Retirement saving and investing strategies should be adapted to reflect changing goals and circumstances as individuals move throughout their life. Individuals in their 20’s, for example, may be just starting out on the career ladder and earning less money than they will be later in life. But their expenses may also be lower, especially if they are single and have not yet started a family.
These and many other factors will influence how much money they can realistically save for retirement at this stage of their life, as well as how the money should be invested.
Moving Toward Mid-Life
As they move into their 30’s, individuals may have begun to climb the career ladder and increase their earning power and income. At the same time, though, they may also have started a family and assumed more financial responsibilities like a mortgage, life insurance, multiple car payments, and all of the expenses involved in raising children. Ideally, this is the life stage where individuals should be gradually increasing the amount of money they are contributing to their retirement plans.
In their 40’s, many individuals are starting to see their incomes continue to rise. At the same time, though, they may also be facing higher living expenses than at any other time in their lives. For example, their children may be teenagers, which can be the most expensive age for supporting kids, or they may be saving for college or helping pay for their children’s college educations at this time.
The 50’s represent the peak earning years for many individuals, as well as a time when their living expenses may be starting to decrease as their children move out of the house and complete college. During this time, individuals should be kicking their retirement savings into overdrive by putting as much money as possible into their retirement plans. Their timeframe for saving is growing ever-shorter as their eventual retirement date draws closer each year.
Entering the Golden Years
Once they enter their 60’s, many individuals’ retirement planning focus shifts from asset accumulation to asset distribution and consumption. This is the time when most individuals should begin thinking about devising a portfolio distribution plan that details how they will withdraw enough money from their retirement plan to meet their living expenses, but not so much that they risk outliving their savings.
Of course, not everyone plans to stop working completely at the traditional retirement age of 65. The longer individuals plan to continue working in their 60’s and maybe even beyond, the more they may be able to accumulate in their retirement account.
By their 70’s, many Americans have either entered full-time retirement or have scaled back their work schedule to part time. This decision usually hinges on such factors as the individual’s health and finances, as well as his or her interest in continuing to work vs. pursuing other interests like traveling, spending time with family, volunteering or taking up hobbies or recreation.
In future articles, we will take a detailed look at retirement planning strategies for each of these life stages.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates,Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be considering in connection with the purchase or sale of securities. Member FINRA & SIPC.