How to Prepare for Retirement at Every Life Stage

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According to some experts, if you are looking to retire by the age of 67 you should have saved at least 10 times your income. But just one in 5 U.S. adults approaching retirement says they are unprepared financially for their golden years, according to a recent survey by Empower Retirement.


Here are tips from experts for every age.


When you are in your 20s

This is a good time to start thinking about retirement, even though you have probably just launched your career.

“In your 20’s the most important thing is to get started. Many 20-somethings live at home with parents after college and find they may have extra cash if they have a decent paying job,” retirement planning counselor Louis J. Czerwinski of Allegiant Wealth Management, LLC, points out.

Separate your financial goals. “Create separate buckets of money for different goals,” suggests Czerwinski. “For example, you may want to save for the purchase of a home in five years. Money saved for the purchase of a future home will most likely be allocated very differently than the money you want to save for your retirement in 40 years.”

Start investing now. “People in their 20s should begin investing in a low-fee, diversified equity index fund and continue to invest consistently whether the market is up, down, or sideways. Dollar-cost averaging into an index mutual fund or ETF (exchange-traded fund) is a terrific lifelong strategy. They should be 100 percent invested in stocks and have no bond exposure,” Robert R. Johnson, professor of Finance, Heider College of Business, Creighton University, advises.



Open a retirement account. “Opening and regularly contributing to a retirement account at this age is a great starting point and when combined with avoiding high-interest debt, you’ll be putting yourself on the path to ensuring that the value of your investments can continue to compound in value in the years to come,” says Anna Barker, personal finance expert and founder of LogicalDollar.


When you are in your 30s

Take a look at your retirement plan. “In your 30’s you most likely will have solidified or started to solidify your career direction. You will want to make sure you have a financial plan and review it at least once per year,” says Czerwinski. “Remember, always pay yourself first. Make sure you are, at the very least, taking full advantage of any employer retirement plan match.”

When you are in your 40s

At this stage, you will have to work a little faster to save — but you can with a plan.

“If you are starting in your 40s, you will undoubtedly be playing catch up. The good news is that it can be with some work and determination,” says Czerwinski. “A properly structured financial plan will tell you precisely what you need to do to catch up. Saving more as a percentage of overall income, spending less, or a combination of both are typical ways to play catch up.”

Saving has to be a priority. “While one can’t make up for lost time, people in their 40s should realize they have a long time horizon to retirement and should focus on saving and investing more of their earnings for retirement. You need to budget for savings,” Johnson, co-author of “Strategic Value Investing, Investment Banking for Dummies” and the “Tools and Techniques of Investment Planning,” offers. “If one truly wants to make savings a priority, it cannot be a residual — what is left over. It should be a line item on your budget. You don’t successfully build wealth by simply taking what you have left after all your expenses. We accomplish what we prioritize. Prioritize savings and invest those savings.”

Top mistakes people make when planning for retirement

  1. Not predicting the future. “Not properly accounting for inflation. Inflation is what I like to call the silent killer of retirement plans,” says Czerwinski. “It can be a slow and steady drag on retirement savings. People don’t notice the effects of inflation on a year-to-year basis, but inflation can erode your retirement savings.”
  2. Forgetting healthcare costs. “Many retirees do not adequately account for healthcare costs in retirement. The estimated cost for health care after age 65 is $295,000 per couple in assets needed in today’s dollars. Healthcare costs can be one of, if not the most considerable cost for retirees,” notes Czerwinski. “While many retirees begin retirement in good health and initially think this number may seem outrageous, there comes a time where they transition from spending money on vacations and hobbies to spending a lot more on health care. Not planning for this can be financially devastating.”
  3. Not investing. “Individuals need to be taught to invest for retirement and not to save for retirement. The surest way to build true long-term wealth for retirement is to invest in the stock market,” Johnson points out.
  4. Waiting. “The earlier you start planning for retirement, the longer your funds have to compound in value. This means that waiting even a couple of years can have a significant impact on the value of your accounts once you reach retirement age,” explains Barker.
  5. Continuing to take on high-interest debt. “Every cent of interest you pay on things like credit card debt is money that isn’t going towards your retirement, so it’s imperative that you avoid this as much as possible in order to reach your financial goals. Credit cards can actually be an asset to your overall money management if used responsibly, but this involves paying them off in full every month. If your balance is too high to do this, you need to focus on bringing this under control as soon as possible,” says Barker.