A competitive runner’s strategy at the start of a race often is different than their approach to the middle and end of a race.
In many ways, 401(k) retirement accounts are like a race. Financial experts recommend strategies for those in their 20s that aren’t a great fit for people in their 40s or 60s, and vice versa. Each stage of life typically requires its own 401(k) approach, said Aoifinn Devitt, managing director of global wealth at wealth management firm Moneta.
"The typical retirement plan strategy has been to match a client’s age with when they anticipate retiring,” Devitt told The Independent in an email. “The younger the individual, you usually see a higher risk-reward strategy, due to their retirement being decades down the road. Longer time horizons tend to mean higher risk tolerance given the chance that any volatility of returns will ultimately even out over time."
20s: Get started
An individual’s 20s are arguably the most important part of a 401(k) retirement strategy because it gives compound interest – earning interest on contributions and interest already earned – the most time possible to work.
“It sounds obvious, but the biggest mistake people in their 20s make isn’t picking the wrong fund — it’s not enrolling at all,” said Jared Porter, chief market strategy officer of 401GO, a 401(k)-focused fintech company. “Time is the most powerful variable in retirement savings, and every year you delay has a compounding cost that’s nearly impossible to make up later.”
Time also gives riskier investments more runway to balance out pronounced ups and downs, Devitt said in an email to The Independent.
Whereas aggressive returns through high-growth equities and thematic funds usually isn’t a recommended strategy for those in their 60s and near retirement, it could be a good fit for those in their 20s who opened a 401(k).
“We recommend a large equity allocation – up 80%, with broad diversification and use of high growth equity funds, thematic funds, emerging markets, as well as other diversifiers such as real assets for this age group,” Devitt said.
Additionally, themed investments such as AI tend to be a better play early in an investor’s life since time tends to soften any market volatility.
“[The 20s] is the age where investors might seek to lean in to certain themes – like digital assets, AI, grid tech, or biotechnology for a portion of their portfolio,” Deavitt said.
30s: Keep the returns going
The 30s are a time for 401(k) growth. In theory, there’ve been multiple years of contributions boosting the balance through returns.
At this point, it may make sense to alter the investing strategy slightly toward fewer high-risk options, Devitt said.
Moving some of a 401(k)’s money away from thematic funds and toward something a little more stable, like index funds – funds designed to follow groups of stocks called “indexes” such as the S&P 500 – can lower risk while maintaining growth, Devitt said.
Additionally, the 30s are a good time to check contribution amounts. As employees move deeper into their career, they tend to earn more money.
Instead of spending that extra income on wants and needs, Porter suggested allocating some of that money for bigger contributions.
“Your 30s are when earnings typically start rising, and it’s tempting to let lifestyle creep absorb those increases,” Porter told The Independent in an email. “An effective strategy is to increase your contribution rate every time your income goes up. Even 1 percent per year makes a meaningful difference over the next three decades.”
Contribution amounts are typically found on pay stubs or by logging into the 401(k)’s online account.
40s: Create balance
Ages 40 to 49 mark a new stage in 401(k) investing.
Retirement may not be far off for some, a reality that should influence contribution and investment decision-making. Practically speaking, that means moving away from riskier investments and creating more balance in the portfolio, Devitt said.
That means cutting down equities, which can be risky, and adding lower-risk investments like bonds.
“They may need … to structure their 401k portfolio with a balanced risk reward,” she said. “So at this stage, a 401 (k) starts to look more like a traditional balanced portfolio – with 60% equities and 40% bonds.”
Account holders should consider adding to their portfolio some diversifiers – investments that help spread out risk – that help drive returns from more places without increasing risk, Devitt said.
The 40s are also a good time to catch up on missed contributions in the past by maxing out yearly contributions ($24,500 in 2026, per the Internal Revenue Service), Porter said.
Additionally, diversification is more important at this stage because those in their 40s are moving toward retirement, even though it’s still a couple of decades away. Be intentional about diversification and consider how fees can impact long-term returns, Porter said.
“You don’t need to be conservative, but having a thoughtful mix across asset classes helps manage risk as your balance grows,” he said. “Review fees on your investment options; small differences in expense ratios compound significantly at this stage.
50s: Catch up
The IRS increases the maximum 401(k) contribution amount once an account holder turns 50. In 2026, that amount is $7,500, for a total of $32,000 in maximum yearly contributions.
This extra contribution amount, known as a “catch-up,” is meant to allow account holders to make up for contributions missed earlier in life. And while catch-up contributions are valuable, they’re often not treated as such, Porter said.
“Once you turn 50, the IRS allows catch-up contributions,” he said. “Use them. This is one of the most underutilized tools in retirement savings.”
Beyond utility, catch-up contributions serve another important purpose in the 50s – they allow account holders to increase their contributions if projections show that they haven’t saved quite enough to match the lifestyle desired in retirement.
Hiring a financial professional can help gauge that, Porter said.
“Start modeling what your actual retirement spending might look like and how your savings trajectory maps to it,” he said. “Consider meeting with a financial advisor if you haven’t already to stress-test your plan.”
A stress-test – simulating what retirement income would look like based on various scenarios that could occur in the future – can also alert account holders to any risks in their asset mix that may need to change.
In general, account holders tend to shift to a more balanced approach in their 50s since retirement is closer, Devitt said.
”Many people begin gradually shifting toward a more balanced mix, still maintaining equity exposure for growth, but incorporating more fixed income to reduce volatility as you get closer to drawing down,” she said. “The right mix depends on your full financial picture, including other income sources, Social Security timing and healthcare planning.”
60s: Strategize withdrawals
At this stage, the recommended 401(k) strategies shift to the role 401(k) withdrawals will play in retirement.
Retirees with income from Social Security, 401(K)s, IRAs and other sources walk a tax tightrope, as each stream has its own tax rules.
“Think carefully about the sequencing of withdrawals across account types, pre-tax 401(k), Roth, taxable accounts, because the order can significantly affect your tax liability in retirement,” Porter said.
If the account holder plans to take income from retirement plans, it may make sense to hold off on receiving Social Security payments, Porter pointed out.
Doing so actually increases the Social Security payment in the long run because the retiree will earn increases of up to 8 percent for every year they don’t take payments until they’re 70 years old, according to Western & Southern Financial Services.
The age at which Social Security benefits start in full is 66 for those born from 1945 to 1956, and 72 if they were born in 1962 or later, according to the Social Security Administration.
Another thing to consider: Those who plan to work past 66 or 67 can hold off on withdrawing from their 401(k) until they’re 73. At that point, you must take required minimum distributions, Devitt said.
If that’s your plan, shifting to a conservative investing strategy that focuses on protecting what you have could make sense, she said.
