bracket, starting with;

Number One: Investing in Yourself

I know it sounds kind of lame, but by getting more skills, or certifications, or more education, you’re going to be able to command more income in the job market. When you have more income in the future, that’s going to serve your investments in the future even better, because you’re making more money, you can save more money for investing.

Number Two: Plan to Pay Off Debt

The second priority in my opinion is to have a plan to pay off debt. By the time you actually reach that second bracket of around age 25, you want to have most of your student loan debt either paid off or at least have a plan for exactly how you’re going to pay that off in the years to come.

For debt specifically, I think it’s really important to avoid high-interest rate debt, and if you do get into high-interest rate debt which I would consider anything over 10% or 15%, pay it off immediately if you can.

Number Three: Compound Interest

The third priority at this age I believe is because you have so much time ahead of you, you really want to be taking advantage of compound interest in the form of investing for your retirement, or in taxable brokerage accounts. The best investments at this age are either starting a Roth IRA or contributing to your 401k.

What you want to do is start to consistently invest in these retirement accounts, because these are really great for your future. By starting your investment journey early and setting aside a small portion of your paycheck every single paycheck right into these investment accounts, you’re going to be a lot better off and way ahead of the game when it comes to saving for retirement.

If you’d like to have a stable investment that grows over time, quite passively, and is well diversified, you might want to look into index funds or target-date funds. Some of the best index funds out there are ticker symbol VTSAX which tracks the entire stock market, ticker symbol VVIAX which is a value index fund, or ticker symbol VFIAX which is the S&P 500 index fund by vanguard.

If you like to take on more risk at this stage in life which I think is completely appropriate because you are so young, you have a lot of time left, you can actually start to invest in things that are a little bit riskier but maybe have high return potential such as growth stocks like for example Tesla.

The main summary of the 18 to 24 age bracket is that you can take on more risk because you have so much time left, and again, we are prioritizing time in our investment decisions here.

2. Age 25 to 34.

This is the age at which you probably start to learn a little bit more about yourself, what your foundation is going to be in terms of your career, and you’re going to have to save a lot for different life experiences and life events such as saving up for an engagement, saving up for a wedding, starting a family, buying a house, and all those fun things.

Things are getting a little bit crazier in your life, so it’s really important especially at this age bracket to really prioritize saving and investing whenever you have the chance to. According to CNN Money, this is a mind-blowing fact, by the way, the average net worth of someone from the ages of 25 to 34 is $9,000. $9,000, that’s pretty low and I think we can aim a little bit higher than that.

Here are my priorities for this age range;

Number One: Pay Off All Existing Debt

The first one is to pay off all existing debt except for mortgages. By the end of this age bracket of 34, I would hope that you mostly have all of your student loan debt completely paid off, and no high-interest rate debt at all. The only debt that you’re probably going to keep on is the mortgage since it’s such a long-term loan.

Number Two: Roth IRA and 401k

The second priority in my opinion is to start to contribute more to your Roth IRA and your 401ks, and possibly be maxing those out regularly throughout this age bracket. At the age of 25, you’ll have about 40 years before you retire and at the age of 34, you’ll probably have around 30 years. So you still have a lot of time left especially in this age bracket to experiment with other types of investments, or even diversify your portfolio a little bit outside of stocks.

Ideally, during this whole time you’ve been adding to your index fund positions that you’ve started at the ages of 18 to 24. But if you haven’t started investing yet, it’s not too late, it’s definitely a great time to start.

Number Three: Set Aside Some Money

The next thing to do is to set aside some money for big purchases such as those crazy life events that we talked about earlier like having a kid, getting married, or buying a house.

Number Four: Increase Your Income

The fourth priority is to continue to increase your income, and maybe ask questions at work to figure out “okay, how do I get ahead, and how do I make more money in the future?” The other thing that you can do is to think about other streams of income that you can start outside of your main job. Maybe something like a side hustle, or acquiring rental real estate.

Your time horizon here is still quite long, even from the ages of 25 to 34, so if you think the wrong career choice starting out, it’s not too late to change just yet.

3. Age of 35 to 44

I have a lot of thoughts on the matter, first, your earning potential in this bracket is going to be pretty high if not the highest it’ll ever be. What you really want to make sure of is to not squander your money away. You want to make sure that you’re not spending too much of your income here on fancy toys or designer clothes for example. You want to really be saving a lot of that majority of your income during your peak earning potential towards bigger goals like saving for retirement or putting your kids through college.

The priorities for this bracket are as follows;

Number One: More Retirement Minded

The first priority is to be more retirement-minded, you want to be thinking about what investments are good to add to, or possibly what investments are good to start right now. So by the time you’re 55, those investments are looking pretty good. If you do feel like you’re behind at this age but your earning potential is going up, this might be a good time to try to catch up by allocating more of your income towards investments and your retirement.

