Investing, by nature, involves some uncertainty, and it’s easy to get caught up in day-to-day moves when markets are volatile. Successful investing for retirement is all about thinking long-term. To stay centered on your goals, follow these four steps.  

20s: embrace market ups and downs

When you’re in your 20s, retirement might still be decades away. That can make market volatility an investment opportunity.¹
 

There are two related reasons to consider investing more aggressively when you’re young. First, younger investors may handle market ups and downs easier because they have time before they tap those retirement funds.
 

Second, with time on your side, you can benefit from the concept of compounding interest, or returns. Let’s say you’re 25 and started saving $5,000 a year in your 401(k). You’ve invested 60% in stocks and 40% in bonds, and your goal is to retire at 65. According to historical averages over the past 30 years, this mix would have earned an annual average return of 8.6%.² Using this average rate, by  the time you’re 65, you would have earned just north of $1.5 million.³
 

To reduce the risk of market fluctuations, create a diversified portfolio that holds different asset classes.⁴ A financial advisor can help you choose the right mix.
 

If you do not have access to a 401(k) or other employer-sponsored plan, or if you do but would like to save outside of that plan, you could also invest in a traditional individual retirement account (IRA) or a Roth IRA. The main difference between the two accounts being that with a traditional IRA, the savings grow tax-deferred until you withdraw them in retirement⁵ while any contributions you put into a Roth IRA aren’t tax-deductible now, but your retirement withdrawals are generally tax-free.⁶
 

30s: continue steady contributions

You’ve likely already enrolled  in a retirement plan such as a 401(k)  and have been contributing money consistently for several years. When you’re in your 30s, it’s tempting to reduce how much you put aside for retirement – especially when balancing different financial goals like paying down debt, building up an emergency fund or saving for a house down payment.
 

Even if you have more than one savings goal, the key to building a retirement nest egg is consistency.⁷ Committing to steady contributions takes the emotion out of investing and lets you think longer term.⁸ This approach means you don’t have to think actively about retirement savings all the time – you’re building up your nest egg automatically.
 

40s: capitalize on higher income

At this stage of your life, you’re potentially at the peak of your career and your earnings may have also risen. It’s an ideal time to revisit what you’re putting away for retirement.
 

Consider increasing contributions to your 401(k). One tactic is to add a little more whenever you get a pay raise.⁹ Check with your employer to see if your 401(k) has a setting which automatically increases your contribution annually, which would help make it easier to save more money.¹⁰
 

If you’re in your 40s, retirement is a little closer on the horizon and building up a strong emergency fund can help ensure you don’t need to tap into your savings early. Additionally, having a healthy emergency fund can help you get a head start building the cash savings you’ll need to have once you enter retirement. Experts suggest retirees should have at least one year¹¹ of daily living expenses in cash, and some recommend as much as three years to help weather any natural market volatility.¹²
 

All ages: invest savings

Once you’ve built your emergency fund and paid off your debt, you may want to focus on other savings strategies. It’s a natural instinct to keep additional funds in a savings account but you might want to rethink that plan.
 

While savings accounts have the upside of being low risk, it also means you’re likely getting a lower interest rate and more limited growth potential.¹³ When you invest your extra capital instead, you give your money the potential to grow faster and help cushion your savings against the impact of inflation.
 

At the end of the day, it comes down to what is best for your personal financial goals. If you’re saving for a short-term goal, like a special vacation or a down payment on a house, you should consider investing towards these goals relative to your time horizon and risk tolerance to help potentially accelerate progress towards your goals. However, some prefer to save for these goals, preferring the low risk and easy access of savings accounts. For longer-term goals, like your child’s college tuition or retirement, investing your additional savings is typically recommended. With a longer timeline you could be better positioned to navigate market ups and downs and may boost your savings potential.
 

It’s natural to feel uncertainty when markets fluctuate. But remember, the key part of investing for the long term is time in the market, not timing the market. For information on retirement planning, speak to a John Hancock certified financial advisor.