Saving for retirement should be a priority throughout our working years, but many don’t know where to start. The highest priority should be getting rid of credit card debt before considering a retirement strategy; otherwise, you could get stuck in an endless cycle of payments. If you’re in debt, consider using this snowball debt calculator to create a plan for getting out of it as quickly as possible.
Aside from becoming debt-free, there are other steps you’ll need to take at every stage of life to ensure you’re on track to retire. Here, we’ve broken down the major milestones you should work towards for every decade until you hit your goal retirement age.
Your teenage years are where you’ll begin to develop the financial skills that you will carry with you throughout your life. It will be difficult to think about retirement at such an early age, so don’t stress if retirement is too much of an abstract thought now. What you should focus on, though, is learning how to handle your money wisely. Open a joint checking account with a parent or guardian and start understanding how money can flow in and out of your life. You should also open a savings account at a bank without minimum balance requirements and create a habit of saving money for emergencies.
Your twenties will be a lot of work as you move into adulthood and gain financial independence. You’ll probably make a few mistakes here and there, especially once you start getting approved for credit cards. Don’t let yourself think of credit as extra money for your bar tab or shopping trips; this mindset will have a ripple effect that can last for decades and give you less freedom when you’re hitting retirement age.
Start to save more aggressively than you did when you were a teenager. Any compound interest you receive now will make a big difference with how much money you’ll have to use during retirement. If you land your first full-time job, utilize your employer’s retirement options, such as a 401k or IRA account, especially if they’ll match your contributions up to a certain amount.
It will be challenging to hold onto all of this new money you’re getting, especially when retirement seems so far away. But if you set a budget that includes retirement and savings, then you’ll be able to build a sound financial plan that lets you splurge here and there while also providing a solid foundation for retirement.
Your thirties will be a time where you move further into your career and start to accrue higher salaries. Use that extra income to clear up any lingering debt from credit cards, student loans, etc. You’ll also need to rebalance your budget to account for more income and if, for instance, you paid off your student loan debt.
At this point, if you haven’t begun saving for retirement, do that as soon as you can. Your retirement portfolio should be a diversified mix of cash, bonds, and stocks. Since you’ve got time before hitting retirement, you can also skew your portfolio to be more aggressive now, which means having a higher allotment of riskier assets like stocks in proportion to less-risky assets like cash and bonds. You may also consider investing in other assets that could support you during retirement in your thirties, such as real estate.
By your forties, you may have accumulated a lot of debt for assets, i.e., mortgages. You may also now have to pay for things like college for your kids, so it can be a challenging decade to navigate when you’re focusing on building your retirement nest egg.
You also may be at a time when you’re near the peak of your career and collecting a decent salary for your effort. Since there are so many moving parts to your finances, now is a good time to start working with a financial planner to help ensure your money is being allocated well for retirement. Look for a fiduciary planner as they have a legal obligation to work in your best interest and are typically fee-based instead of commission-based.
You’re so close! Your fifties are the time when you’re getting all of your ducks in a row for retirement. If your student loan or mortgage debt hasn’t been paid off yet, now is the time to get rid of it. Work with your financial planner to ensure that you’re set up for the retirement lifestyle you’re looking for. If you’re not, start looking at how you can improve your portfolio or add more income to make that vision a reality.
Sixties and beyond
Once you’ve hit your desired retirement age, the primary concern is blowing through your nest egg too quickly. You’ll need to stay on top of your finances and adjust your lifestyle to fit your cash flow. If you’re feeling a pinch, you can always look for passive income streams to help pad your savings.
Wherever you are on this list, start making it a priority to become debt-free and put money toward retirement savings—the earlier you begin, the better. With a solid financial plan and years of savings, you’ll be able to have a comfortable and peaceful retirement at whatever age you choose.