Number Two: Diversify

The second thing that you really want to focus on in this age range is to diversify your portfolio. You don’t want to be a hundred percent in stocks anymore at this age, you want to be starting to add other types of investments to your overall portfolio so that you can have a more well-balanced portfolio.

Ideally, in a one million dollar portfolio, I mean I would be blessed to have a 1 million portfolio at the age of 44, but let’s say you did have a million dollars at the age of 44 for your investments, ideally, 100% of that investment portfolio is not all in stocks. Hopefully, it’s well-diversified across many different asset classes including real estate, alternative investments, cash, etc.

For stocks in the market, you’re going to continue to invest in index funds, but now might be a really good time to start locking in some more aggressive plays for the next 20 to 30 years. For example, I believe in Tesla and Apple for the long term, especially in the next 20 to 30 years, and I think there’s still going to be a force in the economy 20 or 30 years down the line, I wouldn’t really mind investing heavily in those options.

Number Three: Assess What You’ll Need at 45+

Our last priority for this age bracket is by the time we’re 45 to figure out how much money we would need to comfortably live off of in retirement. Hopefully, by the age of 45 we have a sizable investment already that we might be able to live off of, but if we can’t live off of it just yet, how much are we actually off, so by the time we’re 55 or maybe 60 then we’re going to be able to retire.

It’s at this bracket that we want to become more retirement-minded because we are starting to slowly run out of time, we really want to make sure we have a plan for the next bracket.

Recommended: How Much You Need To Save – By Age

4. Age 45 to 54.

Admittedly I’m not in this age bracket yet, but I have done a lot of research and so the following information. Let me know if it hits the mark or completely misses the mark in the comments below, especially if you fall between the ages of 45 and 54.

The average net worth of someone at this age is around $100,000 according to CNN Money, I’m hoping that we’re well north of that because life tends to get really expensive at this age bracket. For example, you’re going to have to start paying for your kid’s tuition, especially if it’s college tuition in America that costs an arm and a leg, or you just have a bunch of teens that are just eating a bunch of food every single day. You might also have a mortgage, you might also get divorced, you might have a lawsuit against you, and life just gets really expensive at this point.

My priorities here for this age bracket are quite simple.

Number One: Don’t Lose Money

Number Two: Don’t Take Too Many Risks

In conjunction with not losing money, you don’t want to take on too much risk with new investments. I would actually shift more of the allocation of my portfolio towards more conservative investments and prioritize stability over growth.

Number Three: Continue to Diversify

You want to continue to diversify especially if you haven’t already. If you did do some diversification in the earlier age brackets, continue to do so and spread out your money. But if you haven’t, now is a great time to start because if you are 100% in stocks still at this point it might be a really good time to look elsewhere.

Number Four: Still Explore New Opportunities

Lastly, I did say you didn’t want to risk too much and prioritize stability over growth during this age bracket, but you still want to be looking for new investments and new opportunities because you still want to have a portion of your portfolio growing over time. If you go way too conservative too early, you could be jeopardizing the later years of your life, because who knows how long you’re going to live for, with the average life expectancy going way up these days.

You want to have some investments that won’t go completely to zero but still have some growth potential something like apple stock for example.

5. Age 55+

As we reach the age of 55 and up, this is going to be the last and final bracket that we’re talking about today. This is where we’re going to be way more retirement-focused.

At age 55 and up, this is the pre-retirement age, you’ve mostly made it, most of the way there I mean you’re pretty much close to retiring. If you’re not close to retiring at the age of 55, you’re probably going to continue to work towards 65 and retire then. The priorities at this stage are pretty easy and straightforward.

Number One: Figure Out What Else You Need

Assess what else you need to live off of comfortably for retirement. You want to know exactly how much is going to be coming to you, especially if you have a pension plan, or if you’re taking out early social security benefits at the age of 62. You’ll also want to figure out how much money you need to live off of in retirement, and there are going to be a lot of different calculators online for you to do so.

Number Two: Continue Best Practices

Secondly, you want to continue all the best practices from the prior brackets, but to maybe possibly start shifting more of your portfolio into conservative positions.

Number Three: Tax Strategy

The last priority in this bracket is to start thinking about taxes because we are going to probably take some taxable events when we withdraw from our IRAs or 401ks. If you have a traditional IRA or traditional 401k, you can read more about the taxable event situation, but you’re basically taxed at ordinary income rates. It’s at this time that it’s really good to start planning your tax strategy, especially around this age, perhaps even moving to another state to take advantage of low state income taxes.

Okay, so, those are the priorities and the investments by age that we’ve talked about in this article. Hopefully, you guys found this article valuable, if you did make sure to share it so a lot of people can find it and get informed as well. Peace and Happy Hustling!