You have a great chance to achieve your retirement goals if you treat retirement planning as a long-term project. When you start saving young, you can keep reinvesting gains and earning compound interest that adds up over the years. Perhaps even more important, you have time on your side. That means you can calmly ride out intermittent market fluctuations and won’t feel tempted to sell in a panic or buy on hype.
While you can always enjoy benefits from starting your retirement savings early, you should also consider adjusting your savings plan to conform to your age. If you’re not sure how you should approach retirement savings, consider some strategies that tend to work well for people in different stages of their life:
Get Started In Your Twenties
Did you know that less than one-third of all young adults have anything saved for retirement? Certainly, young adults may find it difficult to put away money for the far future when they’re still beginning their careers and coping with school loans, starting salaries, and a high cost of living. Even so, setting aside a small amount today will help you more in retirement than a larger amount later because you have more time for your money to grow, as illustrated below. Plus, you can develop the habit of saving and budgeting when you first begin your career, and those good practices will serve you well for a lifetime.
If you have an employer who matches employee contributions to a 401K, you also should take advantage of the chance to basically earn free money with even modest savings. Naturally, the faster you can reduce or eliminate your debts, the quicker you will be able to focus on future savings. Besides retirement savings, also focus upon setting aside an emergency fund that can help you avoid taking on even more debt when the unexpected happens.
Planning for You and Your Family in Your Thirties
If you’ve earned a few promotions and raises since you’ve begun your career, you should still prudently work to ensure that your income exceeds your lifestyle and not the other way around. People in their thirties might heed the good advice to pay themselves first, so they can save more money from their increased incomes. Retirement may seem like it’s still a long way away, but time passes quickly while you’re focused upon your growing career and family.
At this stage in life, some adults choose to step out of the workforce for a time to focus on their family. Before leaving your job, you might also consider the impact the loss of income will make upon your savings and even your Social Security retirement benefits. You might speak with a financial advisor to gather information that will help you decide if you can still reach your savings goals if you leave the workforce, cut back, or stay with your current job and profession.
In any case, people who do a good job of saving for retirement in their thirties should still have plenty of time to accumulate a nest egg. Hopefully, you’ll enjoy a higher income and reduced debt from your twenties, so you can invest aggressively to benefit from compound interest and reinvested returns.
Focus on the Future During Your Forties
During your forties, you might enjoy some new benefits and challenges. Many people around this age find that they have the work experience to make these some of their best earning years; however, they may also have to deal with the expenses of helping college kids or elderly parents. For instance, you might decide that it’s more prudent for your own kids to take out school loans than to help them with every college expense. If you save more money, you’ll be in a better position to help both you and them in the future.
In any case, if you do fall behind schedule for your retirement goals, you still should have time to save for a comfortable retirement. Just remember that if you wait until your fifties to catch up, you won’t have much time to take advantage of accumulated growth in your accounts.
Maximize Savings During Your Fifties
Hopefully, you’ll have had time to pay off a mortgage, reduce other debts, and accumulate a sizable retirement nest egg by the time you are in your fifties. Sadly, the Motley Fool found that typical Americans in their fifties still had just about as much debt as retirement savings. Hopefully, you’ve done better.
Once you relieve yourself of burdens, you can keep increasing your retirement contribution. You might also consider preparing for your retirement by downsizing. This is particularly true if you don’t believe you’re far enough along in your retirement plan for your age.
As you enjoy your fifties, you should start realistically thinking about the kind of retirement that you hope to enjoy. Remember that once you’ve reached your fifties, you’re almost at the finish line for your retirement goal, but it’s not the time to slack off. This is also a good time to ask for help from financial advisors if you need some assistance catching up.
Hopefully, you’re already working with a retirement professional. If not, you should start before you retire. Retirement planners can give you lots of great advice, including when to and in what order to begin drawing income from a pension, Social Security, and your savings. Not only can withdrawing money in the most sensible way help you conserve your savings and maximize income, it may also impact your tax burden.
If you retire from your job and find that your planned income won’t quite meet your budget, you may decide to extend your working years with a part-time or consulting position. As you did when you were younger, you’re wise to keep your income ahead of your lifestyle. You can make plans to budget, but you also don’t want an unplanned expense to totally derail your comfortable retirement.
You might also start planning for the legacy that you hope to leave behind. A financial advisor can help you find products that will help you enjoy security during retirement and leave a legacy behind for your family and favorite charities.
It’s No Time to Worry — It’s Time to Plan
No matter where you are in your life journey or retirement plan, we can help you improve. In our years’ of experience with retirement planning, we have heard and seen it all. Still, the sooner you get started, the sooner you can ensure you have the assets that you need to look forward to retirement. Tell us more about yourself today by sending an email, and we’ll show you exactly how we have helped other people in a similar situation.