It seems like young adults can barely graduate high school these days without experiencing the anxiety that goes along with planning for retirement. The good news is that starting early and being proactive about your retirement plans can help you feel empowered instead of anxious. There are investment milestones that we should all reach by the time we enter our 20s, 30s and 40s. Where should you be in your path to retirement? Take a moment to discover what each decade of your financial life should look like if you intend to retire comfortably.
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Retirement Planning in Your 20s
If your employer has a matching 401(k) program, not contributing is like leaving money on the table and walking away. You should definitely do your best to contribute the maximum amount during this period of your life. The other important thing you should do is establish a budget. Whether you rent an apartment or live with your parents, keep track of how much you are paying for categories like food, car insurance, cell phone plans and entertainment. If you have student loan debt, focus on creating a payment plan that allows you to get out of debt as early as possible. The decade of your 20s is also a great time to focus on avoiding the accumulation of debt. You can do this by making smart choices like paying cash for a used car instead of taking out a loan to purchase a fancier car. In addition to avoiding new debt, do your best to save up enough money to create an emergency fund that will cover a few months of living expenses. If you are nearing the end of your 20s and you still haven’t saved any money, it’s not too late to start. Take a look at your budget and see where you can trim costs. You can even force yourself to save by automatically depositing a dollar amount from your checking account into your savings account every pay period.
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Retirement Planning in Your 30s
The decade of your 30s is a time to get serious about creating a life for yourself. If you haven’t already purchased a home, you’re probably thinking about the prospect of owning one soon. In addition, many people your age are now juggling the financial responsibility of having kids. Many people find it challenging to manage all of the needs of the present while still putting away savings for retirement. However, there are many painless things you can do to put away some money. This is a great time to get interested in stocks. Most of your investments should be in stocks that represent a healthy mix of American and foreign companies. In addition to participating in an employer-sponsored retirement plan, take the step of creating your own Roth 401(k). The decade of your 30s is also an ideal time to try and pay off any credit card debt you may be carrying around. The good news about being in your 30s is that it’s still not too late to get serious about saving for retirement if you dropped the ball in your younger years. In fact, you can easily catch up to your peers without a lot of pain. If your salary is higher than it was in your 20s, use the opportunity to increase the amount of money you automatically put into your savings account each month.
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Retirement Planning in Your 40s
It’s really crunch time for savings once you hit the big 4-0. If you haven’t been saving all along, now is the time to do your best to save at least 15 percent of your salary each year until retirement. Take the first step by freezing your expenses and making a full audit of where your money goes. In addition, you should pledge to save all earnings from future raises. Now is also a great time to tackle any credit card debt you have. It is also time to face the fact that the days of riding the wild waves of the stock market are better left for people who are younger than you. You need to focus on taking fewer risks since you have less time to make up for lost funds. On the investing front, you may want to focus on cycle funds that include stocks and bonds that are less susceptible to changes in the stock market.
Keep Reading: Financial roadblocks that can harm you in your 40s
Retirement Planning in Your 50s and 60s: The Homestretch
By now you’ve paid off your credit card debt, minimized your exposure to the volatility of the stock market, and put a solid chunk of your earnings into saving vehicles. Luckily, if you’re like most Americans, you’re making more income than ever. If not, it’s time to start reducing your expenses, your tax liability and finding alternative sources of income to bolster your savings. Empty nesters should consider renting out that spare bedroom, while hobbyists should think about monetizing their passion. If you still need to play catch-up, consider delaying your official retirement age to increase your Social Security benefits. Part-time jobs can help boost your Social Security benefits even after you pass the “full benefit” age of 66.
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