Important Retirement Savings Milestones to Keep in Mind as You Age
As you move through adulthood, few financial tasks can be as daunting as saving for retirement. Are you anxious just thinking about it? If so, you are not alone. But sitting down and actually working out goals to hit as you move toward your post-work days can take a load off of your mind. Let’s break it down into a timeline that can help you on this journey.
In your 20s
Welcome to the real world! Whether you are a recent college grad or have been working already for a few years, the advice is the same: Start saving. The ideal method is to put away 10% of your income in a 401(k) or an IRA, depending on your employer’s policies. But if you can only afford to save a few dollars a month, that is fine too. Something is better than nothing. But because of the interest your savings will accumulate over the years, deposits made sooner will accrue the most value in the long run.
In your 30s
Chances are your finances are a bit more stable now than they were a few years ago — making your 30s a good time to check in on your savings progress. Conventional wisdom says you should have one year’s salary set aside by age 30 and two years’ by age 35. If you have not already paid off your student loans, work toward crossing that off the to-do list in this decade. Lastly, if you can increase your savings contributions, do so.
In your 40s
For most people, this is the peak of their professional lives. Remember that starting goal of saving 10% of earnings? Bump it up to 15% now, if possible. Think about other ways you can increase your funds, too. Are you in a position to ask for a raise? Can you shave any unnecessary expenditures off of your living expenses? Anything will help.
In your 50s
If you are a parent, child-rearing is probably winding down about now. This means life may be getting less expensive. Use that extra money to increase your savings! By age 55, you want to have four or five times your current salary saved up. If you are not at that point, this is a good time to work on catching up. Sit down with a professional and figure out the best way to maximize your contributions.
In your 60s
This is the home stretch! If all has gone well, you should be able to retire by your mid-60s. But if you do not have enough money in your savings to do this yet — ten times your current annual income — don’t despair. There are still strategies for meeting your needs. The most common: Simply holding off on retiring in order to build savings and Social Security benefits and minimize time spent not working.
As you can see, retirement planning is an intricate and important process, and it’s important that you do it right. For specific recommendations based on your current age and where you are in your professional life, consider consulting with a retirement planning professional like those at CNB.