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Guide to retirement planning at every stage of life

When you’re starting your first full-time job in your 20s, you may not be thinking about retirement in 40 years. It’s much easier at this point to think about budgeting for rent and nights out and saving for your next big trip.

The same goes for your 30s, 40s, and even 50s. There is always something on the horizon you could be saving for besides your retirement. However, understanding your retirement goals and managing your accounts sooner rather than later is the best way to prepare for the day you clock out one last time.

With the help of a smart financial advisor and a solid budget, you can move toward confidence in your retirement plan—at any stage of life.

  1. Retirement savings in your 20s
  2. Retirement savings in your 30s
  3. Retirement savings in your 40s
  4. Retirement savings in your 50s
  5. Retirement savings in your 60s and beyond

Types of Retirement Plans

Before diving into saving strategies for different life stages, let’s take a look at the different types of accounts you could invest in:

  • IRA (Individual Retirement Account): A tax-advantaged investing tool that individuals use to earmark funds for retirement savings
  • 401(k): Employer-sponsored retirement account offered by corporations
  • SEP IRA (Simplified Employee Pension): For self-employed individuals or small business owners
  • SIMPLE IRA (Savings Incentive Match Plan for Employees): May be set up by employers with less than 100 employees
  • 403(b): Employer-sponsored retirement account offered by public schools, certain tax-exempt organizations, nonprofits and hospitals
  • 457: Employer-sponsored retirement accounts offered by state or local governments and certain non-governmental employers

And next, how that money goes in and out of the account:

Traditional: Contributions are made before tax but withdraws in the future are subject to ordinary income taxes. Examples include Traditional IRAs and most types of employer-sponsored plans.

Roth: This account feature means you make contributions after tax, and then future withdrawals are tax-free on the conditions the account is held for at least five years and you are age 59 ½ or older. Examples include Roth IRAs and Roth 401(k)s.

Does it matter which type of account you invest in for your retirement?

Darby Affeldt, DVM, RICP®, financial advisor in Seattle recommends different accounts based on life stage, “In general, the Roth IRA is a great place to start early in our careers; tax free income is going to become more and more important in retirement if taxes go up, but the employer plan match is KING—take advantage of it as soon as possible!”

Brad North, CFP®, Minneapolis financial advisor, says the type of account matters, but not as much as your dedication to saving.

“Saving money and sticking to a long-term strategy is what matters most,” He says, “Investor behavior is the dominant determinant of results. Financial advisors help investors stay focused and not abandon long term investment strategies at key moments of decision making.”

Often, it is best to bring all your retirement options to a financial advisor for recommendations on the best strategy for you based on your current situation.

Retirement saving in your 20s

While retirement may be far off, saving for it shouldn’t be. As soon as you graduate and start earning a regular income, you should begin working with a financial advisor to organize your investments and retirement savings.

Create a budget and stick to it

Affeldt says, “Managing, prioritizing and spending below ones’ means are key habits to establish now. First, make a budget and discipline yourself to stick to it, and if you overspend one month, reel it back in the next month. Pay your Future Self first; save, then spend.”

Start saving to take advantage of compound interest

Making savings a habit now means you’ll benefit from compound interest and make more for your money over time.

With the recommendation of your advisor, get started by saving for retirement in a 401(k), IRA or another investment account. Your advisor can also explain and educate you on different types of accounts and their characteristics, as well as helping align your investing strategy with your other financial goals.

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of people in their 20s have no retirement savings, and only 28% perceive their retirement savings as being on track.¹

If your employer offers an employee benefits package, understand your options and make the most of what is available to you. Many employers offer a matching program up to a set percentage of contributions. Even a small monthly contribution from your paycheck will build on interest in the years between now and retirement.

Work with a financial professional to help balance your financial priorities

There are multiple reasons to start working with a financial advisor. As your financial picture grows increasingly more complex, bringing in a professional can provide guidance, expertise, and accountability when you need it most.

Whether you have a specific topic you’d like another opinion on or you’d like guidance on your financial strategy as a whole, a financial advisor can provide you with valuable input and insight.

Your financial professional can help you identify whether the options offered are sufficient for you or if an additional product is recommended.

How does compound interest work?

*Hypothetical example at 8 percent annual interest rate for illustrative purposes only.

Here’s how the advantage of time works. Compound interest is a mathematical principle where interest accrues not only on the amount you invest—but also on the interest accrued on it.

This is a hypothetical example of three investors who all started saving at a different age. You see the power of compounding in Anna’s example. She started saving at age 25. She contributed a total of $84,000 over 35 years and has $413,560 thanks to the effect of compound interest building over time.

Rob starts 10 years later, investing the same monthly amount as Anna. Missing out on 10 years of compound interest costs Rob over $200,000.

Finally, John is a later starter at age 40. He puts in more than the early starters—$96,000 over 20 years—but with less time for compounding, he has $219,657 upon retirement. He invested more total but has less at retirement than Anna.

Related: Compound Interest: What It Is and How It Works

This hypothetical example is for illustrative purposes only. Not based on any particular investment. Assumes 8 percent annual return. Investments will fluctuate and when redeemed, may be worth more or less than originally invested.

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Retirement saving in your 30s

As your income increases or you start paying off some loans and debt, resist the temptation to channel all those new available funds into lifestyle changes. Instead, consider how you can increase your retirement contribution.

