Retirement planning isn’t one size fits all. The strategies that matter most in your 20s look very different from those that become important in your 50s. While everyone’s financial situation is unique, each stage of life presents opportunities to build toward greater financial security.
The good news? You don’t need to do everything at once. The goal is to build healthy habits early and continue adding to them as your career, income and financial life evolve.
Retirement Planning in Your 20s: Build the Habit
The name of the game in your 20s is simple: spend less than you earn and start saving something.
The cliché that “something is better than nothing” really does hold true. If your employer offers a retirement plan with a company match, consider contributing at least enough to receive the full match.
Another powerful habit is increasing your retirement contribution whenever you receive a raise. If your income increases by 5%, for example, consider directing 1% or 2% of that raise toward your retirement plan. You still get to enjoy higher take-home pay while gradually increasing your savings rate.
Retirement Planning in Your 30s: Don’t Let Lifestyle Creep Win
Your 30s can bring promotions, higher income, a home, children and inevitably, more expenses. One of the biggest threats to retirement savings during this stage is lifestyle creep, or allowing spending to increase every time income does.
Consider working toward saving 15% or more of your income for retirement, depending on your circumstances.
Your 30s can also be a good time to look beyond your workplace plan. For those who are eligible, contributing to a Roth IRA can help create tax diversification. Contributions are made with after-tax dollars, but qualified withdrawals are tax-free, and starting early gives those dollars decades to potentially grow.
Retirement Planning in Your 40s: Expand Beyond Retirement Accounts
As you enter what may be some of your higher-earning years, look for opportunities to accelerate your progress.
Consider working toward maximizing contributions to available workplace retirement plans and IRAs. Once you are making strong use of tax-advantaged accounts, another milestone may be building a taxable investment account.
Unlike retirement accounts, taxable investments generally don't carry the same age-based withdrawal restrictions, which can provide additional flexibility for retirement or other long-term goals.
Retirement Planning in Your 50s: Prepare Your Finances for Retirement
Your 50s are when retirement can begin shifting from an abstract future goal to something much more tangible.
Continue maximizing savings opportunities but also evaluate your debt. A valuable goal is to enter retirement with as little burdensome debt as practical, potentially including paying off your mortgage.
This is also the time to reconsider how your investments are positioned. Your portfolio may soon need to do something it has never done before: replace your paycheck. That means balancing the need for continued long-term growth with your upcoming income needs and appropriate investment risk.
Retirement Planning Evolves with You
These milestones are guidelines, not requirements. Your appropriate savings rate, investment strategy and retirement timeline depend on your individual circumstances.
A CFP® professional can help you understand which milestones matter most for you and turn these individual decisions into a coordinated retirement strategy. Whether you're establishing your first savings habit or preparing to turn decades of savings into retirement income, the most important milestone is continuing to make progress.
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