Being midway to retirement means you may still have years of earnings ahead. However, the margin for error is smaller than it was earlier in your career. Choosing investments typically involves balancing continued growth with a growing emphasis on risk management and future income. At this stage, you want to protect your progress while positioning your portfolio to support retirement spending later on.
A financial advisor can help review your strategy based on your timeline, risk tolerance and financial goals.
Investing Midway to Retirement: Goals and Time Horizon
Investing midway to retirement generally applies to individuals who are roughly 10 to 20 years away from leaving the workforce. This phase sits between accumulation-heavy investing and pre-retirement income planning. Growth still matters, but downside risk begins to carry more weight. At this stage, investors focus on preserving the gains they’ve already achieved, while continuing to accumulate assets for retirement.
Unlike early-career investing, where investment portfolios may lean heavily toward stocks, investments midway to retirement often call for a more intentional asset allocation. Investors may begin to gradually reduce equity exposure while increasing allocations to bonds, income-producing assets and other stable investments.
For example, a portfolio might shift from an aggressive stock-heavy mix toward a more balanced allocation, such as 60%–70% in equities and 30%–40% in fixed income and alternatives, depending on risk tolerance and retirement timing.
A targeted investment plan for this horizon typically blends growth assets, income-oriented investments and capital-preservation components. Equities continue to support long-term growth, while bonds, dividend-paying investments, and cash-like holdings help manage volatility and prepare for future income needs. This balanced approach aims to reduce the impact of major market swings, without sacrificing the long-term return potential needed to support retirement goals.
1. Diversified Stock Funds
Diversified stock funds invest across a wide range of companies, sectors and, in some cases, regions. Examples include total market funds, large-cap index funds and broad international equity funds. For investors midway to retirement, these funds are often used as core holdings because they provide broad equity exposure without relying on individual stock selection. At this stage, portfolios commonly hold a majority allocation to equities, adjusted for risk tolerance and time horizon.
Opportunities: Stocks have historically been a primary source of long-term growth. Over extended periods, broad U.S. equity markets have averaged annual returns near 10%, supporting purchasing power over time. Diversified stock funds allow investors to participate in this growth while spreading exposure across many companies, which can support continued asset accumulation as retirement approaches.
Risks: The main risk of diversified stock funds is market volatility. Significant market declines can have a greater impact later in an investing timeline, when there is less time to recover losses. As retirement nears, the size of equity positions and how they interact with other assets becomes more important, since short-term swings can affect portfolio value and withdrawal planning.
2. Dividend-Paying Stocks and Funds
Dividend-paying stocks and funds invest in companies that distribute a portion of earnings to shareholders on a regular basis. These investments often focus on established firms with consistent cash flow and mature business models. Dividend strategies are commonly used as part of an equity allocation and may sit alongside other stock holdings depending on overall risk tolerance.
Opportunities: Dividends can provide ongoing cash flow that may be reinvested during accumulation years or used as income later in retirement. Over long periods, dividends have contributed meaningfully to total equity returns, particularly when reinvested. Dividend-focused investments have also historically shown less downside volatility than growth-oriented equity strategies in some market environments. For example, from 1989–2025, Dividend Aristocrats specifically outperformed the S&P 500 in 66.7% of down months for the broader market. 1
Risks: Dividend payments are not guaranteed and can be reduced or eliminated during periods of financial stress. Dividend-focused portfolios may also become concentrated in certain sectors, which can increase exposure to sector-specific risks. In addition, share prices remain subject to market fluctuations even when dividends continue to be paid.
3. Bonds and Bond Funds
Bonds and bond funds are debt investments issued by governments, municipalities or corporations that pay interest to investors. Bond funds hold many bonds across issuers, credit qualities and maturities, which spreads risk. As investors move closer to retirement, bonds are often used to moderate overall portfolio fluctuations and may account for a larger share of fixed income exposure during this phase.
Opportunities: Bonds can help reduce portfolio volatility during stock market declines and provide a steadier stream of interest income. Over long periods, broad bond indices have produced average annual returns of roughly 4%–6%, including an average of about 4.79% from 1928 through 2024. While returns are typically lower than stocks, the lower volatility can support more stable portfolio behavior as retirement approaches.