Give your savings a raise when you get one

“Once you get started, give your retirement savings a raise when you get a raise,” recommends Joe Fox, CLU, ChFC, CLTC, financial advisor at North Star Resource Group. “Say you get an annual increase of 3%. Take 2% in your paycheck and increase your retirement plan contribution by 1%.”

of people in their 30s have no retirement savings, and 37% perceive retirement savings as being on track.¹

Affeldt adds, “Please take advantage of any workplace retirement plan with an employer match, if credit card debt and emergency reserves are in place. If there’s no match, think about saving on your own in the Roth or the Traditional IRA. While retirement seems so far off, consider that saving is simply delaying spending.  Time can either be our ally if we are planning early or our foe if we procrastinate.”

Consider diversifying your investments

Your 30s are also a good time to start exploring investing beyond your employer plan. Diversifying your investing portfolio can help you spread risk across a wide variety of investments and categories.

Look into life insurance policies

If your family is growing, you may also consider how purchasing in life insurance can help protect your family financially if anything happens to you. Affeldt also recommends parents create a strategy for college expenses now.

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Retirement saving in your 40s

When your children start heading off to college, you’ll find yourself with some room in your budget, possibly for the first time since they were born! This may be a good opportunity to increase the amount you send to your retirement fund as that retirement date is getting closer.

Increase your savings commitment

This marks the start of your peak earning years, which is a good time to strengthen your commitment to saving by setting more aside.

Update your life insurance policy

Affeldt says,Consider converting term life insurance to permanent if other planning is in place and cash flow allows. Using permanent life insurance carefully designed as a financial tool (deeply complex) can be a fit if your income has reached Roth IRA contribution limits or you are maximizing other retirement plans and still have additional cash flow. Hiring a financial advisor is a strong consideration.

Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods.

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Retirement saving in your 50s

Now is the time to really consider retirement. Plan to meet with your financial advisor to review what type of retirement you’re hoping for, how much you have in your retirement fund, what your social security benefits will look like and when you will be able to retire realistically based on these factors.

Check that your retirement contributions are on track

Review your retirement accounts on a regular basis to determine if your savings are on track and if your contributions could be increased. Keep in mind the annual limitations on contributions to 401(k)s—in 2017, $18,000 for those under 50 and $24,000 for those over 50.2

of people in their 50s perceive their retirement savings to be on track.¹

If you have 401(k) plans with past employers, discuss with your advisor on how to best deal with these. Your options include leaving the account where it is, rolling over to your new employer, rolling over to an IRA or taking a cash distribution.

Consider decreasing your risk in investments

In your 50s, you are entering the second phase of saving: preservation. Fox typically recommends decreasing the amount of risk in your investments at this point. He says, “The clock to retirement is winding down so this is the time to consider decreasing the amount of risk you take with your investments.”

Look into downsizing your living arrangements

Affeldt typically recommends downsizing your living arrangements at this point and investing proceeds or paying cash for a smaller home. She adds, “Focusing on long term care options will now become front and center; self-funding is not recommended.”

Related: What to Do with Your Retirement Plan When Changing Jobs

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Retirement saving in your 60s and beyond

Retirement consists of something different for everyone. Whether you choose to keep working, take on a different or less demanding role at work, spend more time at home with family or spend time volunteering, consider what retirement will look like for you. Reflecting on your options ahead of time can help you more accurately prepare your financial strategy.

Determine if your savings are on track for retirement

Less than half of people in their 60s perceive their retirement savings as being on track.¹

North says of this stage in savings, “By this point your lifetime you will have either achieved a critical mass for retirement, or you won’t, requiring part-time income.”

As retirement edges closer, do you know where your money will come from? Consult with your financial advisor to map out where your income will stream from throughout retirement. The most typical sources of income for retirees are social security, pension and retirement plans, employment earnings and interests and dividends from investments.

Develop a budget for retired living

Throughout the process, work with your advisor to arrive at a budget fit for you. Within your budget, include any upcoming larger items, such as contributing to a grandchild’s college education, as well as increased monthly costs, such as health care and insurance before Medicare kicks in.

Regularly assessing your budget is necessary whether you’re still several years out from retirement, about to retire or well settled into retirement.

Talk to your financial professional about tax-efficient decumulation

Affeldt says, “Planning out the retirement decumulation strategy to be most tax efficient is crucial. The IRA to Roth rollover strategy will be important to consider and monitor annually… Careful social security consideration with your advisor is also essential; delaying to age 70 may mean significantly more income.”

What if I start saving late?

If you feel like you’re behind, you’re not alone. A 2017 study1 showed that a quarter of non-retired Americans had no retirement savings.

If you’re starting late, consider these tips for making the most of your investments:

  • Consider opening a Roth IRA to invest above the amount allowed in your retirement plan.
  • Make sure you have adequate insurance (disability and life) protection to avoid setbacks.
  • Pay attention to the amount of debt you take on and pay off before retirement.
  • Consider the help of a financial advisor to help make up for lost time.

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Our team of professional advisors are experts in retirement planning, including those who specialize in retirement saving for physicians, lawyers, veterinarians, self-employed individuals, small business owners and more.

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    1Report on the Economic Well-Being of U.S. Households in 2017. (2018, May). Retrieved June 26, 2019, from

    2IRS Announces 2017 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2017. (2016, October 27). Retrieved June 26, 2019, from

    2566623/DOFU 6-2019