Retirement Investing Through the Decades: What to Do in Your 20s, 30s, 40s, 50s and 60s

Your 20s: Build an emergency fund, then start saving

In this decade, you likely have your first job and can begin socking away some money for retirement. But before doing so, make sure you have enough cash to pay for 3 to 6 months’ worth of living expenses, in case an emergency arises. If you set up a retirement account and then withdraw from it to pay for emergency expenses, you may be subject to taxes and a penalty payment.

If your company offers a 401(k) plan, that should be your first choice, especially if your company matches some of your contributions. If you turn down the option to contribute to a 401(k) plan that matches, you’re giving away free money.

You can also open an individual retirement account, or IRA. In 2026, you can contribute up to $7,500 (opens in a new tab).

If you can’t save enough for both a 401(k) and an IRA, go for the 401(k) because contributions are automatic, pretax and subject to matching.

Your 30s: Consider a Roth IRA and get asset allocation right

If you open an IRA in your 20s or 30s, you’ll want to consider a Roth IRA. Unlike a regular IRA, you don’t receive a tax deduction for contributions to a Roth. But when you withdraw money from a Roth IRA during retirement, it’s all tax-free. The money you withdraw from a regular IRA is taxed as regular income.

So if your tax rate is likely to be higher when you withdraw money from your IRA than it is now, you’re better off with a Roth IRA.

When it comes to allocating your retirement investments, a common guideline is to put at least 60% in stocks during your 20s and 30s. But it all boils down to your risk tolerance. If you are unwilling to stomach losses, don’t put everything in stocks when you’re young.

The worst thing you can do is buy stocks and then sell them for a big loss.

Your 40s: Don’t sacrifice retirement for a big home, kids’ college education

Many people purchase homes in their 30s and 40s. It’s important to remember that your house is not part of your retirement plan. Few people buy a great home, sell it at 60 and then live off the profits. So don’t spend so much money on a home that you can’t afford to save for your retirement as well.

You also must be realistic in providing for your children. Excessive spending on kids – education, cars, etc. – can leave retirement needs behind. You have to figure out what you need to retire and not give too much to your kids.

Fund retirement plans ahead of your children’s college funds. College tuition payments can come from a variety of sources, but retirement funds will have to come largely or exclusively from the parents of these college-bound youths.

Your 50s: Capitalize on catch-up contributions

The 50s are the peak earning years for most people, so saving is even more paramount.

The government gives you some assistance, allowing increased contributions to IRAs and 401(k)s through catch-up provisions (opens in a new tab). For IRAs, people 50 and older can contribute an extra $1,100 this year – $8,600 in total. For 401(k) plans, participants 50 and older can put in an extra $8,000 – $32,500 in total. Workers ages 60 to 63 can put in a higher catch-up of $11,250 – $35,750 in total. Starting in 2026, if your wages from your employer were more than $150,000 in the prior year, your 401(k) catch-up contributions must be made on a Roth (after-tax) basis.

If you have kids who are now out of the house, you might have enough money to finance those catch-up payments.

The 50s is a good decade to opt for more safety in your asset allocation. Somewhere in your 40s and 50s, you want to transfer to more conservative stocks, and make sure you aren’t all in stocks. Start having 20% to 30% in bonds. Consider orienting your stock holdings toward dividend-paying blue chips. They offer both safety and income payments that you’ll appreciate during retirement.

Your 60s: Plan an income strategy

This is the decade in which you may well retire. You’ll be shifting from accumulation to distribution. Hopefully you have built your savings and have a realistic distribution plan for your money to last.

The traditional rule of thumb is that you can cash out about 4% of your portfolio in the first year of retirement and adjust that amount for inflation after that. A lower starting rate may be more appropriate if you expect a long retirement. Ideally, you should have 2 years’ worth of living expenses in cash to avoid having to dump your investments when markets are weak.

In any case, if you retire at the full retirement age of 67 (opens in a new tab), you may have another 20 to 30 years to live.

As for asset allocation, your need for safety and income means bonds should account for a larger part of your portfolio.

Editorial note: Contribution limits are adjusted by the IRS every year. The figures in this article are the 2026 limits.