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Ways to Prepare for Retirement at Every Age

Ways to Prepare for Retirement at Every Age

April 12, 2023

Retirement is a complex issue that has no cookie-cutter solution that works for all people. Different people, with different backgrounds and varying priorities, need to tailor their retirement plans according to their specific needs. While some may have been saving for retirement for years, others may have just started thinking about it. Regardless of where you are in your retirement planning process, it's essential to understand ways to look out for your best interests at every age. In this blog, we created a rough guideline to break down retirement investment strategies by age and life stages.

Saving For Retirement In Your 20s

Entering the workforce can be a daunting task for people in their 20s. The idea of saving for retirement probably seems distant, but in reality, these years are crucial for getting a head start on saving. Compound growth is the term used to describe the phenomenon where interest gained on original investment is reinvested and earns interest of its own. This compounding effect can significantly increase your wealth over time. To take advantage of compound growth in your 20s, it is recommended that you save at least 10% of your gross salary, starting as early as possible. Additionally, many employers offer a company match option that should be taken advantage of. This match essentially gives you free money towards your retirement savings, so it's important to check with your employer to see if it's an option available to you.

Starting to save for retirement in your 20s is unique because this age group is experiencing many life events that can affect their plan. For example, many are finishing up college, starting their first job, and perhaps even getting married or purchasing a home. All of these events can be expensive and competing financial priorities make it difficult to prioritize retirement savings. However, it's important to remember that the earlier you start saving, the less you will need to contribute in the long run due to compound growth.

Saving For Retirement In Your 30s

When it comes to saving for retirement in your 30s, it is crucial to start early and have a solid plan in place. This decade is often marked by significant life changes such as getting married, having children, and buying a house, which can make it difficult to save for the future. However, it is important to prioritize retirement savings amidst these expenses.

To begin saving, individuals should consider contributing to employer-sponsored retirement plans, such as a 401(k), and take advantage of any matching contributions. For those who do not have access to an employer-sponsored plan, traditional or Roth Individual Retirement Accounts (IRAs) are viable options. Traditional IRAs offer a tax deduction for contributions, while Roth IRAs allow for tax-free withdrawals in retirement. In addition to retirement accounts, individuals can also invest in stocks, bonds, and mutual funds to diversify their portfolios and potentially increase returns. One unique aspect of saving for retirement in your thirties is the ability to take on more risk. As there is more time for investments to bounce back from market fluctuations, individuals can consider more aggressive investment strategies to potentially earn higher returns. A good benchmark to aim for by the end of this decade is to have three years of their annual pay saved for retirement.

Saving For Retirement In Your 40s

People in their 40s are experiencing several life events that can impact their ability to save for retirement. Many are dealing with aging parents and shouldering the costs of their care. Some may be dealing with their own health issues as well. Additionally, this is a time when many are focused on their children's education and might be funding college expenses. It can be tempting to cut back on retirement savings to meet these immediate needs, but it is critical to stay focused on the long-term goal of retirement.

There are many tools that people in their 40s can use to enhance their retirement savings. For example, they can contribute to an individual retirement account (IRA) or a 401(k) plan. Individuals should consider maximizing contributions to both accounts to ensure that they save as much as possible for retirement. In addition to retirement accounts, individuals can also invest in assets like stocks, bonds, and real estate. These assets can help diversify their portfolio and potentially generate more significant returns. When saving for retirement, people in their 40s should also resist the urge to take out loans from their retirement accounts. While it may be tempting to access these funds to pay for competing priorities, doing so can significantly impact their retirement savings in the long run. By the end of this decade, the general rule of thumb is to have put away at least four times their salary into retirement to help ensure that they may maintain their standard of living once retired.

Saving For Retirement In Your 50s

For people in their 50s, saving for retirement should remain a top priority. At this age, people often experience significant life events that can affect their retirement plans. For example, sending children to college or paying for their children's weddings can impact savings, along with caring for aging parents or dealing with unexpected medical expenses. However, this age group should also take the time to evaluate their retirement income plan to determine if they're on track to meet their financial needs when they retire. It is important to estimate your projected retirement income with your current savings, projected savings, and expected expenses during retirement.

One tool to help individuals save for retirement is to maximize contributions to their 401(k) and IRA. People aged 50 and over can save even more in these plans, making the most of the tax benefits and taking advantage of any employer-matching contributions. It is also important to minimize risky investments and diversify portfolios to reduce the risk of losing money in the event of a market downturn. In this decade of life, many individuals aim to save eight times their salary.

Everyone’s Situation Is Unique… So Should Be Their Savings Plan

No matter what stage you're at in life, it's important to understand the significant impact that saving for retirement can have on your financial future. Whether you're just starting your career, approaching retirement age, or anywhere in between, it's never too late to start planning for retirement. At Benefit & Financial Strategies, we understand that everyone's circumstances are unique and we are dedicated to ensuring that your best interests are considered when planning for retirement. Our team of experts offers a comprehensive range of retirement planning services including traditional and Roth IRAs, simple and SEP IRAs, and much more. With our unbiased, objective advice based on sound, up-to-date research, we can help you make a plan that works best for your retirement goals. Contact us today to learn how we can help you secure your financial future.