When to save for retirement

The question of when doesn’t really matter, what matters is whether you are on track when it comes to preparing for retirement. In fact your age has nothing to do with preparing, however using your age as a guide to determine whether you’ve taken care of recommended steps can be helpful. Your age can help you determine what you should be doing to develop, or improve, your retirement strategy.

Your Early 20’s & 30’s

  • Define your goals – This is the easy part where you sit back and imagine what you want to be doing in the future. When working is no longer a requirement do you want to travel in your spare time, do you want to live somewhere else, or are you happy staying at home and reading the latest novel? When you have a general idea as to what type of retirement lifestyle you want, you begin to develop a strategy as to what you need to be saving in order to reach your goal.  Calculate what your retirement nest egg should be here.
  • Save now – Don’t put off savings. . . ever! Whether you’re building up your emergency fund of 3 to 6 months’ worth of expenses or you’re contributing to your employer’s retirement plan. As long as you’re taking the steps to save now, you can figure out all the other details later! It’s easier for your advisor to help you redirect your savings to the right place rather than have you change your behavior to actually start saving.
  • Don’t miss out on ‘free’ retirement money – Take a look at your employer’s retirement plan and find out whether they match your retirement contributions. Take steps to get the full match they offer because whatever they put in on your behalf is essentially free money. You’re not taxed on it (until you pull it out of course) and all you had to do was save for your future-self. It’s a win-win!

Mid 30’s to Mid 50’s

  • Review your portfolio – If you’ve been diligent about savings, there is a pretty good chance that you’ve already built up a nice-sized nest egg. That really is the hardest part! Now is a good time to ensure your investments are diversified. Asset allocation is the number one contributor to portfolio performance. Use a free tool such as Personal Capital to ensure your investments are diversified.

  • Increase your savings – We’ve all heard the old saying to pay yourself first but it’s true! Every year when we re-enroll for my husband’s benefits we not only increase his 401(k) contribution rate, we also increase our other savings and you know what? We don’t miss it! You find ways to cut back, to live on less, and at the end of the year we look up and see all that progress that was made towards our savings goals. Learn how to incorporate savings into your budget by reading my post here.
  • Combine accounts – Take inventory of your accounts and where they’re all located. To simplify and focus efforts, combine your old 401(k) accounts with one custodian. Having all your investments under one provider allows you to avoid duplication of efforts and fees. Too many accounts with different strategies is like having too many cooks in the kitchen. Stay focused and keep costs low.

Late 50’s & Up

  • Catch up – Whether you have been diligent in your savings efforts or you got a late start, take advantage of catch-up contributions that are allowed in retirement accounts for those age 50 and up. Individual Retirement Accounts (IRAs) allow you to contribute an additional $1,000/year (2016) and an additional $6,000/year (2016) in employer plans.
  • Calculate retirement income needs – Now that you’re approaching those retirement-aged years, you can reasonably estimate what your retirement income needs are going to be. Use this handy retirement income needs calculator by Vanguard.
  • Understand retirement income sources – When retired, it is important to understand where your income is going to be coming in from. Whether that is social security, your investment portfolio, rental properties, or a business sale it is important to sit down and estimate what that income will be and any taxes that may be associated with that income.
  • Social Security planning – There are several strategies to consider before you take the steps to apply for Social Security benefits. You can take it as early as age 62 or as late as age 70. To get a quick estimate of Social Security benefits click here but if you plan on continue working or concerned about getting the most out of your benefits, you would greatly benefit from sitting down with your local Social Security office or with an advisor who specializes in Social Security planning.
  • Estate planning – Estate planning is really for all ages but if you are approaching your retirement needs, estate planning is more important that ever. From a basic will to what will happen to your digital iTune files, take a look at the proper documents you should have in place here.

Taking these small steps will help ensure that you’re on the right track for a successful retirement. Remember, saving and investing is like watching paint dry. It may seem like it takes forever but when it’s completed, you’re left with a beautiful picture.

Even until your old age, I am the one, and I’ll carry you even until your gray hairs come. It is I who have created, and I who will carry, and it is I who will bear and save. Isaiah 46:4



Disclaimer: I am a CERTIFIED FINANCIAL PLANNER TM (CFP®), but I am not your CFP® or financial advisor. The information in this article is for general informational and entertainment purposes only and does not constitute financial advice. This article does not create a financial planner-client relationship. The author is not liable for any losses or damages related to actions of failure to act related to the content in this article. If you need specific financial advice, consult with a licensed financial advisor or CFP® who can tailor advice regarding your specific circumstances. Additionally, sometimes I use affiliate links to support my website. This means I may earn a small commission, which is no additional cost to you, for referring and discussing products and services that I personally use, or have used, and trust. Thanks for your support!