The path to becoming financially secure is not linear. Nor is there a one-size-fits-all approach.
But saving and investing, whether for retirement or some other goal to sand your head into, is probably the worst strategy of all.
Different circumstances make everyone’s journey a little different, but no matter your age, there is always a vision. You can change it in decades, but at least you have something to aim for, and an idea of where you stand in relation to that goal. Include a margin of error because no one knows what life or the stock market will bring.
This path — and the choices you make — will look different depending on your age, the life-changing moments you’ve experienced, and the lifestyle you want. A few years after retirement one should not have the same mix of stocks and bonds in their portfolio as one who has just started his/her career. A baby or an empty nest, a new business or business failure, divorce or illness can all change your ability to save.
Of course, retirement is one of the biggest financial goals. There is no one answer to how much money you will need or how to go about it. And saving can be hard and can involve sacrifices. But there’s one virtue of doing so that’s often underestimated: That money gives you more control over your life and how you spend your time—which dictates how happy and comfortable you’ll be.
These tips can help you get there, no matter what stage of life you are in:
Retirement seems far away now. But this may be the most important time to start saving, as people in their 20s can benefit most from the power of compounding. That is when the returns and interest of an account keeps increasing every month, year after year, decade after decade.
Paul Merriman’s eye-opening explanation of how you can turn yourself into a multi-millionaire by saving for retirement for just five years if you start at 25 and do nothing after that.
Of course, this is also the time when you’re probably making the least amount of money in your career and budgets can be tight. You can balance multiple money goals and obligations.
Still, here are some tips to get your savings back on track:
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This is the decade when you may be buying your first home, getting married, building a business, starting a family or some combination of all of these. That’s a lot of financial obligations. But that doesn’t mean retirement accounts should be forgotten.
According to a guideline from Fidelity Investments, ideally, a 30-year-old should have double his salary at the moment. Many people say this is not possible, not with the rent and mortgage, their student loans or kids’ college funds, support for their parents, and other bills to pay.
True enough, but the point remains: retirement should not be forgotten. If you’re living paycheck to paycheck or close, you should still try to allocate something to a retirement account, and then promise to increase that contribution when the budget allows.
Try these tips in your 30s:
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Wealth Milestones: This Is What Your Finances Should Look Like in Your 30s
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This is the decade when you may be seeing more money in your paycheck, thanks to a pay increase or job change. And retirement doesn’t suddenly look impossibly far. At some point in this decade, you will be working longer than you have left until retirement.
Of course, financial obligations don’t disappear in your 40s—there’s still a mortgage to pay, kids’ college funds, maybe to help elderly parents… the list goes on. But the goal should be to put 10% to 15% of your salary away for retirement and throw in a little extra cash from raises or side gigs.
If you haven’t already started investing outside of a 401(k) or IRA, now is the time. Withdrawing money has less drastic tax consequences than a 401(k) or IRA, which gives you breathing room in a crisis like a health crisis or layoff.
Consider doing this:
Wealth milestones: This is how your finances should look in your 40s
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Now retirement is really not that far away. So spend more time thinking about when you want to retire and what your expenses might be. Take an honest look at your finances. Estimate your Social Security benefits using a My SSA account with the Social Security Administration, and run a few scenarios of retirement income and needs.
Retirement accounts allow catch-up contributions for people age 50 and older, so take advantage of this opportunity to grow your savings.
You should still have a healthy amount of stock in your retirement accounts because that money needs to grow for decades to come, but build a fund that you can invest in at the start of your retirement rather than being forced to sell investments in a market downturn. You can tap on the position. ,
When is it appropriate to hire someone to manage your money?
Try these tips in your 50s:
Wealth milestones: This is how your finances should look in your 50s
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60s and 70s
These are the decades when most people want to stop working. Although you cannot control the timing, there is a lot you can do to secure your finances.
Don’t go into retirement blindly. Analyze your income sources in retirement: Social Security, savings (including retirement accounts), pensions and more. Should you look into an annuity, after careful consideration and guidance from a trusted professional?
Think carefully about when you will claim Social Security. People can start receiving their Social Security benefits as early as age 62, but not everyone should. Americans who are paid and fully covered in the system receive 100% of their benefits at their full retirement age, depending on their date of birth. Those who claim before their FRA get an exemption for every month before that FRA, while those who delay their benefits till age 70 get a bonus.
Not everyone can afford to delay Social Security benefits, even for a year. Just know that the decision, whatever it may be, has an impact on spouse and dependent benefits as well.
more: The Messy Math of Social Security, Spouse Benefits, and When to Claim
This is also a time to examine healthcare costs. After all, Medicare, which becomes available at age 65, is not free. People who retire before age 65 should build health insurance into their budget while waiting to be covered under Medicare.
You Could Unintentionally Triple Your Medicare Premium—Here’s What to Look for
And just because retirement is here doesn’t mean the portfolio should be mostly invested in bonds. Yes, retirees need to conserve fixed assets, but retirement can last two or three decades. Without a healthy mix of stocks and bonds, you risk running out of money in old age.
Do this in your 60s and 70s:
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Check out Businesshala’s columns to help you plan your retirement, including “Where should I retire?” And “Retirement Hacks.” Curious what other people are asking themselves about their retirement? follow along “Help My Retirement”