Planning for retirement is a lifelong process, and there are different steps for you to take in every decade leading up to these years. Starting early and being disciplined are key parts to a successful strategy ? the more you plan and follow that plan, the more likely you?ll feel financially secure during your retirement years.
?Imagine taking a 30-year vacation and the amount of time it would take you to plan what you?re going to do and for you to fund it? that?s what planning for retirement is about,? says Rebekah Barsch, vice president at Northwestern Mutual. ?It?s really important that your financial planning delivers the kind of retirement that you want.?
Knowing how long your retirement will be is a big unknown though. Current life expectancy is 78.8 years, according to the CDC, but you may very well live into your 90s. ?The sooner you begin to save though, the more time you?ll have on your side. ?Investment management is about the probability of you reaching your financial goals,? says chartered financial analyst Robert Stammers, director of Investor Education for the CFA Institute. ?The longer you have, the less risk you have to take. People who start in their 40s have to take more risk because they have no other way of getting there.?
Experts provide guidance on steps to take during each decade.
20s
?Start developing a habit of putting money away for retirement,? says Barsch.
Most employers offer 401k plans and match your contributions? it?s free money so don?t pass that up.
Begin to fund a Roth IRA. ?You would pay the tax for those today, and the money would grow tax-free and any money you take out in retirement would be tax-free,? says Marcy Keckler, vice president of financial advice strategy at Ameriprise Financial.
Start paying off student loans and credit cards, too, since investing and carrying debt at the same time doesn?t always work in your favor. ?Even though you?re paying down your debt, you?re getting a risk free return on your money,? says Stammers.
30s
?Keep your lifestyle constant and put anything that?s unexpected, like bonuses, raises and tax refunds, in savings,? says Stammers. ?Build an emergency fund.? Unexpected expenses affect savings, but if you set aside six to nine months of expenses, you won?t have to dip into your retirement funds.
?Commit to saving just a little more each year,? says Keckler. If you?ve started to save money in a 401k plan, set up automatic increases each year. This way, you won?t feel squeezed and will begin to save more.
?Begin to create your own portfolio,? says Michael Eisenberg, a certified public accountant in Los Angeles. Depending on what your goals are, whether that?s to save for a down payment on a new home or to put money aside for a child?s tuition, have separate savings accounts that you can earmark for each.
40s
These are your peak earning years. ?One of the key strategies is to continue to boost your retirement savings by capturing some or all the raises you get,? says Keckler. ?It can make sense to save the entire or half the raise for retirement.?
Maximize your 401k plan contributions. If you haven?t already, diversify your retirement accounts into a tax-deferred, taxable and Roth account to give you flexibility in retirement if the tax code changes.
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