Preparing Your Finances for Your Golden Years

Decade-by-Decade Tips on Planning for Retirement

Planning for retirement can be overwhelming, but these decade-by-decade tips can help you move in the right direction.

Your 20s & 30s

At this point, you may still be paying off your student loans, planning for a family, or saving for a downpayment on a home, but even a small amount of money will go a long way. Your job’s 401(k) is a great place to start, but if you don’t have one, a Roth IRA will be your best bet. 

Since there are many years until retirement, you have a fairly high risk tolerance, so it may be a good idea to invest in potential high-reward stocks. Consider using a robo-advisor – a digital service that offers low-cost, simple investment management according to your goals. Many banks and financial advisors offer free resources and advice to help identify your goals and provide a roadmap for the future.

Adopt a pay-yourself-first mentality with saving and investing early and often. A solid financial plan includes disability and life insurance, taking advantage of employer matches in retirement plans, and benefiting from the power of compounding growth with consistent monthly saving.

Your 40s

If you have the means, invest additional money outside of your retirement account to continue growing your wealth. Work with a financial professional to help you diversify your portfolio and manage your risk levels. 

Make sure you have a robust emergency savings fund in case of job loss or a medical or housing emergency, ideally enough for three to six months of expenses. You should also make a concerted effort to eliminate debt from credit cards, cars, student loans, and mortgages, and plan for the costs of caring for aging parents. 

Your 40s is a decade for peak earnings! This is the time to invest aggressively. Work with your HR department to maximize your retirement savings. If you’re just getting started, put 5% away and increase it by 2% every year after.

Your 50s & 60s

If you haven’t already started saving for retirement, it’s never too late! Dedicate some time to thinking realistically about your goals for retirement and how much money would be required to achieve them. Enlist a professional financial advisor to help you assess the next steps.

If you already have an investment portfolio, move toward lower-risk investments. Use a social security calculator to estimate how much income you’ll have available during your retirement years, and don’t forget to account for how much of your money will need to go to healthcare as you budget. 

Increase savings rate and take advantage of catch-up enhancements in IRAs and employer plans. Incorporate tax planning into your savings strategies; explore Roth options. While you continue to accumulate assets, also work to reduce or eliminate debt in preparation for retirement.

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