Ready for Retirement

Essential Steps Towards a Healthy Retirement

June 26, 2023 Author: Tess Downing, MBA, CFP®, Complete View Financial

Retirement is a topic that many people don’t believe they need to start thinking about until they get older. With the norms of retirement changing rapidly, it is essential to start thinking about this stage of your life at an early age to set yourself up for success. No matter what your age, it is important to be able to start saving to provide yourself with a life you would want in the future. This article lists items you can do during each stage of your life to properly set yourself up for a healthy retirement.

Your Twenties: The Time to Begin Saving

When you’re in your twenties, the last thing you want to be thinking about is retirement. You have just started entering the workforce and working up the ranks at your new company. While you may not think you should be thinking about retirement, this is the perfect time to start.

The earlier you can start a savings account for your retirement fund, the more interest that will compound on your initial investment. This compound growth is crucial to the funds you can gain on your first investment into the account. This interest is not linear; therefore, the earlier you start, the better.

To start saving, put 10% of your gross salary towards a retirement account. If you can afford to put more, go up to 15%. Start to think about which retirement accounts you want to save in. See what your company offers in terms of retirement accounts and benefits. Be sure to match what your employer contributes to set yourself up for success in the future.

Overall Goal for your Twenties: Save a year’s worth of your salary before you hit your 30s

Your Thirties: Put your Saving into Overdrive

If you have not started saving for retirement at this stage in your life, you should put 15-20% of your gross salary towards a retirement account to catch up. If this seems like a lot, start reviewing your purchasing decisions and distinguish between your wants and needs. It is vital to prioritize retirement savings at this stage in your life.

This decade of your life is a time when a lot can change. Getting married, having kids, buying a home, purchasing a car, whatever the change may be, it is important to resist taking money out of your retirement account. If you have children, start college-fund saving early to resist the need to tap into these accounts.

Overall Goal for your Thirties: Have three times your annual salary saved before you hit your forties

Your Forties: Manage your Spending

These years will often be when you experience career growth and potential raise opportunities that have not come in the past. It is important to maintain your contributions to your retirement accounts, if not, increase them. Refrain from using your funds in these accounts for big purchases. It would be better to take out a loan than to use these funds because the lender will hold you accountable for repayment.

If your children are college bound, consider talking to them about student loans and plans to fund their education. It is also essential to learn how social security works as you near retirement. It may seem early, but you must understand how it works to maximize your contribution in the years when you are earning the most income.

Overall Goal for your Forties: Have four times your annual salary saved before you hit your fifties

Your Fifties: Retirement is Near

Now is the time when you can start thinking about what your retirement may look like. Do you want to travel? Purchase a new home? Move to a new city? These are essential things to consider as you get close to a new stage in your life.

Also, it is important to think about your potential expenses. What are you gaining and losing in terms of expenses now that you aren’t working? Do your plans add any additional costs you didn’t think about? Use your collected data in a retirement calculator to see what your potential income may be. Think about what decisions you can make to save more aggressively if this income doesn’t match your plans.

Overall Goal for your Fifties: Have eight times your annual salary saved before you hit your sixties

Your Sixties: Your New 30-Year Lifestyle

The closer you are to retirement, the better you will understand what your retirement expenses will be. It’s important to keep these estimates updated every couple of years. Ideally, cover your essential expenses with a guaranteed income so you aren’t at risk for market fluctuations.