How to Maximize Your 401(k) Money if You're 60 Years Old

If you're 60 years old, you're coming down the home stretch of your career and your retirement savings journey. Full Social Security retirement age for people born in 1964 (age 60 in 2024) is 67, so your retirement is not just a faraway dream; it's a serious reality. And ideally you've been saving some serious money in your 401(k).

At 60, you still have some time to save and invest aggressively for retirement. Along with your future Social Security retirement benefits, you still have seven years (or longer) to maximize your 401(k) and other tax-advantaged retirement savings accounts like a traditional IRA or Roth IRA. Hopefully you're also earning enough extra cash to save some of it in a taxable brokerage account, giving you even more options to buy stocks and invest for your future.

As a 60-year-old investor, you might wonder how much of your portfolio should be invested in stocks. Although you're getting closer to retirement, you still have a few years left for your money to grow -- and for your money to recover from possible stock market declines. Don't invest as aggressively as a carefree 25-year-old, but definitely keep a healthy percentage of stocks in your portfolio.

Let's see how 60-year-olds should consider investing and allocating their money in their 401(k) and other retirement accounts.

1. Use target date funds as your retirement role model

As a 60-year-old, you're not new to investing. But you can still use one of the simplest strategies that's also good for early-career investors who are just getting started with the stock market: target date funds. By allocating your investment dollars automatically to a diversified mix of stock and bond ETFs (exchange traded funds), target date funds can help you manage your investment risks and (hopefully) boost your chances of maximum long-term gains.

And keep in mind: Even as a 60-year-old, you should be investing some of your money for the long term. You want that money to grow not just for the next seven years until you're Social Security–eligible, but for the next 10, 15, 20, 30 years or more -- of what will hopefully be a long, happy life in retirement.

The Fidelity Freedom® 2030 Fund is a good example of a target date fund that would be appropriate for a 60-year-old investor who wants to retire in about seven years (2031, as of this writing). As of April 28, 2024, this fund is invested in:

• 38% U.S. stocks
• 25% international stocks
• 37% bond funds

That's a total of 63% stocks. Different target date funds will give you various blends of U.S. and international stocks, and some might offer a higher percentage of bonds. If this allocation feels too risky to you, that's OK. You could choose a different target date year that has fewer stocks and more bonds. But in general, looking at target date funds can give you a good "retirement role model" for how to invest your retirement savings at age 60.

2. Yes, you still need to buy stocks (lots of them)

Whether you agree with the approach of a particular target date fund or not, the fact is that 60-year-old investors should still keep investing a big percentage of their retirement savings in stocks. Unless your retirement accounts have accrued so much value and you're so close to your "magic number" that you're considering retiring early, a seven-year (or longer) time horizon is still long enough to invest aggressively in stocks.

At 60 years old, you need to keep buying stocks to stay ahead of inflation. You need to make those numbers in your retirement accounts as big as possible so you can generate retirement income for the next 20 to 30 years. Yes, there are risks of investing in stocks. But retirees also face other risks, like inflation eating up the value of your retirement savings, or longevity risk (the risk of outliving your money).

Target date funds aren't the only way to buy stocks. You can build your own portfolio with low-cost stock and bond index fund ETFs, like the Vanguard Total Stock Market ETF and the Vanguard Total Bond Market ETF. Just look for low-cost funds that give you hundreds (or thousands) of stocks and bonds, all in one place.

3. Talk with a professional financial advisor

If you're age 60, retirement is likely starting to feel a lot more real for you. At this age, investors might want to talk with a professional to get personal advice for their situation. Working with a fiduciary advisor like a Certified Financial PlannerTM can be a smart move at this age (or any age). It can be worth hiring a financial planner, even for a few hours of their billable time, so you can get professional advice on how to save and invest for retirement.

Some investment firms like Betterment, Charles Schwab, and Vanguard offer access to personalized advice from fiduciary advisors, such as CFP® professionals. (Fees and/or minimum assets may apply.) Even if you've never worked with an advisor before, age 60 could be a good time to get a professional's perspective on your retirement savings, investments, and other personal finance questions.

Bottom line

As a 60-year-old, your retirement is getting closer -- but you still have some good years ahead to save, invest, and earn returns. Try to maximize your investment growth with a healthy dollop of stocks. Keep buying stocks to make the most of your money, and consider meeting with a fiduciary advisor for unbiased, professional advice on your retirement plans.