Retirement saving strategies are likely to evolve throughout your life, with an early focus on putting away whatever you can, followed by protecting and perhaps catching up on your savings, and then sensibly drawing down assets in retirement. How much to save depends on when you want to retire, and your level of current income. Regardless of these variables, implementing a few savings habits at each stage of life can help increase your retirement security.
In your 20s. It may be tempting not to prioritize saving for retirement in your 20s because it feels far away. Saving for retirement can also be difficult in this age group because pay checks can be small, and student debt and rent payments can be large. However, this age is also the best time of your life to save for retirement because even the smallest amount of savings has many decades to grow. Putting money aside early also creates a habit of doing so. At the very least, saving as much as your company will match avoids leaving “free money” on the table.
In your 30s. You will hopefully find yourself with more income during this decade, but are also likely to have new expenses, such as childcare and home maintenance. Having created good savings habits in your 20s may help ensure that you not lose sight of the long-term savings goal. This is a good time to develop a budget. It is also a time where you do not have to be too conservative in your investment choices because you are young enough to withstand market downturns.
In your 40s. This decade usually means less student debt and a profitable time in your career, but you may also be behind in your savings. At this age, you can make more specific retirement plans in order to stay motivated, such as at least maxing out your 401K contributions each year. It is a good time to recalibrate your saving plan as necessary and increase or decrease your contributions accordingly. Failure to continue saving in your 40s compresses the time that you have to achieve your retirement plans.
In your 50s. At this age, you are eligible to make catch-up contributions worth an extra $6,000 to 401Ks, and an additional $1,000 to IRAs. Also, if your retirement account balance is significant, this is a good time to consider shifting some of it to more conservative investments to avoid substantial losses leading up to retirement.
In your 60s. You should view this time as a final chance to get money into retirement accounts before retirement. This is also a good time to consider whether you are financially prepared to leave your job, or whether a part-time or consulting job may be important for you to maintain your lifestyle.
In your 70s. By this time, you likely will have stopped making new contributions to retirement accounts and have started to take withdrawals, while also enjoying investment growth. People who are 70½ years and older are no longer able to claim a tax deduction on traditional IRA contributions, and annual distributions from traditional IRAs are required after age 70½.
Although it may be tempting to put off, or burdensome to stick with, saving for retirement early and consistently will be well worth the effort as you enjoy a long and comfortable retirement.