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Retirement Planning Decade by Decade

Retirement planning is a lifelong process. Below are some of the key retirement-planning actions you need to be taking from your 20s through your 60s.

Your 20s

Start saving. The sooner you can start saving for retirement, the less you’ll have to save overall. If you start saving $5,000 per year at age 25, you’ll have just under $775,000 by age 65, assuming annual returns of 6%. Wait until age 35 to start saving and you’ll have about $395,000 — more than $300,000 less. Also, since you’re still decades away from your retirement date, don’t be afraid to take some risk with your investments. You’ll have to stomach some ups and downs, but earning higher returns from equity (or stock) investments now means more money (and less to save) as you get older.

Other steps to take when you’re young: start budgeting, avoid debt, and save for other goals, like buying a house. Even if you’re not earning a lot right now, adopting healthy money habits today will pay big dividends later in life.

Your 30s

As you enter your 30s, your income is probably heading upward and your life is beginning to stabilize. You may find that you can contribute more to your retirement savings accounts than you could in your 20s. As your income increases, consider increasing your retirement contributions by the amount of your annual raise so you don’t fall behind on saving. Reassess your savings rate and consider meeting with a financial advisor to make sure you’re saving as much as you can — and investing it well.

Your 40s

You’re at the halfway point to retirement. If you’ve been saving for the past 10 or 20 years, you should have a nice nest egg by now. If you haven’t gotten serious about saving, now is the time to do so. You’ll have to be fairly aggressive, but you still have some time to build a respectable financial cushion. Whether you’re an accomplished saver or just getting started, you may also want to consider meeting with a financial advisor to help you make sure you’re saving enough to meet your goals and investing in the best way possible.

A special note: people in their late 40s and early 50s are often looking at steep college tuition bills for their children. Don’t make the mistake of sacrificing your retirement goals to pay for your children’s college educations. Stay focused and on track so your children don’t have to jeopardize their financial future to support you as you get older.

Your 50s

Once you turn 50, you have the option to make catch-up contributions to retirement savings accounts like 401(k)s and IRAs. You can save an additional $6,500 a year in your 401(k) plan and $1,000 a year in your IRA in 2021. That’s great news if you’re already maxing out your savings in those accounts.

Your fifth decade is also the time to start thinking seriously about what’s going to happen when you retire — when exactly you’re going to stop working, where you want to live, whether you plan to work in retirement, and other lifestyle issues. It’s also the time to take stock of your overall financial situation. You’ll still want to keep saving as much as you can, but you may also want to make an extra effort to be debt-free at retirement by paying special attention to paying off your mortgage, car loans, credit card debt, and any remaining student loans.

Your 60s

Retirement is just a few years away. If you haven’t already, you’ll want to dial down the risk in your portfolio so you don’t take a large loss on the eve of your retirement. You’ll also want to start thinking about a firm retirement date and estimating your expected expenses and income in retirement. If your calculations show that you’re falling short, it’s better to know before you stop working. You can make up a shortfall in a number of ways — reducing living expenses, working a bit longer, and even delaying Social Security payments so you get a larger check.

Whatever your age, the key to retirement is having a plan and consistently executing that plan.

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