Risks: Bond values are sensitive to interest rate changes, with rising rates generally reducing prices, especially for longer-duration bonds. Inflation can lower real returns if interest payments do not keep pace with rising costs. Bonds with lower credit quality introduce credit risk, including the possibility that issuers may miss payments or default.
4. Tax-Advantaged Retirement Accounts
Tax-advantaged retirement accounts such as 401(k)s, traditional IRAs and Roth IRAs often remain a core part of an investment strategy in the years leading up to retirement. These accounts allow investments to grow on a tax-deferred or tax-free basis, which can materially affect long-term accumulation. Many investors focus more heavily on these accounts as income rises and retirement planning becomes more time-sensitive.
For 2026, contribution limits increase across several account types. The 401(k) employee deferral limit rises to $24,500, with a higher $32,500 limit for workers age 50 and older. Individuals ages 60 to 63 may also qualify for a special super catch-up contribution of up to $11,250, allowing total deferrals of up to $35,750. IRA contribution limits increase to $7,500, or $8,600 for those age 50 and older 2 .
Opportunities: Tax-deferred and tax-free growth can support compounding over longer periods, especially for investors still several years from retirement. Catch-up and super catch-up contributions provide an opportunity to increase annual savings during higher-earning years. Using a mix of traditional and Roth accounts may also provide tax flexibility later, depending on how retirement income is structured.
Risks and Limitations: Annual contribution limits restrict how much can be added each year, which may limit savings potential for those starting later. Tax rules governing retirement accounts can change, affecting contribution limits, withdrawal requirements or tax treatment. Required minimum distributions from traditional accounts may also affect retirement income planning and increase taxable income in later years.
5. Target-Date Funds
Target-date funds are professionally managed portfolios that automatically adjust their asset allocation as a selected retirement year approaches. They typically hold a mix of stocks, bonds and other assets, with risk levels gradually reduced over time based on a predefined glide path. These funds are commonly offered in employer-sponsored retirement plans such as 401(k)s, though they may also be available in other account types.
Opportunities: A key benefit of target-date funds is built-in diversification and automatic rebalancing. For investors who are partway to retirement, this structure can help maintain exposure to growth assets while gradually shifting toward a more conservative allocation. At this stage, many target-date funds still hold a meaningful portion in equities, which supports continued growth while adding an element of risk control.
Risks: Target-date funds rely on standardized assumptions about retirement age and risk tolerance. These assumptions may not match every investor’s situation, particularly if retirement timing, income needs or outside assets differ from the fund’s design. The limited ability to customize allocations can also make it harder to coordinate tax planning or respond to changes in personal circumstances.
How a Financial Advisor Could Help With an Investment Plan
A financial advisor can be useful when you are partway to retirement and trying to decide how to invest for continued growth while managing risk. At this stage, the focus often shifts from simply accumulating assets to making sure your investments can support future income needs without taking on more risk than necessary.
The decisions involved usually include how to set an appropriate asset allocation, whether your portfolio is too aggressive or too conservative and how your investments should change as retirement gets closer. You may also need to decide how often to make adjustments and which accounts to use for different types of investments.
A financial advisor can help evaluate your current portfolio, identify gaps or overexposure and recommend an allocation that reflects your time horizon and goals. Advisors can also assist with rebalancing, diversification and reviewing how the portfolio might behave under different market conditions to support more informed decisions.
Questions you might ask include whether your current investments match your retirement timeline, how much risk you are taking today, how taxes affect investment choices or how future withdrawals should be planned. These questions often become more important as the margin for error narrows.
Advisor input tends to add value as investment decisions become more connected, timing becomes more sensitive and changes are harder to undo. Managing risk, taxes and income planning together can add complexity, and guidance can help keep the investment approach consistent as priorities and circumstances change.
Bottom Line
Investments midway to retirement often call for a different approach than earlier or later stages. The emphasis typically shifts toward maintaining growth while managing risk and preparing for future income needs. A combination of diversified equities, income-focused investments, stabilizing assets and tax-advantaged accounts can help support this balance.
Retirement Investment Tips
- Because retirement decisions can have lasting effects, a financial advisor may help create an investment plan that reflects your timeline and financial priorities. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to diversify your portfolio, here’s a roundup of 13 investments to consider.
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