Retirement Planning Across the Decades

Your 20s: Start Early

As an investor, the most valuable asset you have in your twenties is time. Even small contributions to your retirement accounts can become meaningful due to compounding over the years. A person who begins saving in their 20s often has a major advantage over someone who waits until their thirties or fourties to start.

Your twenties is the ideal decade to build strong financial habits. Contributing regularly to a 401(k) or IRA can help make retirement saving part of a normal monthly routine. Taking advantage of matching in your employer’s retirement whenever possible is essentially free money that can significantly boost long-term savings.

Your 30s: Balance Family and Savings

For many people, their thirties bring major financial responsibilities such as buying a home or raising young children. These responsibilities can place stress on monthly budgets, and it’s tempting to reduce retirement contributions. However, consistently saving during these years remains important because retirement accounts still have decades to grow.

Instead of allowing lifestyle expenses to rise with income, retirement savers should aim to increase their contributions whenever they receive raises or promotions. Most employer retirement plans give you the option to increase your contribution by one percent each year automatically, which helps set up your environment for success.

Your 40s: Expand Savings Strategies

The forties are the decade where income tends to increase more substantially, making this an important decade for accelerating retirement savings. Many investors move beyond basic retirement plans and begin using additional tools such as IRAs, Health Savings Accounts, Permanent Insurance, and taxable investment accounts to build long-term wealth.

This is also the time to carefully evaluate financial goals and overall progress. Reviewing investment allocations, estimating future retirement expenses, and considering the impact of taxes and healthcare can help ensure long-term plans stay on track. Don’t overlook risk management as your income and assets are incredibly important to protect through the stretch run.

Your 50s: The Stretch Run

Retirement planning becomes more urgent in your fifties. Fortunately, retirement plans allow catch-up contributions for people age fifty and older, providing an opportunity to boost savings during your later working years. Many individuals also focus on paying down debt to reduce fixed expenses in retirement, but this must be weighed against other financial planning alternatives.

Your fifties is a good time to begin considering a retirement income strategy. Future retirees should estimate monthly expenses, consider healthcare costs, and review expected income from Social Security, pensions, and investments.  Your goal in retirement should be to align guaranteed income with guaranteed expenses, and you’ll want time to be able to make that happen.

Your 60s: What Do You Want To Do When You Grow Up?

Not everyone can control when retirement begins. Health concerns, job loss, or family caregiving responsibilities sometimes force people to leave the workforce earlier than expected. The need for additional savings may force people to work longer than they want.  Because of this uncertainty, maintaining financial flexibility is especially important during the years leading up to retirement.

Retirement savers in their sixties should also carefully lay out their retirement distribution strategy and determine the best way to optimize Social Security benefits. Thoughtful preparation will provide greater confidence in retirement, lead to a more thoughtful legacy, and allow you to live your life by design.  The hardest part of retirement?  Figuring out what you want to do when you grow up!