Planning for your retirement can feel overwhelming. Whether you are just starting your first job out of college, have babies at home or a newly empty nest, you need to have a savings plan for your retirement years. We rounded up some ways to save for your retirement, no matter what phase of life you are living.
What should you be doing to plan for retirement now that will help you later?
In your 20s
You’re getting started in your career and not earning much. Money you are able to accumulate towards retirement now will grow exponentially by the time you retire.
As soon as you are eligible, sign up for your company’s 401k plan. Many companies match employee contributions, so make sure you are contributing enough to max that out.
In your 30s
Your income is higher, but you may have added expenses, such as a mortgage or children. It is important to save as much as you can towards retirement now, because these funds have years to grow.
Contribute as much as possible to your company plan, but also look into investing outside of it.
Learn about asset allocation. Financial planners (or online tools) can help you determine what percentage of your portfolio should be in stocks, bonds or other investments.
Thinking of moving to another company? Take into consideration any vesting period that may be required in order for you to keep 100 percent of your company’s contributions.
If you leave your current employer, be sure to roll over your 401k distribution. Many are tempted by the large check and decide not to roll those funds into a new retirement account. Not only will you pay tax plus a 10 percent penalty on the money, but you will make a huge dent in your nest egg.
In your 40s
Hopefully your income is continuing to grow in your 40s. Expenses include saving for your child’s college and potentially more medical issues during this decade, leading to higher medical costs.
Now is the time to budget and get a handle on expenses. Consolidate debts, if possible. Getting your financial house in order takes time, but paying down debt and watching expenses is easier to do now than when you are ready to retire.
In your 50s
Most people hit their peak earnings in their 50s, and this is a critical time to boost your retirement savings. Your children are most likely moving out on their own. While expenses may decline, many people in their 50s begin caring for their parents.
Many people in their 50s assume they will inherit a sum of money when their parents pass away and consider that part of their retirement savings. But parents are living longer and spending down this money, so don’t count on it. Keep contributing to all of the retirement savings plans you have been using.
In your 60s
You are probably either planning to retire in your 60s or at least scale back to part-time work. Keep up your retirement savings while you are working full-time. Just because you are close to retirement doesn’t mean you should stop contributing.
Start thinking about how you will withdrawal your funds once you are retired. Put together a plan for distributions that takes into account taxes and fees on each account to maximize your return.
Consider ways in which you could retire yet still produce a small income. Maybe a hobby can turn into a small business, or your career skills might be useful on a part-time basis.
By planning ahead and building your savings, you can have the life in retirement that you have always dreamed of.