The Biggest Retirement Savings Move You Can Make Every Decade
Planning for retirement isn’t something you can do in a few years, it’s something you should be doing your whole life. This idea, however, can seem daunting, so rather than get overwhelmed, here is a specific retirement planning task you should focus on in each decade leading up to this milestone.
Your 20s: Open a retirement account
Many people spend much of their 20s paying off debt, accumulating funds to buy a home, and tackling the challenges of being a financially independent adult. As such, you may not have the ability to maximize a pension plan every year in your twenties, and that’s okay. what do you should to do during your 20s, however, is to open a retirement account and start putting in some money, even if it’s only $ 50 a month. If your employer offers a 401 (k), this is a good place to start, especially if the company you work for matches the contributions. If you don’t have access to a workplace retirement plan, you can save in an IRA instead.
Your 30s: Focus on Your Investments
A winning investment strategy could help you capitalize on the tax-advantaged growth of your 401 (k) or IRA, so your 30s is a good time to plan and choose funds or stocks to match it. align. It pays to invest your retirement savings aggressively, while staying focused on keeping your costs to a minimum. For a 401 (k), index funds can be a good bet, as they allow you to enjoy large market gains without incurring the high fees of actively managed mutual funds which heavily eat away at your returns.
Your 40s: Boost your savings rate
You may not have the financial means to maximize your retirement plan in your 20s or even 30s. But by the time you turn 40, you’ve probably already bought a home if that’s your goal, and your salary may be more substantial than it was when you started your career, so now is the time to ramp up your savings rate and put more money into your retirement plan. Doing it at this point in life will still give your money enough time to grow.
Your 50s: Catch Up
Maybe you didn’t put a lot of money into your retirement plan in your 20s and 30s, and your efforts in your 40s still leave you a long way from where you want to be. savings. The good news is that once you’re 50, you have the option to make catch-up contributions to your pension plan, so if you’re unhappy with your balance, take advantage. For 2020 and 2021, you can put an additional $ 6,500 in your 401 (k) if you are 50 or older, or an additional $ 1,000 in your IRA.
Your 60 years: protect yourself
Many people retire in their 60s, some by choice and others against their will. In fact, you never know when health issues (yours or those of a loved one) might force you to quit the workforce earlier than expected, so a good bet for your 60s is to play defense. . Start shifting some of your retirement plan investments into bonds and create a back-up income stream for yourself in case the market crashes and your savings take a hit. This income stream can be a strong emergency fund that you keep in the bank or a home equity line of credit that you organize.
Sometimes, when presented with an important task, it helps to break it down into steps and deal with each one individually. This can be a good bet when it comes to planning for retirement. Knowing what is expected of you each decade could help keep you more easily on track so that you can ultimately enjoy the comfortable retirement you deserve.