Your Age-by-Age Map to Retirement Planning
Retirement planning is a crucial part of financial planning and, ideally, it should begin early in life. As we age, however, our retirement planning strategies must evolve to meet changing financial needs and goals. In this article, we’ll explore strategies for retirement planning by decade, starting in your 20s and continuing through your 60s. Whether you’re just starting to save for retirement or you’re already nearing the day you’ll leave the workforce, there are strategies below that you can use to help create a comfortable and secure retirement.
Retirement Planning by Decade: Your 20s
Your 20s are often a time of exploration, adventure, and personal growth. Yet, this is also an ideal time to start planning for your future retirement. Here are some retirement planning strategies to consider in your 20s:
- Start contributing to a retirement account: If you have a job that offers a 401(k) or other retirement accounts, start contributing to it as early as possible. Even if you can only afford to put in a small amount each month, your contributions will grow over time, thanks to the power of compounding.
- Keep your expenses low: Your 20s are a great time to live frugally and keep your expenses low. The more you can save and invest now, the better off you’ll be in the long run.
- Invest in yourself: Your 20s are also a smart time to invest in yourself by building your skills and education. The more you can increase your earning potential, the easier it will be to save for retirement and achieve your other financial goals later on in life.
Retirement Planning by Decade: Your 30s
This is a time when many people start to settle down and build a family. This can make retirement planning more complicated, but there are still plenty of strategies to consider:
- Increase your retirement contributions: As your income grows, try to increase your contributions to your retirement accounts. Experts suggest putting at least 10-15% of your income toward your retirement savings.
- Build an emergency fund: An emergency fund can help you avoid taking on debt in the event of unexpected expenses, such as a medical emergency or job loss. It’s typically suggested that you should have at least three to six months’ worth of living expenses saved in your emergency fund.
- Start college savings for your children: If you have children, consider starting a college savings account, such as a 529 plan. This can help ensure that your kids won’t have to take on excessive student loan debt.
Retirement Planning by Decade: Your 40s
Your 40s are often a time when your earning potential is at or near its highest. However, this decade is also when many people start to realize that retirement is getting closer. Here are some strategies to consider in your 40s:
- Maximize your retirement contributions: By your 40s, you should aim to contribute the maximum amount allowed to your retirement accounts each year. In 2023, the maximum contribution for a 401(k) is $22,500.
- Pay off your mortgage: If you haven’t already paid off your mortgage, now is the time to start working toward that goal. The more you’re able to minimize your bills, the more money you’ll be able to free up to put toward your future savings.
- Review your investment portfolio: As you get closer to retirement, you may want to shift your investments toward more conservative options, such as bonds or dividend-paying stocks. Work with a financial advisor to review your portfolio and make any necessary adjustments.
Retirement Planning by Decade: Your 50s
Your 50s are a crucial time for retirement planning. This is when you’re likely in your peak earning years and can make significant progress toward your retirement savings goals.
- Assess your retirement readiness: Work with a financial planner to assess whether you’re on track to meet your retirement savings goals. This can help you make any necessary adjustments to your savings and investment strategies.
- Prepare for healthcare expenses: As you age, healthcare expenses may become a significant financial burden. Consider opening a health savings account (HSA) and contributing to it regularly to help cover future healthcare expenses.
- Review your retirement income sources: Make sure you have a solid plan in place for retirement income. This can include Social Security, pensions, and other retirement accounts. Wherever your income is coming from, you’ll want to ensure that you’ll have enough money coming in when you stop working to support your lifestyle for the entirety of your retirement.
Retirement Planning by Decade: Your 60s
Your 60s are when many people start to transition into retirement. This can be an exciting time, but it’s also essential to make sure you’re financially prepared.
- Review your retirement budget: You’ll want to sit down and write out all of your living expenses as well as all of the streams of income you’ll have and create a budget that’s realistic for your life in retirement. Ensuring that you’re living within your means in retirement will go a long way in helping you maintain financial stability throughout this phase of life.
- Delay Social Security: If you can afford to delay taking Social Security, it can be beneficial in the long run. Though you can start taking Social Security as early as age 62, your benefits increase the longer you wait.
- Stay invested: Just because you’re retired doesn’t mean you should stop investing. Make sure you have a diversified investment portfolio that can continue to generate income in retirement.
Implementing Retirement Planning Strategies by Decade
Ultimately, retirement planning is an ongoing process that requires careful consideration and regular adjustments. By following these retirement planning strategies by decade, you can help ensure that you’re on track to meet your retirement savings goals and enjoy a comfortable retirement. Remember, the earlier you start planning, the better off you’ll be in the long run.
At Andersen Wealth Management, we specialize in helping clients create personalized retirement plans that meet their unique financial needs and goals. Whether you’re just starting to save for retirement or you’re nearing retirement age, we’re here to help you navigate the complexities of retirement planning and make informed decisions about your financial future. Contact us today to schedule a consultation and learn more about how we can help you achieve your retirement goals.