Planning for Retirement During Each Stage of Life

Those of us planning for retirement face a very different set of circumstances than we did a couple of decades ago. Pensions are often less generous, if they exist at all, young people are saddled with more debt, and the future of Social Security may not be guaranteed.

So what can you do to ensure you are set up financially for your later years? We’ve broken down some strategies that work for each stage of life.

Your 20s

This is often where you first experience some level of financial independence. It is also when you develop financial habits – good or bad – that can last a lifetime. Those habits will impact your ability to retire comfortably, even though retirement may seem like the distant future.

Start by establishing good credit. You can do this by opening up a credit card account and paying off the balance each month. You can also establish good credit by taking out a car loan and making the payment on time each month. If you have a chance to pay more than the required monthly payment, that will save you money in the long-term.

When it comes to retirement savings, if you have an employer that offers an employer-sponsored retirement plan, contribute as much as possible. If your employer offers a match, that is free money that you should take advantage of. And the money you save now will grow through the magic of compound interest more than the money you put in later.

If you don’t have an employer-sponsored retirement plan, consider opening a traditional IRA or a Roth IRA—accounts which enable you to put away money for retirement while earning interest over the long-term.

Your 30s

Now is the time when you likely are earning more money, but where you may also have more expenses. If you already contribute to your employer-sponsored retirement plan or your IRA accounts, try to contribute even more.

Many people start their families in their 30s, so saving for college will also become a priority. College costs continue to increase, so the earlier you can start saving, the better. There are a number of state-sponsored college savings funds that have a wide range of benefits.

Another thing to consider at this stage of life is setting up an estate plan. This is a framework for how you will provide for your children or other family members. As your wealth grows, you can amend your estate plan throughout your life.

Your 40s

Your children may be entering, or about to enter college. If you’ve saved for college, great! If not, look into grants, scholarships, and private or public student loan options.

Now is also the time when many people start to get even more serious about retirement. Make sure to set a savings plans with clear goals that will help you achieve success. You’ll start to visualize what your retirement will look like and will want to have discussions with any family members of what that entails. Having a plan to get you there is a huge part of making your dreams a reality.

Your 50s

Look back at your retirement plan. Are you hitting your goals? Will you be able to retire when you want to? These are questions that will become clearer in your 50s. If you aren’t on pace, you can start to save even more than you normally do.

You also will start to put some more specific timelines around your intended retirement. Many retirement plans offer catch-up contributions to people in their 50s that allow you to put away more than previous limits.

Your 60s

You may be ready to retire in your 60s. If so, congratulations! Consider putting off drawing your social security benefits as long as possible, allowing you to receive more per month than you otherwise would.

Also, before you retire, make sure you understand the tax implications of your various savings accounts. Certain retirement accounts are tax-deferred, meaning you pay taxes when you withdraw. Other retirement accounts are post-tax, meaning you pay nothing on withdrawals.

A major expense to think about at this stage is health. Learning about the details of your health care plan and Medicare supplements can help save you money over the coming years.

And remember, retirement isn’t all about frugality. If you’ve saved enough over a lifetime of work, it’s time to enjoy it during your sunset years!